IDEAS home Printed from https://ideas.repec.org/p/nfi/nfipbs/2006-pb-09.html

Privatizing a Government Sponsored Enterprise: Lessons from the Sallie Mae Experience

Author

Listed:
  • Michael J. Lea

Abstract

Government Sponsored Enterprises (GSEs) are government-chartered, special purpose corporations. They have been created to advance foster funding in a number of areas including housing, education and agriculture. Over the past 2 decades, the privatization has been proposed. There are many challenges associated with privatizing large, complex and politically powerful entities. Fortunately, a model for such an action exists. The Student Loan Marketing Association (Sallie Mae) was privatized through an Act of Congress in 1996. Sallie Mae re-organized under a holding company charter with a GSE and non-GSE subsidiaries. The GSE activities were limited and terminated on December 29, 2004 almost 4 years ahead of schedule. This paper describes the rationale for privatization, the constraints to the process, the reorganization structure and the effect of privatization on Sallie Mae and the student loan market. The key elements of the privatization process and structure are highlighted with reference to the applicability to Housing GSEs today.

Suggested Citation

  • Michael J. Lea, 2006. "Privatizing a Government Sponsored Enterprise: Lessons from the Sallie Mae Experience," NFI Policy Briefs 2006-PB-09, Indiana State University, Scott College of Business, Networks Financial Institute.
    • Handle: RePEc:nfi:nfipbs:2006-pb-09
    as

    Download full text from publisher

    File URL: http://www.indstate.edu/business/sites/business.indstate.edu/files/Docs/2006-PB-09_Lea.pdf
    File Function: Full text
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. William Haraf, 1988. "Restructuring Banking & Financial Services in America," Books, American Enterprise Institute, number 917739, September.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Mark A. Carlson & Burcu Duygan-Bump & William R. Nelson, 2015. "Why Do We Need Both Liquidity Regulations and a Lender of Last Resort? A Perspective from Federal Reserve Lending during the 2007-09 U.S. Financial Crisis," Finance and Economics Discussion Series 2015-11, Board of Governors of the Federal Reserve System (U.S.).
    2. van Eeghen, Piet-Hein, 2021. "Funding money-creating banks: Cash funding, balance sheet funding and the moral hazard of currency elasticity," International Review of Financial Analysis, Elsevier, vol. 76(C).
    3. Mei Li & Frank Milne & Junfeng Qiu, 2022. "Central bank screening, moral hazard, and the lender of last resort policy," Journal of Banking Regulation, Palgrave Macmillan, vol. 23(3), pages 244-264, September.
    4. Junnosuke Shino, 2010. "Lender of Last Resort Policy in a Global Game and the Role of Depositors Aggregate Behavior as Signaling," Departmental Working Papers 201007, Rutgers University, Department of Economics.
    5. Gerard Caprio, Jr., 1995. "The role of financial intermediaries in transitional economies," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 42(1), pages 257-302, June.
    6. János Kornai & Eric Maskin & Gérard Roland, 2003. "Understanding the Soft Budget Constraint," Journal of Economic Literature, American Economic Association, vol. 41(4), pages 1095-1136, December.
    7. George G. Kaufman, 1998. "Central banks, asset bubbles, and financial stability," Working Paper Series WP-98-12, Federal Reserve Bank of Chicago.
    8. Vincent Bignon & Marc Flandreau & Stefano Ugolini, 2012. "Bagehot for beginners: the making of lender‐of‐last‐resort operations in the mid‐nineteenth century," Economic History Review, Economic History Society, vol. 65(2), pages 580-608, May.
    9. Bordo, Michael D. & Dueker, Michael J. & Wheelock, David C., 2003. "Aggregate price shocks and financial stability: the United Kingdom 1796-1999," Explorations in Economic History, Elsevier, vol. 40(2), pages 143-169, April.
    10. Marvin Goodfriend, 1991. "Money, credit, banking, and payments system policy," Economic Review, Federal Reserve Bank of Richmond, vol. 77(Jan), pages 7-23.
    11. Docherty, Peter & Wang, Gehong, 2010. "Using synthetic data to evaluate the impact of RTGS on systemic risk in the Australian payments system," Journal of Financial Stability, Elsevier, vol. 6(2), pages 103-117, June.
    12. Kane, Edward J., 1999. "Implications of superhero metaphors for the issue of banking powers," Journal of Banking & Finance, Elsevier, vol. 23(2-4), pages 663-673, February.
    13. Goodfriend, Marvin, 2014. "Lessons from a century of FED policy: Why monetary and credit policies need rules and boundaries," Journal of Economic Dynamics and Control, Elsevier, vol. 49(C), pages 112-120.
    14. Jean-Charles Rochet & Xavier Vives, 2004. "Coordination Failures and the Lender of Last Resort: Was Bagehot Right After All?," Journal of the European Economic Association, MIT Press, vol. 2(6), pages 1116-1147, December.
    15. Edward J. Kane, 1991. "Financial Regulation and Market Forces," Swiss Journal of Economics and Statistics (SJES), Swiss Society of Economics and Statistics (SSES), vol. 127(III), pages 325-342, September.
    16. Tarishi Matsuoka & Makoto Watanabe, 2019. "Banking Panics and the Lender of Last Resort in a Monetary Economy," CESifo Working Paper Series 7451, CESifo.
    17. Li, Mei & Milne, Frank & Qiu, Junfeng, 2016. "The Signaling Effect and Optimal LOLR Policy," Queen's Economics Department Working Papers 274679, Queen's University - Department of Economics.
    18. Xavier Freixas & Anthony M. Santomero, 2002. "An overall perspective on banking regulation," Working Papers 02-1, Federal Reserve Bank of Philadelphia.
    19. Olivier Jeanne & Charles Wyplosz, 2003. "The International Lender of Last Resort. How Large Is Large Enough?," NBER Chapters, in: Managing Currency Crises in Emerging Markets, pages 89-124, National Bureau of Economic Research, Inc.
    20. Herrala, Risto, 2000. "Markets, reserves and lenders of last resort as sources of bank liquidity," Research Discussion Papers 3/2000, Bank of Finland.

    More about this item

    Keywords

    ;
    ;
    ;

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:nfi:nfipbs:2006-pb-09. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Ray Thomas (email available below). General contact details of provider: https://edirc.repec.org/data/nfinsus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.