[Analytical Perspectives]
[Special Analyses and Presentations]
[8. Underwriting Federal Credit and Insurance]
[From the U.S. Government Publishing Office, www.gpo.gov]


 
              8.  UNDERWRITING FEDERAL CREDIT AND INSURANCE

  The Federal Government continues to be the largest financial 
institution in the United States, with a face value of $6.0 trillion 
outstanding at the end of 1996. Of this, $165 billion is direct loans, 
$805 billion is loan guarantees, and $5.0 trillion is insurance. 
Including Government-sponsored enterprises (GSEs), the total Federal and 
federally assisted credit and insurance outstanding is $7.7 trillion.
  These diverse financial programs offer credit for education, housing, 
business, and exports, and offer insurance for deposits, pensions, and 
other risks. They are now facing two challenges. Like all other Federal 
programs, they are operating in a period of tight budgetary constraints. 
And they are seeking to redefine their purpose and improve their 
effectiveness in the context of rapidly evolving private financial 
markets, that are making some of their functions less necessary and 
generating both new risks and new opportunities.
  The introduction to this chapter summarizes key changes in financial 
markets and their effects on Federal programs. Its first section is a 
cross-cutting analysis of the rationale for a continued Federal role in 
providing credit and insurance, performance measures for credit 
programs, and criteria for re-engineering credit programs so as to 
enhance their benefits in relation to costs. The second section reviews 
Federal credit programs and GSEs for four sectors: education, housing, 
business and community development, and exports, noting the rationale 
and goals of these programs, and analyzing the efforts to improve their 
effectiveness. The final section of the chapter assesses recent 
developments in Federal deposit insurance, pension guarantees, and 
disaster insurance.

Evolving Financial Markets

  Financial markets have been evolving rapidly in recent years. Both 
intermediaries--banks and the many non-bank firms engaged in financial 
services--and capital markets have been reaching out to new clients that 
they did not serve a few years ago. Competition for business within and 
across industry lines has become more intense as legal and regulatory 
restrictions segmenting financial markets have eased. Massive databanks 
and increasingly sophisticated analytical methods are being used to find 
creditworthy borrowers among people and businesses previously thought 
ineligible for private credit. These systems are under development and 
may still screen out some creditworthy clients, but they are also a 
relatively inexpensive way of screening new potential borrowers.
  Moreover, funds are flowing more readily to their most productive uses 
across the country and around the world. Interstate banking and 
branching are nationwide except for a few states that have opted out. 
Capital market financing is available to smaller companies and for a 
broader range of purposes than before. Secondary markets are the main 
source of financing for mortgages, and a rapidly growing source of 
financing for household durables, consumer credit, and small business 
loans. Nonbanks and nonfinancial firms that sell construction, 
equipment, and supplies are helping to funnel funds from capital markets 
to small clients in cities and in rural areas.
  Fast and cheaper information and communications systems have 
revolutionized ``back office'' functions. These can be consolidated to 
achieve economies of scale and located anywhere in the world where 
capable help is available and economical. From these locations, 
communications can bring the ``back office'' to the front line on a 
computer terminal in the office of any realtor or supplier or in any 
storefront or kiosk. From a timely information base, credit servicing 
and workout have become much more efficient, driven by benefit/cost 
calculations.

Impact on Federal Programs

  These changes are affecting the roles, the risks, and the operations 
of Federal credit and insurance programs.
     In some cases, private credit and insurance markets may 
          evolve sufficiently to take over functions that were 
          previously left to Federal programs. More likely, they may 
          take away the best risks among those who have been borrowing 
          from the Government or with its guarantee, leaving the Federal 
          program facing a smaller pool of riskier clients. If the 
          Government is aware of this in time, the result may be new 
          benefit/cost calculations that might help to redesign--or to 
          end--the program. If the Government is caught unaware, the 
          result may be greater cost for the taxpayers.
     At the same time, Federal programs can take advantage of 
          the growing private capability. They can leverage it to 
          provide additional assistance to their clients. With careful 
          attention to the incentives faced by the private sector, they 
          can develop a variety of partnerships with private entities. 
          And they can contract with the private sector wherever it can 
          provide specific credit servicing, collection, or asset 
          disposition services more efficiently.
  Insurance programs, too, are affected by the evolution of the 
financial marketplace. That is most obvious for deposit insurance, which 
now backs a recovered, consolidating industry, but one that has assumed 
the risks inherent in providing a growing array of increasingly 
sophisticated services, including many off-balance sheet activities, 
often on a world-wide basis. It is also true 

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for pensions, where the 
Government guarantees defined benefit plans, but defined contribution 
plans play an increasing role--attracting the support of younger workers 
in an aging workforce. And it is true for disaster insurance, where 
private firms are gaining a better understanding of their risks and 
exploring ways to diversify them in capital markets.
  In this changing environment for Federal credit and insurance 
programs, this chapter asks three questions. First, what is our current 
understanding of the roles of these programs? Second, how well are they 
achieving their goals? And finally, could these programs be re-
engineered to achieve greater benefits in relation to costs? The third 
question marks the beginning of a research project, cutting across all 
programs, which will continue over the next year.

