Government-Sponsored Entities.—A government-sponsored enterprise (GSE) is a privately-owned corporation, but one established and chartered by United States Congress. GSEs are designed to fulfill a public purpose, such as facilitate the flow of financing to from capital markets to areas of the economy thought to require increased funding (such as the mortgage market). By creating the corporation and giving it certain benefits, GSEs may reduce the risk those willing to invest in their financial products. The economic areas that have been favored by the creation of GSEs are in farming and agriculture, education and the home finance system.
The first GSE was the Farm Credit System, which was established in 1916. Other GSEs were created in turn, such as the Federal Home Loan Banks in 1932, the Federal National Mortgage Association, and Sallie Mae in 1972. This last GSE was privatized and became a fully private institution in 1995).
Privatizing Government-sponsored enterprises
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