Government-Sponsored Enterprise (GSE)

A financial services corporation chartered by Congress for the public policy purpose of improving the availability of, and reducing the cost of, credit to a specific borrowing sector of the economy. GSEs targeting home finance include the Federal Home Loan Banks, Fannie Mae, and Freddie Mac. The Federal Farm Credit Banks target agriculture. Sallie Mae was set up as a GSE to target education, although it became fully privatized and gave up its government sponsorship in 2004. The GSEs are private companies with a limited charter of activities mandated by Congress. Their securities are not backed by the full faith and credit of the federal government, although investors have always assumed there was an implicit guarantee that the government would not allow a GSE to default on its debt. In September 2008, this implicit guarantee was recognized, when Fannie Mae and Freddie Mac were taken over and put into conservatorship.