                      I.  A Cross-cutting Assessment

The Federal Role

  In most lines of credit and insurance, the private market efficiently 
allocates resources to meet societal demands, and Federal intervention 
is unnecessary. However, there are situations where Federal intervention 
may improve on the market outcome. The following are six standard 
situations where this may be the case, \1\ together with some examples 
of Federal programs that seek to address them.
---------------------------------------------------------------------------
  \1\ Economics textbooks also list pure public goods, like national 
defense, where it is difficult or impossible to exclude people from 
sharing the full benefits of the goods or services once they have been 
produced. It is hard to imagine credit or insurance examples in this 
category.
---------------------------------------------------------------------------
     Information failures occur when there is an asymmetry in 
          the information available to different agents in the 
          marketplace. A common Federal intervention in such cases is to 
          require the more knowledgeable agent, such as a financial 
          institution, to provide certain information to the other, for 
          example, the borrower or investor. A different sort of 
          information failure occurs when the private market deems it 
          too risky to develop a new financial instrument or market. 
          This is rare nowadays, but it is worth remembering that the 
          Federal Government developed the market for amortized, fixed-
          rate mortgages and started other innovations in housing 
          finance.
     Externalities occur when people or entities either do not 
          pay the full cost of their activities (e.g., pollution) or do 
          not receive the full return. Federal credit assistance for 
          students is justified in part because, although people with 
          more education are likely to have higher income and even 
          better health, they do not receive the full benefits of their 
          education. Their colleagues at work, the residents of their 
          community, and the citizens of the Nation also benefit from 
          their greater knowledge and productivity.
     Economic disequilibrium is a third rationale for Federal 
          intervention. This is one rationale for deposit insurance. If 
          many banks and thrifts are hurt simultaneously by an economic 
          shock, such as accelerating inflation, and depositors have a 
          hard time knowing which ones may become insolvent, deposit 
          insurance prevents a contagious rush to withdraw deposits that 
          could harm the whole economy.
     Failure of competition, resulting from barriers to entry, 
          economies of scale, or foreign government intervention, may 
          also argue for Federal intervention--for example, by reducing 
          barriers to entry, as has often been done recently, by 
          negotiating to eliminate or reduce foreign government 
          subsidies, or by providing countervailing Federal credit 
          assistance to American exporters.
     Incomplete markets occur if producers do not provide credit 
          or insurance even though customers might be willing to pay for 
          it. One example would be catastrophic insurance, where there 
          is a small risk of a very large loss; a disaster that occurred 
          sooner rather than later could bankrupt the insurer even if 
          premiums were set at an appropriate level. Another example is 
          caused by ``moral hazard'' problems, where the borrower or 
          insured could behave so as to take advantage of the lender or 
          insurer. This is the case for pension guarantees, where 
          sponsors might underfund plans, and for deposit insurance, 
          where banks might take more risk to earn a higher return. In 
          these cases, the Government's legal and regulatory powers 
          provide an advantage in comparison with a private insurer.
     In addition to correcting market failures, Federal credit 
          programs are often used to redistribute resources by providing 
          subsidies from the general taxpayer to disadvantaged segments 
          of the population or regions.
  In reviewing its credit and insurance programs, the Federal Government 
must continually reassess whether the direct and indirect benefits to 
the economy exceed the direct and indirect costs. This assessment should 
include the costs associated with redirecting scarce resources away from 
other investments. In some situations, the market may have recently 
become capable of providing financial services, and older Federal 
programs may need to be modified or ended to allow private markets to 
develop. Private providers in similar circumstances might go bankrupt, 
merge, or change their line of business; for Federal programs, a policy 
decision and usually a change in law are needed to eliminate 
overcapacity. In other instances, Federal programs may be redesigned to 
encourage the development of private credit market institutions or to 
target Federal assistance more efficiently to groups still unable to 
obtain credit and insurance in the private market.

[[Page 147]]

What Are We Trying to Achieve?

  If the main Federal role is to provide credit and insurance that 
private markets would not provide--to stretch the boundaries in 
providing credit and insurance--the Federal goal is to achieve a net 
impact that benefits society. Together, these objectives make the 
standard for success of a Federal credit or insurance program even more 
daunting than for a private credit or insurance firm.
  For credit and insurance, as for all other programs, implementation of 
the Government Performance and Results Act (GPRA) will help to assess 
whether programs are achieving their intended results in practice--and 
will improve the odds for success. GPRA requires agencies to develop 
strategic plans in consultation with the Executive, the Congress, and 
interested parties; this process should refine and focus agency 
missions. The strategic plans set long-range goals, annual performance 
plans set milestones to be reached in the coming year, and annual 
performance reports will measure agency progress toward achieving their 
goals.
  GPRA defines four kinds of measures for assessing programs: inputs 
(the resources used), outputs (the goods or services produced), outcomes 
(the gross effects on society achieved by the program), and net impacts 
(the effects net of those that would have occurred in the absence of the 
program, e.g., with private financing). For credit and insurance 
programs, interesting interrelationships among these measures provide 
the keys to program success.

  Net impacts measure the net effect of the program on intended outcomes 
compared with what would have occurred in the absence of the program; 
they exclude, for example, effects that would have been achieved with 
private credit in the absence of the program. Among the net impacts 
toward which Federal credit programs strive are: a net increase in 
college graduates, a net increase in home ownership, a net increase in 
small businesses, a net increase in exports, and a net increase in jobs.
  For credit programs, the first key to achieving any of these net 
impacts is outreach. In the spirit of the Federal role, programs need to 
identify borrowers who would not get private credit. They need to reach 
out to under-served populations (e.g., low-income or minority people) 
and neighborhoods (urban and rural). They need to encourage the start-up 
of new activities (e.g., beginning farmers, new businesses, new 
exporters). And they need to reach their legislatively targeted 
populations (students, veterans). Federal lending is often directed to 
higher risk borrowers, or for higher risk purposes. In order to assist 
certain target groups or encourage certain activities, credit may be 
extended for longer periods or at a lower cost to the borrower.
  Achieving program objectives, however, also means finding ways to 
assist those borrowers at the boundary of private credit markets to 
repay their loans. This is not just a financial goal; it is necessary to 
achieve the program's social purpose. Education that enhances income is 
associated with repayment of student loans. Home ownership requires 
mortgage repayment. Remaining in business with a good credit rating 
requires repayment of small business, farm, and export loans. And loan 
repayment is inherent in program cost-effectiveness. Moreover, when the 
Federal Government bears risk for less creditworthy borrowers and does 
so in a way that fails to assist them to repay, they struggle with high 
debt burdens and are left with poor credit records.
  With implementation of the Federal Credit Reform Act of 1990, Federal 
credit programs began to reconcile the tension between giving help to 
certain groups or for certain purposes and ``business-like'' financial 
management. With the implementation of GPRA, they may begin to see 
program success and financial success as two facets of the same goal. 
The challenge is usually to identify ``boundary'' borrowers and to 
structure the loan and its servicing (including technical assistance) so 
as to pull those borrowers toward financial and programmatic success. In 
some cases, savings from improved credit program management may be 
reinvested to pull more borrowers across that boundary.

