What main purpose do government-sponsored enterprises (GSEs) serve?

Government-sponsored enterprises (GSEs) primarily serve to facilitate affordable financing options for individuals and businesses, particularly in sectors such as housing and agriculture. GSEs, like Fannie Mae and Freddie Mac, were established to increase the availability of mortgage credit for low- to moderate-income borrowers and improve the stability of the financial system. By purchasing mortgages from lenders, GSEs provide liquidity, making it easier for lenders to extend affordable loans to consumers. This practice ultimately lowers borrowing costs and promotes home ownership, which is a key goal of GSEs.

In contrast, regulating market competition is not the primary function of GSEs; rather, their role is to enhance access to financing. While they may influence market dynamics indirectly, their objectives are more aligned with supporting specific sectors rather than directly managing competition. Providing financial education is outside the main purpose of GSEs, as their focus is primarily on facilitating financing rather than educating consumers. Enhancing credit ratings is also not a core function of GSEs since they do not provide credit ratings themselves but may influence the ratings of the securities they issue or back through their activities, though this is a byproduct rather than a primary aim.