What is a Government Corporation? Definition,Type & Overview

A government corporation is a firm or organization that is wholly or partially controlled by a sovereign government. Not usually is the government link readily apparent. Click on each section below to read more information related to it.

What is a Government Corporation?

A government corporation is a firm that is owned by the government and operates with the same degree of autonomy as a private enterprise, with the exception that its owner is the government.

Government businesses are typically established in industries where a natural monopoly exists, the industry is essential to the nation’s infrastructure, important natural resources are at issue, or the public interest is at stake.

Type of Government Corporation

There are three distinct categories of government corporations. In this part, we will examine the many categories that exist.

Government-Sponsored Corporation

Do you owe student loans?. Hopefully not! However, if you have debt obligations, you may have to deal with Sallie Mae. Although the government does not own Sallie Mae, its student loans are supported by the government. Because of this, we refer to it as a government-sponsored corporation.

What is a Government Corporation?

Government-sponsored firms are not owned by the government, but they get partial funding from the government and are thus subject to government regulation. The mortgage giants Fannie Mae and Freddie Mac are an additional example of such a company.

Officially, these businesses exist to generate profits for their shareholders. However, Fannie Mae and Freddie Mac are able to provide homeowners with discounted loans because the government insures these loans. Therefore, despite the fact that these firms are officially owned by their shareholders, the government may control them since it subsidizes their loans.

What is a Government Corporation?

Government-Owned Corporations

Government-owned companies are ubiquitous. Need to ride a train from New York to Washington, D.C., for instance? Almost certainly, you will travel Amtrak, a publicly-owned national passenger rail service that operates as a business.

Have a letter to send to Los Angeles? You may choose either a pricey private carrier or the economical United States Postal Service, which is government-owned yet self-funded through postage.

Do you wish to see television? Perhaps you can watch PBS, which is owned and operated by the Corporation for Public Broadcasting, or Voice of America, a government-owned station. Want to ensure that your bank funds are adequately insured?

What is a Government Corporation?

The Federal Deposit and Insurance Commission, an independent government agency, guarantees your bank deposits, so you do not need to be concerned.

In other nations, government-owned companies are far more prevalent. For instance, you may have heard of the British Broadcasting Corporation, or BBC, a prominent worldwide news broadcaster controlled by the British government.

In a similar manner, the Venezuelan government has a total monopoly on all oil and gas sales through PDVSA. It is typical for a number of nations to exercise control over significant natural resources.

Government-Acquired Corporations

Occasionally, the government might buy a corporation that it did not create or commission. Perhaps the firm has fallen into tax arrears, allowing the government to seize control. Another example would be when the government saves a corporation on the verge of bankruptcy.

What is a Government Corporation?

This happened in 2009 when the federal government purchased shares of General Motors (GM) when the firm filed for bankruptcy. In order to assist the firm escape bankruptcy, the government agreed to purchase shares in order to prevent a national economic collapse. In this instance, the federal government purchased GM.

Conclusion

Government corporations have the independence of private enterprises, yet they are owned, funded, or bought by the government. Examples of government corporations may be seen all around us.

For example, Fannie Mae and Freddie Mac are instances of government-sponsored corporations. PBS is a government-owned corporation. GM is an example of a government-acquired firm.

Government corporations normally are founded in industries where a natural monopoly exists, it is crucial to the infrastructure of the country, significant natural resources are at stake, or there is a broad public benefit at stake.

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Pat Moriarty
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