  Outputs and Outcomes, therefore, have an interrelationship which is 
crucial to the performance of credit programs. The most obvious output 
of Federal credit programs is the number and value of direct loans 
originated or loans guaranteed. But volume alone does not achieve the 
objectives of Federal credit programs; indeed, large volume or market 
share may be a sign of displacement of private lenders. Loans must have 
certain characteristics in order to achieve the desired outcomes and net 
impacts; these characteristics are therefore part of desired program 
output.
  Because of the Federal role, output measures should include an 
estimate of the percent of loans or guarantees originated going to 
borrowers who would otherwise not have access to private credit, and the 
percent of loans or guarantees originated going to specific target 
groups (e.g., veterans) or for specific purposes. Because of the Federal 
goal, output measures should include the percent of loans or guarantees 
that are current. This should be compared with the percent that were 
expected to be current at this point in the repayment cycle.
  To assess the latter, program data should be analyzed to determine 
whether repayment prospects are enhanced by particular characteristics 
of loan structure (such as higher initial borrower equity), of loan 
origination (such as verifying borrower financial status), of loan 
servicing (such as prompt counseling), or of guarantee conditions (such 
as lender risk-sharing). When such characteristics help to control the 
cost of credit programs and to achieve desired outcomes, then these 
characteristics should be measured as part of the program's output.
  The linkage between such output characteristics and the outcomes of 
Federal credit programs is not always fully recognized. For example, one 
desired outcome is to reach under-served populations or neighborhoods; 

[[Page 148]]

to achieve this outcome, it would be useful to monitor whether loans are 
going to borrowers who would not otherwise have access to credit or to 
specific target groups. Other desired outcomes include supporting 
investment important to the economy, encouraging start-up of new 
activities, or contributing to sustained economic development. To 
achieve these outcomes, it would be useful to monitor whether the 
program's loans and operating procedures have characteristics that would 
enhance borrower repayment.

  Inputs. Program cost is also a performance measure. For credit and 
insurance programs, it is a continuing challenge to understand and 
control the risks that the Government assumes and to measure the 
inherent cost. This is especially true in view of the rapid changes in 
financial markets discussed above and the increasingly complex financial 
instruments.
  The net present value subsidy cost of Federal credit programs, 
cumulated over time for each cohort of the program's loans or loan 
guarantees, is the main input. Another is the administrative cost of the 
program, including the cost of credit extension, direct loan servicing 
and guaranteed loan monitoring, collecting on delinquent loans and 
collateral, and other administrative costs such as policymaking or 
systems development.
  The relationship between subsidy and administrative costs is another 
crucial one for the success of credit programs. Careful servicing of 
loans, for example, can reduce default costs, and perhaps total program 
costs. So good servicing is good financial management for the taxpayer. 
But good servicing is also an art, which can--by helping borrowers to 
repay--help to achieve the program's performance objectives. Private 
servicing of loans offers many examples of the gains from matching 
repayment to the borrower's flow of income, treating borrowers in 
different circumstances differently, and in other ways maximizing the 
borrower's chances to make good.
  In sum, there are three relationships that seem to hold the key to 
excellence in credit program performance: the relationship between 
repayment and the achievement of program objectives, the relationship 
between the characteristics of credit program outputs and desired 
outcomes, and the relationship between subsidy cost and good servicing 
and program administration. Another important key to success is the 
speed with which the program adapts to market changes, including its 
ability to provoke or harness private markets to meet the Federal goals.

Principles for Re-engineering

  In order to improve the effectiveness of Federal credit programs, OMB 
will be working with agencies over the next year to identify ways to re-
engineer credit management. In particular, this effort will focus on 
improving servicing, will consider consolidation of functions such as 
data collection and asset disposition, will rely on the private sector 
when that would improve efficiency, will devise incentives to improve 
management and reduce cost, and will ensure the development of detailed 
data for program management and subsidy estimation.
  The focus will be on managing the servicing, workout, and sale of any 
collateral as efficiently as possible. For example, why does the Federal 
Government pay claims on guaranteed loans and handle the workout, 
instead of leaving this to the originating lender? Why does the 
Government take over collateral? How do the timing and results of our 
asset disposition compare with private practice? Why do we make loans to 
finance purchases of collateral? What incentives and penalties would be 
useful for programs and program staff? For guaranteed loan originators? 
For contractors who service Federal loans or dispose of collateral?
  A tentative set of principles for re-engineering credit programs has 
been developed that builds on OMB Circular A-129 and initial research. 
These will be circulated for agency comment and modified by lessons 
learned from additional research over the next year. The resulting 
principles are intended to improve the performance of Federal credit 
programs in the years ahead. Because private markets are extending 
credit where it was formerly unavailable, and because there is little 
purpose to re-engineering programs which are not justified, these 
principles start with basic questions of program justification. But 
their main focus is on how programs should be carried out.

                                                                        
                                                                        
                                                                        
                                                                        
Program Justification                                                   
                                                                        
  1.           Credit assistance should be provided only when it has    
                been demonstrated that private credit markets cannot    
                achieve clearly defined Federal objectives. What is the 
                objective? Is access to private credit available? If    
                not, why not? If so, why and to what extent should      
                private terms and conditions be supplemented or         
                subsidized?                                             
                                                                        
  2.           Credit assistance should be provided only when it is the 
                best means to achieve Federal objectives. Can private   
                credit markets be developed? Can market imperfections be
                overcome by information, regulatory changes, or other   
                means? Would small grants for downpayments,             
                capitalization for State, local, or nonprofit revolving 
                funds, or other approaches be more efficient?           
                                                                        
  3.           Credit assistance should be provided only when its       
                benefits exceed its cost. Analyze benefits and costs in 
                accordance with OMB Circular A-94.                      
                                                                        

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Program Design                                                          
                                                                        
  4.           Credit programs should minimize substitution for private 
                credit. What features of program design minimize        
                displacement? Encourage and supplement private lending? 
                To what extent is credit for this objective expanded by 
                this program compared with what would be available in   
                the absence of the program? What is the economic cost of
                the lending bumped from the credit queue?               
                                                                        
  5.           Credit programs should stretch their resources and better
                meet their objectives by controlling the risk of        
                default.  What features of program design minimize risk?
                Are there incentives and penalties for loan originators 
                and servicers to minimize risk? What features of the    
                loan contract, the process of origination, the quality  
                of servicing, and the workout procedures minimize risk? 
                Do borrowers have an equity interest? Is maturity       
                shorter than the economic life of the asset financed?   
                Are the timing and amount of payment matched with       
                availability of resources? Is timely reminder and       
                technical assistance provided? How well is risk         
                understood, measured, and monitored?                    
                                                                        
