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.