Government Sponsored Enterprises and You
Ever hear of Sallie Mae? If you have anything to do with private student loans, I bet you have. Sallie Mae started in 1972 as what is referred to as a government sponsored enterprise, or GSE for short. Now, in 1997, Sallie Mae became privatized. But, there are other GSE’s that are still out there and functioning.
In short, a GSE is any financial service corporation that is created by the U.S Congress, usually for the purpose of helping with credit flow to different targeted sectors, like agriculture, education, and home financing. These enterprises may be privately owned, but their services are largely publicized and sponsored by the government.
Now, what agencies have been or are currently considered GSE’s?
- Fannie Mae and Freddie Mac. These two companies were the nicknames for the Federal National Mortgage Association and the Federal Home Loan Mortgage Corporation. President Roosevelt put Fannie Mae into existence with the New Deal, and Freddie Mac expanded on it in the 1970’s. Both helped with the availability of home mortgages through local banks and the secondary housing market. In 2008, when the housing market collapsed and the mortgage market crisis occurred, both companies were going to go under. The government stepped in and gave the Treasury department and Federal Reserve guardianship over the companies.
- Sallie Mae. As I said before, helped with financing private loans to students of higher education. It still exists, but in 1997 became a private company without any government control other than the control they have over other private loan companies.
- Federal Home Loan Banks. Like Fannie Mae and Freddie Mac, these 12 banks helped with distributing monies for home mortgages to banks and credit unions for easier access and distribution. They supply monies for over 8,100 financial institutions all over the US. They are much more regulated than Fannie Mae and Freddie Mac used to be, and were not as adversely affected by the mortgage crisis.
- Farm Credit System. In 1916, this was created to assist farmers with being able to obtain credit easily. They help with getting equipment, supplies, rural homes, and energy and water infrastructure. Basically, they’re meant to help rural America continue to thrive.
- Federal Agricultural Mortgage Corporation. As Freddie Mac was a secondary market to assist Fannie Mae, the Federal Agricultural Mortgage Corporation (also known as Farmer Mac), is the secondary market to assist the Farm Credit System. It was created in 1987.
So if you’re a homeowner or farmer, these really do play a role in your life. Even as a student, like I said, Sallie Mae used to be a GSE. In recent years, the public has called for more regulation of these by the government so disasters like the Freddie Mac/Fannie Mae one will not reoccur, but overall, these sources of extra credit can be a good thing for both the economy and those who are using their resources. We need farmers, and everyone needs a place to live!