  6.           Credit programs should stretch their resources to better 
                meet their objectives by minimizing cost; most should be
                self sustaining.  Do fees and interest cover the        
                Government's cost, including administration? Are        
                interest rates specified as a percent of market rates on
                comparable maturity Treasury securities? Are charges for
                riskier borrowers proportional to their higher cost?    
                                                                        
Program Operations                                                      
                                                                        
  7.           Credit programs should take advantage of the capacity,   
                flexibility, and expertise available in competitive     
                private markets unless the benefits of direct Federal   
                operations can be shown to exceed the cost.  Private    
                financial institutions may offer convenient access for  
                borrowers, potential for graduation to private credit,  
                economies of scale, ready adjustment to changing volume 
                or location of loans, and knowledge of current credit   
                conditions and techniques.                              
                                                                        
  8.           The lender (in the case of a loan guarantee), the        
                servicer, and the providers of workout and asset        
                disposition services should have a stake in the         
                successful and timely repayment of the loan or          
                collections on claims and collateral. Originators of    
                guaranteed loans should bear a share of each dollar of  
                default loss, and--unless other arrangements can be     
                shown to be more cost-effective--should be responsible  
                for handling workout. Each contract should include      
                incentives for good performance, and penalties,         
                including loss of business, for poor performance. The   
                duration and scope of each contract or agreement should 
                be limited so as to maximize specialization and         
                competition, unless those are offset by economies of    
                scale in operations and monitoring.                     
                                                                        
  9.           Criteria should be established for lender participation  
                in Federal loan guarantee programs, servicers, and      
                providers of workout and asset disposition services.    
                These should include financial and capital requirements 
                for lenders and servicers not regulated by a Federal    
                financial institution regulatory agency, and may include
                fidelity/surety bonding and/or errors and omissions     
                insurance, qualification requirements for officers and  
                staff, and requirements of good standing and performance
                in relation to other contracts and debts. Lenders       
                transferring and/or assigning servicing, and lenders or 
                servicers transferring and/or assigning workout or asset
                disposition must use only entities which have qualified 
                under the Federal participation criteria.               
                                                                        
  10.          When there are economies of scope or scale, the data     
                gathering and analysis, servicing, debt collection,     
                workout, asset disposition, or other functions of       
                specific credit programs should be combined or          
                coordinated. The sequence of operations should be       
                streamlined, and accountability for each step clearly   
                defined.                                                
                                                                        
Program Monitoring                                                      
                                                                        
  11.          Each program should maintain or receive monthly loan-by- 
                loan transaction data and a system whereby this         
                information triggers servicing, workout, and follow-up  
                actions.  These data shall be linked by loan number to  
                an analytical database showing characteristics of loans,
                borrowers, projects financed, financial information,    
                credit ratings, and other data in a form suitable for   
                use in subsidy estimation and loan pricing.             
                                                                        
  12.          Each program should design and carry out steps to foresee
                problems, and to inspect, audit, and assess the         
                program's operations. Methods should be benchmarked     
                against the best practices used elsewhere. The program  
                and its lenders, servicers, and other contractors should
                experiment with and assess ways in which the            
                effectiveness or efficiency of the program might be     
                improved or costs reduced.                              
                                                                        

[[Page 150]]

                       II.  Credit in Four Sectors

                   Education Credit Programs and GSEs

Student Loans

  The Federal Government helps to finance student loans through two 
major programs: the Federal Family Education Loan (FFEL) program and the 
Federal Direct Student Loan (FDSL) program. Eligible institutions of 
higher education include public and private 2-year and 4-year 
institutions as well as vocational training schools. Schools may choose 
to participate in either program. Loans are available to students and 
their parents regardless of income. Borrowers with lower family incomes 
are eligible for higher interest subsidies.
  Overall student loan volume is expected to increase by almost 40 
percent over the next five years. In 1997, lending (excluding amounts 
for promissory notes that never result in loans) is expected to be $34 
billion, of which $7 billion is for consolidation of existing loans and 
the remainder is for new loans. By 2002, lending is expected to increase 
to $47 billion, of which $10 billion is for consolidations. The 
projected volume increase continues current trends, which have seen loan 
levels rise dramatically over the past 10 years. The principal causes of 
this increase--both to date and in the future--are steadily rising 
educational costs, higher loan limits, and a growing population of 
eligible borrowers.
  The Federal Family Education Loan program provides loans to students 
and parents through a complex administrative structure involving over 
7,000 lenders, 32 State and private guaranty agencies, 90 participants 
in the secondary markets, and 7,300 participating schools. Under FFEL, 
banks lend private capital to students and parents, guaranty agencies 
insure the loans, and the Federal Government reinsures the loans against 
borrower default. In addition to paying for defaults, the Federal 
Government provides interest and administrative subsidies to banks and 
guaranty agencies.
  The Federal Direct Student Loan program was authorized by the Student 
Loan Reform Act of 1993 to enable students and parents more easily to 
obtain and repay loans than was possible under the FFEL program. Under 
FDSL, the Federal Government provides loans directly to borrowers, thus 
eliminating the reinsurance and subsidization of private lenders. The 
program has several key advantages over the FFEL program:
     Borrowers may choose from a variety of repayment options, 
          including income contingent repayment. This gives them a wider 
          range of options in pursuing public service careers and 
          managing their finances.
     Application and repayment processes are streamlined for 
          borrowers and schools, eliminating substantial paperwork and 
          long lines at campus financial aid offices.
     Loan servicing and default collection is handled by 
          contractors selected through competitive bidding processes. 
          This ensures that the Federal Government obtains high quality 
          administrative services at the lowest price possible. The FFEL 
          program, by contrast, guarantees payments to all participating 
          lenders and guaranty agencies based on fixed rates set by law, 
          without regard to how well their services are performed.
     The simplified program structure is more manageable and 
          significantly less vulnerable to fraud and abuse. In 1995, the 
          Inspector General issued a clean audit opinion of the program, 
          the first time a clean audit has ever been received by any of 
          the Department's student loan programs.

