Thomas H. Stanton. 1991. A State of Risk: Will Government-Sponsored Enterprises Be the Next Financial Crisis? New York: HarperBusiness.
Review by Stephen W. Hiemstra
Organization of Book
The book is organized into these chapters:
1. Introduction: GSEs and Thrift Institutions.
2. The Hidden Costs and Public Benefits of GSEs.
3. How GSEs work.
4. Enterprises in the Marketplace.
5. The Politics of Enterprise Lending.
6. Enterprises as Private Financial Institutions.
7. The Implicit Federal Guarantee as a Source of Risk Exposure.
8. Supervising Enterprise Safety and Soundness.
9. Enterprise Accountability.
Appendices: Law, Cases, and Other Legal Sources on GSEs.
“A GSE is a privately owned, federally chartered financial institution with nationwide scope and specialized lending powers that benefits from an implicit federal guarantee to enhance its ability to borrow money” (17). Stanton clarifies this definition with two insights: (1) “An enterprise raises money the way the federal government does but it lends that money as a private institution…” and (2) “An enterprise is a privately owned and controlled institution with a public purpose” (39). These insights sound simple, but in practice many analysts have trouble understanding the business function of the GSEs.
Stanton Explains GSE Risk
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