A
government-sponsored enterprise (
GSE) is a
financial services corporation created by the
United States Congress. Their intended function is to enhance the flow of
credit to targeted sectors of the economy and to make those segments of the
capital market more efficient and transparent, and to reduce the risk to investors and other suppliers of capital. The desired effect of the GSEs is to enhance the availability and reduce the cost of credit to the targeted borrowing sectors primarily by reducing the risk of capital losses to investors:
agriculture,
home finance and
education. The two most well known GSEs are the Federal National Mortgage Association, or Fannie Mae, and the Federal Home Loan Mortgage Corporation, or Freddie Mac.