Government-Sponsored Enterprise

A government-sponsored enterprise (GSE) is a financial institution created by the U.S. government to provide credit and other financial services to targeted market segments. GSEs are privately owned, but they are subject to government oversight and regulation.

The GSEs were created in response to market failures that prevented private lenders from providing credit to certain borrowers. For example, the Federal National Mortgage Association (Fannie Mae) was created in 1938 to provide a secondary market for mortgages. Fannie Mae buys mortgages from lenders and then sells them to investors. This helps to increase the liquidity of the mortgage market and makes it easier for lenders to make loans.

The GSEs have played a significant role in the U.S. economy. They have helped to make homeownership more affordable for millions of Americans and they have provided financing for a variety of other projects, such as student loans and infrastructure development.

However, the GSEs have also been criticized for their lack of transparency and their exposure to risk. In 2008, the GSEs were bailed out by the U.S. government at a cost of taxpayers of over $180 billion.

The future of the GSEs is uncertain. Some policymakers believe that they should be privatized, while others believe that they should be retained as public entities. The GSEs are a complex issue with no easy answers. However, it is important to understand their role in the U.S. economy and the potential risks they pose.

Here are some additional details about the GSEs:

* The GSEs are overseen by the Federal Housing Finance Agency (FHFA).
* The GSEs are required to maintain a minimum capital ratio of 2%.
* The GSEs are exempt from state and local taxes.
* The GSEs have issued over $5 trillion in debt.
* The GSEs have been criticized for their lack of transparency.
* The GSEs were bailed out by the U.S. government in 2008.

The GSEs are a significant part of the U.S. economy. They play a vital role in providing credit to targeted market segments. However, the GSEs also pose a number of risks. The future of the GSEs is uncertain, but it is important to understand their role in the U.S. economy and the potential risks they pose.