Accountability of government sponsored enterprises

Government sponsored enterprises (GSEs) are federally chartered, privately owned institutions that benefit from the perception that the government stands behind their financial obligations. GSEs provide large amounts of credit to selected constituencies such as farmers, home buyers and students. On the other hand, GSEs lack sufficient accountability to the government and taxpayers that create and subsidize them. Three elements of accountability deserve attention: (1) assure that GSEs are well capitalized and properly supervised to protect against unnecessary financial risk; (2) authorize continuing independent analysis of their public benefits and costs; and (3) provide for an exit strategy so that the government can withdraw its sponsorship once a GSE outlives its public purposes.