  Reform proposals. The Administration continues to support allowing 
individual institutions to choose whether to participate in FFEL or 
FDSL. To improve both programs for students and taxpayers, the 1998 
Budget includes proposals for reducing borrower fees, matching subsidies 
more closely with lender costs, and restructuring the guaranty agency 
system. These proposed changes will achieve savings of $3.5 billion over 
five years.
  The U.S. General Accounting Office and Federal courts have 
acknowledged that the Federal Government is the actual guarantor of 
loans made under FFEL. The State and non-profit intermediaries in FFEL 
act as agents of the Federal Government; there are no non-Federal funds 
at risk. Guaranty agencies are not independent guarantors, but are in 
fact administrators of the Federal guarantee. The Administration 
proposes to end a system in which the guaranty agencies hold Federal 
funds from which they pay default claims. Instead, direct Federal 
payments will cover default claims. Guaranty agencies therefore no 
longer need to hold Federal funds in reserve, making possible the return 
of $2.5 billion in reserve funds over five years.
  To improve accountability for the Federal guarantee, the Secretary's 
agreements with guaranty agencies will be revised and will be subject to 
periodic recertification. They will include specific, publicly released 
performance information--confirmed by reliable audits--to ensure the 
submission of timely, accurate, and consistent data for management 
purposes. The Secretary will have authority to move to a system of 
performance-based contracts for the administration of the guarantee, 
rather than designation of intermediary agencies.
  The Department of Education continues to work to reduce default costs 
and to eliminate excessive subsidies to financial intermediaries. In the 
``gatekeeping'' operation--that is, the process for certifying schools 
for eligibility for Federal student aid--the Department is attempting to 
identify high-risk institutions and target its regulatory and 
enforcement efforts on these institutions. Through its legislative 
proposals, it attempts to reduce defaults through revised incentives to 
lenders 

[[Page 151]]

and guaranty agencies, and increased lender risk-sharing--from 2 
percent to 5 percent. To minimize unnecessary subsidies to lenders, the 
Administration proposes to continue the current policy of providing a 
lower interest rate when students are in school, reflecting lenders' 
lower servicing costs during that period. This also reduces interest 
payments by parents and some students.

  Performance Measures and Management. The Department of Education has 
collected longitudinal data showing that student loans enable college 
students from low-income backgrounds to progress academically and attain 
college degrees at the same rate as middle-income students whose 
families have had sufficient financial resources to avoid borrowing. 
Work continues on performance indicators for a broad spectrum of policy 
objectives that are comparable for both the direct and guaranteed 
programs. These indicators will measure efficiency, Federal costs, and 
financial management, as well as borrower and institutional 
satisfaction. The Department is engaged in an extensive review of its 
information technology systems needed to manage the student loan 
programs, in accord with requirements of the Information Technology 
Management Reform Act of 1995, to ensure that investments in these 
systems are cost effective and provide high quality service to users.

Sallie Mae and Connie Lee

  Sallie Mae. The Student Loan Marketing Association is a for-profit, 
shareholder-owned corporation chartered by Congress in 1972. Its purpose 
is to expand funds available for student loans by providing liquidity to 
lenders participating in the FFEL program. Sallie Mae purchases insured 
student loans from eligible lenders and makes warehousing advances 
(secured loans to lenders). It currently holds about one-third of all 
outstanding guaranteed student loans. Sallie Mae also has authority to 
finance academic facilities and equipment.
  Connie Lee. The College Construction Loan Insurance Association was 
created by the Higher Education Amendments of 1986 to insure and 
reinsure the financing of postsecondary education facilities. In 1988, 
the Department of Education helped provide initial financing of the 
corporation by purchasing, with appropriated funds, $19 million of newly 
issued common stock. Subsequently, the corporation sold additional stock 
to institutional investors.
  Privatization. Legislation has been enacted to privatize (or 
terminate) both education GSEs.
  In response to an Administration proposal to privatize Sallie Mae, 
Congress passed and the President signed on September 30, 1996, 
legislation laying out a process for restructuring Sallie Mae and 
eventually cutting its ties to the Federal Government. Under the new 
law, the shareholders have a choice. If they vote within eighteen months 
to restructure Sallie Mae, a holding company would be established that 
would own the outstanding Sallie Mae common shares. There are no limits 
in the statute on the types of business in which this holding company 
could engage. Sallie Mae's funds and assets would be maintained 
separately from the funds and assets of the holding company, and could 
be used only for Sallie Mae's GSE activities. Sallie Mae could continue 
to buy student loans until September 30, 2007, and would cease to exist 
on September 30, 2008. If the shareholders vote not to authorize the 
restructuring, Sallie Mae is required to submit a plan by July 1, 2007, 
for winding up its GSE activities by July 1, 2013, on which day Sallie 
Mae would cease to exist.
  In 1996, the Administration proposed and Congress approved legislation 
to privatize Connie Lee by repealing the corporation's enabling 
legislation and requiring the Federal Government to sell, and Connie Lee 
to purchase, the corporation's federally owned stock. This sale will 
occur during fiscal year 1997, and proceeds will be used to finance 
public elementary and secondary school facility construction and repair 
within the District of Columbia. The corporation will continue to insure 
debt of educational institutions, including Historically Black Colleges 
and Universities and academic institutions which have lower investment-
grade credit ratings. Free from previous Federal restrictions, the 
corporation will be able to guarantee bonds in other market sectors and 
diversify into new products and services.

                    Housing Credit Programs and GSEs

  The Government provides loans and loan guarantees to expand access to 
home ownership to people who would not qualify for a conventional 
mortgage. It also helps to finance rental housing for low-income 
persons. Housing credit programs run by the Departments of Housing and 
Urban Development (HUD), Agriculture (USDA), and Veterans Affairs (VA) 
supported over $100 billion in loan and loan guarantee commitments in 
1996, helping over 1.3 million households.

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Federal Housing Administration

  The Federal Housing Administration (FHA) provides mortgage insurance 
that expands access to homeownership to people who lack the savings, 
income, or credit history to qualify for a private mortgage. It also 
provides credit to finance the purchase, construction, and 
rehabilitation of rental housing for low-income persons.
  FHA's Mutual Mortgage Insurance (MMI) Fund helps increase access to 
single-family mortgage credit. In 1996, the MMI Fund guaranteed over $59 
billion in mortgages for over 739,000 households. Total MMI Fund 
insurance outstanding at the end of 1996 was $364 billion. Fees and 
premiums paid to the MMI Fund fully offset program costs; thus, the 
program is self-sustaining without an annual credit subsidy 
appropriation from Congress. FHA's General Insurance and Special Risk 
Insurance (GI/SRI) Fund provides for a number of specialized mortgage 
insurance programs, including the insurance of loans for property 
improvements, as well as for cooperatives, condominiums, housing for the 
elderly, rental housing, and hospitals. In 1996, the GI/SRI Fund 
guaranteed over $12 billion in mortgages for over 301,000 households. 
The GI/SRI fund requires a credit subsidy appropriation for the cost of 
multi-family insurance. In addition, the budget projects $5 billion of 
net insurance costs for multi-family projects will be recognized over 
the next three years. The Administration's Portfolio Reengineering 
proposal will help to reduce both these mandatory insurance costs and 
future discretionary rental assistance costs for these properties.
  First-time homebuyers make up over two-thirds of FHA's insurance 
business each year. Very low-income and minority homebuyers, and buyers 
living in underserved areas are a growing proportion of FHA's single-
family business. In 1995, 29 percent of FHA mortgage insurance was 
provided to African-American and Hispanic borrowers--an increase from 18 
percent in 1992 and higher than the 14 percent in the entire conforming 
market. In 1995, 41 percent of FHA's insurance was provided in 
underserved areas--an increase from 36 percent in 1992 and higher than 
the 30 percent for the entire market's lending. In 1995, 18 percent of 
FHA's home purchase loans were made to very-low-income borrowers, while 
the comparable figure for the whole conforming market was 15 percent.

  Reengineering FHA Programs. FHA is streamlining and reorganizing its 
single-family operation. At the beginning of 1996, the FHA single-family 
program was administered by a staff of about 2,200; over the next three 
years, staff levels are projected to decline dramatically, contributing 
significantly to achieving the Department's overall downsizing goals.
  To ensure staff reductions are accomplished without diminishing 
performance, downsizing is being accomplished by prudent consolidation 
of functions much as private sector counterparts have undergone in the 
last decade, along with core business process reengineering, greater use 
of technology, and contracting out work more efficiently performed by 
the private sector. FHA has begun consolidating operations currently in 
81 field offices into three Homeownership Centers. Two more are under 
consideration. New statutory authority to delegate endorsement 
responsibility to lenders is being implemented. Automated underwriting 
systems are being piloted. Three demonstrations using contractors to 
manage property disposition functions are also underway.
  Sale of defaulted single-family and multifamily mortgages is another 
tool to reduce workload and allow a smaller staff to maintain focus. FHA 
has sold about 79,000 nonperforming mortgages over the past two years, 
for proceeds of $5.4 billion. These sales have allowed FHA to cut 
dramatically its backlog of troubled mortgages and focus its staff on 
such core functions as mortgage originations and prevention of future 
defaults. These sales have saved $1.6 billion for the Federal 
Government, compared to the estimated cost of holding the mortgages in 
FHA's portfolio. Proceeds above the estimated value to Government have 
been used to fund other initiatives and to reduce the deficit.
  Starting in 1997, FHA intends to test the viability of sharing single-
family mortgage risk between the Federal Government and other partners, 
including private mortgage insurers and State agencies. Pilot agreements 
are being negotiated. The Government's goal will be to pair the greater 
flexibility of the risk-sharing partner to innovate with new products 
and delivery systems to reach underserved markets with the Federal 
Government's capacity to assume risk. If an agreement offering the 
Government acceptable levels of risk, economic value, and public benefit 
is reached, the pilot will test the proposition that partners can 
provide greater efficiencies through counseling, underwriting, servicing 
and property disposition.
  The Administration will continue to address long-standing problems in 
the properties which have FHA-insured mortgages and also receive rental 
subsidies for low-income tenants. Multi-family Portfolio Reengineering 
will generate $1.3 billion in discretionary savings over five years by 
reducing over-subsidized rents to market levels. However, this reduces 
project income and necessitates writing down the mortgages on these 
properties to the level that market rents will support--resulting in 
claims on the FHA fund. HUD will seek authority to use third-party 
partners to make this mortgage restructuring a proactive process that 
improves the quality of assisted housing and expands housing choices. 
Enacting this authority would produce $665 million in mandatory savings.
  Current appropriations provisions support this objective by limiting, 
with some exceptions, renewal of assistance contracts to 120 percent of 
the applicable fair market rent. If these limitations continue, FHA will 
need enhanced authorities to manage mortgage restructurings for the 
large number of affected properties. Without such authority, FHA will 
not have the ability to realize potential savings from the 
restructuring.

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Rural Housing Insurance Fund

  While credit availability in rural communities has increased 
dramatically over the years, USDA's Rural Housing Service (RHS) credit 
programs are still needed. Many rural counties are served by only one or 
two banks, implying that credit may not be available on competitive 
terms. Moreover, many rural areas have substandard housing for low-
income residents, and a lack of rental housing.
  RHS provides subsidized single-family direct loans (502 direct) to 
very-low and low-income borrowers unable to get credit elsewhere to 
purchase, rehabilitate, or repair homes. Single-family loan guarantees 
(502 guarantee) cover up to 90 percent of an unsubsidized home loan. The 
multi-family direct loan program (515 direct) generally lends to private 
developers to construct and rehabilitate rental housing for low- and 
moderate-income households, elderly households, or handicapped 
individuals. RHS's direct loan programs offer interest rates below the 
Treasury rate; single-family direct loans can reach 100 percent of a 
home's appraised value. For 1998, the Administration estimates that the 
combined direct and guaranteed single-family housing loans of $4 billion 
(an increase of 22 percent over 1997) would allow for 64,000 new 
homeowners. The requested multi-family loan level of $150 million 
(unchanged from 1997 enacted) would provide 2,000 new rental units for 
rural Americans.

