Government-Sponsored Enterprises

Among the small fraternity of analysts that follow Government-Sponsored Enterprises (GSE's), Thomas Stanton is well-known and respected. According to Stanton, a GSE is "a GSE is a privately owned, federally-chartered financial institution with nationwide scope and specialized lending powers that benefits from an implicit federal guarantee of all its obligations to enhance its ability to borrow money" (pp. 1-2). The six GSEs are: Fannie Mae, Freddie Mac, Farmer Mac, Sallie Mae, the Farm Credit System, and the Federal Home Loan Banking System. His book "is about the institutional design and the structure of the GSE as a special type of institution authorized, defined, and shaped by law" (p. xiii). While much of what Stanton writes about in this book is well-known in the fraternity of GSE analysts, few others are privy to these insights. The background on these institutions is mostly chronicled in law, the federal register, and studies commissioned by Congress that most people would find inaccessible. Occasionally, newspaper and magazine articles and technical studies appear that provide insights. The problem is that many of the studies and reports that appear are commissioned by the GSEs themselves, their supporters, and detractors. It can accordingly be difficult at times to separate objective information from other materials. Stanton's contribution is that he provides a coherent overview of the GSEs as institutions. Stanton is also willing to take on difficult subjects. For example, Stanton writes that "the political process does not handle probabilities well. Members of Congress may be insensitive to the results of the regulator's actions in reducing the changes of financial difficulties; by contrast they are likely to be instantly sensitive to any actions of the regulator that reduce immediate benefits to constituents." (p. 46). Stanton's insights into GSE behavior make his book a classic in the policy genre that is both very readible and very quotable.