The Life Cycle of the Government-Sponsored Enterprise: Lessons for Design and Accountability


Thomas H. Stanton is a director of the National Academy of Public Administration and a former member of the federal Senior Executive Service. He teaches at Johns Hopkins University. Concerns that he expressed in A State of Risk (1991) helped lead to the legislation and creation of a new GSE regulator in 1992. He holds degrees from the University of California, Davis, Yale University, and Harvard Law School.


The federal government uses government-sponsored enterprises (GSEs) to allocate credit to sectors such as housing and agriculture that are considered to deserve special support. The GSEs illustrate the importance of life cycle in the design and accountability of federal agencies and instrumentalities. Four case studies are presented here. In general, market and political dominance and rapid growth are inherent in GSE design. Dominance means inadequate feedback, which can foster poor management and financial risk. Government lacks an exit strategy for GSEs that have outlived their usefulness. Government should systematically review the organizational structure, accountability, and design of all agencies and instrumentalities, both at inception and over their life cycles.