  Improving Service and Reducing Costs. In 1997-98, RHS will install a 
new system that will centralize servicing for its 650,000 single-family 
direct loan borrowers, previously carried out in over 1,000 county 
offices. This should provide better servicing with 1,500 fewer 
employees. The National Performance Review anticipates this will save 
$250 million over five years.
  Legislative proposals for 1998 would allow single-family direct loans 
to be refinanced using guarantees, thus helping borrowers to graduate to 
private credit. The refinanced loans would be relatively low-risk 
because the borrowers would have built up equity in their homes. Another 
proposal would require a ``balloon payment'' for the multi-family 
housing direct loan program. All new multi-family loans would have a 30-
year term with payments based on a 50-year amortization. This would 
lower the subsidy rate, and match the loan term more closely to the 
asset's useful life, thus providing an incentive for the borrower to 
better maintain the property.

Department of Veterans Affairs

  The Department of Veterans' Affairs (VA) assists veterans, members of 
the Selected Reserve, and active duty personnel to purchase and retain 
homes as a recognition of their service to the Nation. The main 
objective of VA's loan program is to facilitate mortgage lending by 
private lenders for the purchase, construction, or improvement of homes 
occupied by veterans and their families. More than 29 million veterans 
and service personnel are eligible for VA financing. The programs 
substitute the Federal guarantee for the borrower's downpayment. In 
1996, VA will provide $2.9 billion in loan guarantees at a subsidy rate 
of 0.42 percent. For veterans unable to obtain private home financing 
with the guarantee, VA provides direct loans. In addition, through its 
``vendee loan'' program, VA offers seller financing to purchasers of VA-
owned properties acquired through defaults. In 1996, VA will provide 
$1.3 billion in direct loans at a subsidy of 1.76 percent.
  The home loan program was originally created to assist service members 
returning from World War II in readjusting to civilian life. The program 
was designed to place veterans on equal terms with their civilian 
counterparts when they returned from the War. Since its creation, 
several legislative changes have modified the program. The amount of the 
entitlement has been increased, and the benefit extended to active-duty 
military and members of selective reserves. Approximately 20 percent of 
the population who use this benefit now are active-duty military, and 
the remaining 80 percent are veterans.

  Improving Service and Efficiency. As the veterans population declines 
and technology improves, the quality of service should continue to 
improve. The program's goal is to provide veterans with complete and 
timely access to their loan guaranty benefit while minimizing the costs 
of the program. Ongoing studies will continue to assess the efficiency 
and effectiveness of the delivery of these programs.
  VA's loan processing, loan servicing, and claims functions will 
continue to be consolidated from forty-five Regional offices across the 
United States to eight Regional Loan Centers (RLCs). This will improve 
responsiveness to customer needs and expectations, improve service 
delivery and benefit claims processing, and ensure the best value for 
the taxpayer's dollar. When completed in 2002, this consolidation is 
expected to save $26 million.
  In 1998, VA plans to turn increasingly to automation to improve 
service delivery while decreasing operating costs in the home loan 
programs. Specifically, VA is developing Electronic Data Interchange 
(EDI) capability with lenders, servicers, and appraisers to automate 
loan processing and servicing.

Fannie Mae and Freddie Mac

  Fannie Mac and Freddie Mac, the largest Government-sponsored 
enterprises (GSEs), are the dominant firms in the secondary market for 
conventional mortgages. As of September 1996, Fannie Mae and Freddie Mac 
had outstanding $1.4 trillion in mortgages purchased or guaranteed. 
These GSEs engage in two main lines of business: they issue and 
guarantee mortgage-backed securities (MBS), and they hold portfolios of 
mortgages, MBS, and other mortgage-related securities that they finance 
by borrowing.
  The Federal Housing Enterprises Safety and Soundness Act of 1992 
reformed Federal regulation of Fannie Mae and Freddie Mac. This Act 
created the Office of Federal Housing Enterprise Oversight (OFHEO) to 

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manage the Government's exposure to risk by conducting examinations and 
setting risk-based capital requirements based on a stress test model. 
OFHEO has solicited public comment on a variety of issues related to a 
risk-based capital regulation and, in June 1996, published the first of 
two Notices of Proposed Rulemaking on risk-based capital.
  As required by the 1992 Act, the Secretary of Housing and Urban 
Development issued a final regulation at the end of 1995 that 
established new goals for Fannie Mae and Freddie Mac to foster credit 
for lower-income families and under-served communities. The regulation 
requires each entity in 1997 through 1999 to devote 42 percent of its 
mortgage purchases to finance dwelling units that are affordable by low- 
and moderate-income families, 24 percent of its purchases to finance 
units in areas with low average incomes and high concentrations of 
minority residents, and 14 percent of its purchases to finance units 
that are special affordable housing for very-low-income families and 
low-income families living in low-income areas. During 1993-95, the GSEs 
were subject to transitional goals. As the final goals were 
substantially revised from the transitional goals, the level of the 
goals in 1996 was slightly lower than the level required during 1997-99 
in order to provide an interim period for the GSEs to implement 
strategies to achieve them over time. Fannie Mae consistently achieved 
the required level of the three housing goals during the 1994-96 period. 
Freddie Mac achieved the low- and moderate-income goal and the special 
affordable housing goal in 1994 and 1995 but did not achieve the 
transitional geographically targeted goal, which was defined in terms of 
central cities. In 1996, Freddie Mac achieved the required level of 
performance for all three housing goals.
  Fannie Mae and Freddie Mac have come under increasing scrutiny in 
recent years as they have increased their profits and size. This 
scrutiny was heightened in 1996 when the Department of the Treasury, the 
Department of Housing and Urban Development (HUD), the Congressional 
Budget Office, and the General Accounting Office each published studies 
of the desirability and feasibility of completely severing the ties 
between Fannie Mae and Freddie Mac and the Federal Government. Although 
none of the agencies recommended this, their studies identified the 
benefits and costs of Government sponsorship of these GSEs, assessed the 
relative magnitudes of those benefits and costs, attempted to reach an 
overall evaluation of current Federal policy, and analyzed the potential 
implications of various policy options. The reports agreed that 
regulation of Fannie Mae and Freddie Mac under the 1992 Act has been 
relatively brief, suggesting that it would be prudent to wait before 
reaching final judgments about the status quo.
  The process used to adjust the ceilings on the size of the mortgages 
that Fannie Mae and Freddie Mac may purchase has also come under 
increasing scrutiny. Current law requires the GSEs to adjust the limits 
each year to reflect increases in average house prices. However, 
uncertainty has arisen over the proper adjustment to the loan limits. 
Legislation has been introduced to require Fannie Mae and Freddie Mac to 
limit increases in the ceiling to reflect any decreases that have 
occurred in house prices since the last increase. The GSEs recently 
adopted this policy voluntarily for 1997, choosing to increase the limit 
for 1-4 family mortgages by 3.7 percent to $214,600, rather than by the 
most recent increase in the index of 8.4 percent.

