Agricultural Government-Sponsored Enterprises (GSEs)

Organizations federally chartered, but privately owned and operated, that receive direct and indirect benefits from the government to improve credit availability and enhance market competition.

Congress charters a government-sponsored enterprise, or GSE, when perceived failures in private credit markets exist. Congress established GSEs to improve credit availability and enhance financial market competition in specific sectors of the economy.

GSEs can access a direct line of credit to the U.S. Treasury to achieve their goals, and Congress structures them so that they benefit from an implicit federal taxpayer guarantee on their obligations. The first GSE, the Farm Credit System, dealt primarily with agricultural and rural sectors. It was created by the Federal Farm Loan Act of 1916 (FFLA) and acts as a network of cooperative lending institutions that operates as a direct lender to agricultural producers, agricultural cooperatives, farm-related businesses, and rural residents. Another GSE, the Federal Agricultural Mortgage Corporation, was established in 1988 and acts as a secondary market for agricultural and rural housing mortgages.

Next post:

Previous post: