Research On Legal System Of U.S. Government-Sponsored Enterprises

The U.S. government has created many different kinds of institutions to carry out public purposes. Of these, government-sponsored enterprises are among the most interesting. The six GSEs are financial institutions:Fannie Mae, Freddie Mac, and the Federal Home Loan Bank System in housing, the Farm Credit System and Farmer Mac in agriculture, and Sallie Mae in student loans. GSEs are hybrids that combine the characteristics of public and private organizations. Their ownership and their control are private, but the government provides them significant subsidies. Congress established GSEs to regulate credit markets as federal instrumentalities. Government-sponsored enterprises have established a credit secondary market for United State, they are useful in correcting market imperfections and improving the efficiency of capital markets. However, their statutory benefits turn most GSEs into large institutions that dominate their markets. Fannie Mae and Freddie Mac collapsed in 2008 result from ignoring the management risk, which turns out that any supervision would be useless when an institution develops to be a Monster. The paper discusses the background, structural, and legal attributes of GSEs, analyzes the successes of GSEs and the failure of Fannie Mae and Freddie Mac, and conclude that corporation social responsibility and directors'and officers'accountability is the best way to balance public purpose and private profits.