Wholly-Owned Government Corporation in the United States

Wholly-Owned Government Corporation in the Federal Budget Process

Meaning of Wholly-Owned Government Corporation in the congressional and executive budget processes (GAO source): An enterprise or business activity designated by the Government Corporation Control Act of 1945 (31 U.S.C. § 9101) or some other statute as a wholly-owned government corporation. Each such corporation is required to submit an annual business-type statement to the Office of Management and Budget (OMB). Wholly-owned government corporations are audited by Government Accountability Office (GAO) as required by the Government Corporation Control Act, as amended (31 U.S.C. § 9105), and other laws. The Pension Benefit Guaranty Corporation is an example of a wholly-owned government corporation. Budget concepts call for any corporation that is wholly owned by the government to be included on-budget. (For distinctions, see Government-Sponsored Enterprise; Mixed-Ownership Government Corporation; Off-Budget.)

Independent Agencies & Government Corporations

Note: they should be distinguished from government-sponsored corporations, which are financial services companies created by the U.S. Congress for consumer purposes.

Like U.S. independent agencies of the executive branch, businesses and industry players interact with multiple government corporations. Government corporations are enterprises (“corporate bodies”) that exist in the private sector, but are owned by the federal (or State) government. Important examples include Sallie Mae, Freddie Mac and Fannie Mae). They are revenue generating companies that are legally distinct from but operated or owned (wholly or partially owned) by the government.

Definition and Description

A government-owned corporation, also known as a state-owned company, state enterprise, publicly owned corporation, or commercial government agency, is a legal entity created by a government to undertake commercial activities on behalf of the government. In some cases, government-owned corporations are considered part of the government, and are directly controlled by it. In other instances, government-owned corporations are similar to private enterprises except that the government is the majority stockholder. Government-owned agencies sometimes have public policy functions, but unlike other executive agencies, are primarily intended to bring in revenue.

In the United States, there is a specific subset of government-owned corporations known as government-sponsored enterprises (GSEs). GSEs are financial services corporations created by Congress to increase the availability of low cost credit to particular borrowing sectors. The first GSE in the United States was the Farm Credit System in 1916, which made loans available for agricultural expansion and development. Currently, the largest segment of GSEs operates in the mortgage borrowing segment. Fannie Mae, Freddie Mac, and the twelve Federal Home Loan Banks operate as independent corporations and provide loans for mortgages and real estate development. However, the government possesses sufficient stock to claim 79.9% ownership of the corporations, should it choose to do so.

In addition to the financial sector GSEs, the U.S. government has chartered corporations that are legally distinct from the government (unlike federal agencies) but that provide public services. These chartered corporations sometimes receive money from the federal government, but are largely responsible for generating their own revenue. Corporations in this category include the Corporation for Public Broadcasting, the National Fish and Wildlife Foundation, The National Park Foundation, and many others.

Lastly, the government sometimes controls government acquired corporations–corporations that were not chartered or created by the government, but which it comes to possess and operate. These corporations are usually controlled by the government only temporarily, often as the result of government seizure due to unpaid debts. For example, a delinquent taxpayer’s property may be repossessed by the government. Government acquired corporations are generally sold at auction or returned to the original controller once debts are repaid.

Source: Boundless. “Government Corporations.” Boundless Political Science Boundless, 08 Nov. 2016.

Resources

See Also

• Federal Appropriations
• Entries about the United States Budget Process in the Encyclopedia (including Wholly-Owned Government Corporation)
• Public Debt

Further Reading

• Legislatures and the budget process: the myth of fiscal control (J Wehner, 2010)
• Reconcilable Differences?: Congress, the Budget Process, and the Deficit (JB Gilmour, 1990)
• Fiscal institutions and fiscal performance (JM Poterba, J von Hagen, 2008)