Government sponsored enterprise

Government sponsored enterprise (GSE ) is a special legal for private U.S. financial institutions that pursue business purposes that are in the public interest. The best known examples are the Fannie Mae, Freddie Mac and the FHL banks. Despite their public mission, the GSE are not owned by the state. They are subject to special regulatory authorities. GSE are exempt from federal, state and local taxes.

The GSE obtain money on the capital market by issuing bonds. As a quasi-government institutions they received from the rating agencies the best possible credit ratings, even though they do not have an explicit government guarantee. However, the GSE can fall back in case of liquidity problems on a line of credit from the U.S. Treasury.

In the wake of the financial crisis that began in 2007, on September 7, 2008, two GSEs, Fannie Mae and Freddie Mac, nationalized and the competent supervisory authority, the Federal Housing Finance Agency ( FHFA ) took control.