A privately held or
publicly traded company created by the U.S. Government for some purpose thought to benefit the American
economy. For example,
Freddie Mac was originally a GSE created to encourage
homeownership among middle class and
working class Americans. Because it is "sponsored" but not owned by the government, GSE
stocks carry higher
risk than, say,
Treasury securities, which are backed by the
full faith and credit of the United States. However, GSEs have an implicit guarantee that the government will not allow them to fail. Indeed, when
Fannie Mae and Freddie Mac collapsed in 2008 they almost instantly received federal assistance.