Fannie Mae

The Federal National Mortgage Association, or Fannie Mae, is a government sponsored enterprise that is authorized to make loans and loan guarantees. The company is not funded by the U.S. government, but the capital markets routinely treat the company as if the government has an understood obligation to back the company in the event of disaster.

Fannie Mae is critical to the secondary mortgage market which helps to replenish the supply of lendable money for mortgages and ensures that money continues to be available for new home purchases. Because of the federal government's substantial political interest in home ownership, the company is quite likely to benefit from government support if the business somehow collapses.

As a result of its special status, Fannie Mae has looser restrictions than normal financial institutions. Following the subprime mortgage crisis, its ability to sell mortgage-backed securities with half the capital backing them up than is required by other financial institutions has come into question.

The company ran aground in late 2006 when regulators filed charges against the chief executive and his key aides for manipulating financial statements in order to inflate their personal bonuses. The corporate culture cannot be excised overnight, but the underlying company is still quite the thoroughbred.