CFA Practice Question

CFA Practice Question

Securities issued by which of the following are backed by the "full faith and credit" of the United States Government? (Hint: This is the only government-owned enterprise listed.)
A. Federal Home Loan Bank System.
B. Federal National Mortgage Association (Fannie Mae).
C. Government National Mortgage Association (Ginnie Mae).
Explanation: Of the entities listed, only Ginnie Mae is a Government-Owned Enterprise. The Government National Mortgage Association is one of the most prominent government owned agencies, along with the Tennessee Valley Authority (TVA). Securities issued by government owned agencies are backed by the full faith and credit of the United States Government, whereas securities issued by Government Sponsored Enterprises (GSE's) are not.

There are five government-sponsored agencies that currently issue securities:
  • Federal Home Loan Bank Corporation (Freddie Mac)
  • Federal National Mortgage Association (Fannie Mae)
  • Federal Home Loan Bank System
  • Federal Farm Credit System
  • Student Loan Marketing Association (Sally Mae)

User Contributed Comments 5

User Comment
humphrey the answer said GSE are not backed by full faith and credit of the US government, then why D?
kevin Therefore only C is backed fully by the US government!
vadklim humphrey: As far as I understand Ginnie Mae isn't GSE, it's Government-Owned Enterprise.
mroudnev one way to remember is: F (for federal) doesn't cover your Fanny. That is, anything that has "Federal" in the name is not in fact part of GOE's.
jerasmus Haha, awesome association!
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