Federal Home Loan Bank System

  The Federal Home Loan Bank System (FHLBS) was established in 1932 to 
provide liquidity to home mortgage lenders. The FHLBS carries out this 
mission by issuing debt and using the proceeds to make secured loans, 
called advances, to its members. Federally chartered thrifts are 
required to be FHLBS members, and membership is open to commercial 
banks, credit unions, and insurance companies on a voluntary basis. As 
of September 30, 1996, 6,023 financial institutions were FHLBS members, 
an increase of 319 over September 1995. About 65 percent of members are 
commercial banks, and 32 percent are thrifts; however, over 75 percent 
of outstanding FHLBS advances were held by thrifts as of September 30.
  The FHLBS reported net income of $1.3 billion for the year ending 
September 30, 1996, up from $1.2 billion in the previous 12 months. 
Total System capital rose from $14.6 billion to $16.4 billion, and the 
ratio of capital to assets rose from 5.5 percent to 5.8 percent. Average 
return on equity was about 6.7 percent, after adjustment for payment of 
interest to the Resolution Funding Corporation (REFCorp). Outstanding 
advances to members reached $153 billion at September 30, 1996, up from 
$122 billion a year earlier. One reason for the large increase in 
advances may have been the use of FHLBS advances as a substitute for 
deposits. During most of 1996, a large disparity in deposit insurance 
premium rates existed for institutions insured by the Savings 
Association Insurance Fund and the Bank Insurance Fund; thrifts may have 
mitigated the high cost of deposit insurance by relying more heavily on 
FHLBS advances.
  System investments other than advances stood at $124 billion, or about 
44 percent of total assets, as of September 30, 1996; compared to a year 
earlier, investments have declined in both dollar terms and as a 
percentage of assets. The Federal Home Loan Banks are required by law to 
pay $300 million annually toward the cost of interest on bonds issued by 
the Resolution Funding Corporation. The need to generate income to meet 
this obligation and provide a competitive return on members' investment 
was a driving force behind the substantial increase in the System's 
investment activity in recent years. This need has thus encouraged the 
System to expose itself to new kinds of risk and resulted in a departure 
from the System's traditional focus of making advances to members.
  In the past, the System's exposure to credit risk was virtually 
nonexistent. All advances to member institu-

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tions are collateralized, and the FHLBanks can call for additional or substitute collateral during the life of an advance. No FHLBank has ever experienced a loss on an advance. The System's expanding investment activities, however, have added new sources of risk. In addition, pilot programs to allow the FHLBanks to underwrite mortgages jointly with their members were approved this year by the Federal Housing Finance Board, the System's regulator. Through these programs, the FHLBS is taking on credit risk, which it has not previously assumed; this new source of risk could 
become significant if such programs expand. In addition, the pilot 
programs represent a departure from the FHLBanks' traditional role as a 
wholesale lender. Instead, the Banks are participating in retail lending 
for the first time and competing directly with non-GSEs.
  The role and risks of the FHLBS must continue to be examined and 
monitored in the face of rapidly changing financial markets. Changes in 
housing finance markets, such as increasing securitization, have reduced 
the role of portfolio lenders. Of about $4 trillion in residential 
mortgage debt outstanding, only 14 percent is held directly by thrifts 
and 18 percent by commercial banks; about 47 percent is held or 
guaranteed by Fannie Mae, Freddie Mac, or Ginnie Mae. In addition, the 
Deposit Insurance Funds Act of 1996 calls for eliminating the Federal 
thrift charter by 1999; requirements that thrifts specialize in home 
mortgage lending are eased by the Economic Growth and Regulatory 
Paperwork Reduction Act of 1996. The role of the FHLBS should be 
reexamined in light of changes in housing finance markets, the System's 
recent shift away from its core mission of providing advances to 
members, and potential changes in the structure and activities of the 
industry served by the FHLBS.

         Business and Rural Development Credit Programs and GSEs

Small Business Administration

  Over the past four years, SBA has successfully expanded small 
businesses' access to capital despite fewer resources to operate its 
programs. While increasing loan volume by 38 percent (from $7.4 billion 
in 1993 to $10.2 billion 1996), SBA has reduced its staffing by 23 
percent.
  In its principal program, Section 7(a) General Business loans, SBA has 
introduced several initiatives to provide access to capital for the 
Nation's most under-served small businesses. The Low Documentation 
(LowDoc) initiative reduces the application form for 7(a) loans under 
$100,000 to a single sheet. The FasTrack pilot allows lenders to use 
their own forms in exchange for a reduced Government guarantee. These 
initiatives--and aggressive lending goals--have increased 7(a) loan 
volume to minority- and women-owned businesses from $1.8 billion (27 
percent of 7(a) loan volume) in 1993 to $3.0 billion (39 percent) in 
1996.
  Reliance on private sector partners.  With its portfolio growing from 
$20.7 billion in 1993 to $35.3 billion in 1996, SBA has relied 
increasingly on its private sector partners for loan servicing and 
liquidation, especially in the 7(a) program, which accounts for 75 
percent of SBA business lending.
  SBA's most experienced lenders are given unilateral authority to 
approve, service, and liquidate SBA-guaranteed loans under the Preferred 
Lender Program (PLP). Prior to 1996, in exchange for this authority, 
PLPs received a lower SBA guaranty (80 percent versus 90 percent for 
other lenders). Beginning in 1996, Congress set the maximum guaranty for 
all 7(a) loans--including PLP--at 80 percent. This change in legislation 
and SBA's goal of increasing its use of PLP lenders have led to a large 
increase in such lending. Loans approved through PLP lenders grew from 
$1.3 billion in 1995 (16 percent of loan volume) to $3.0 billion in 1996 
(39 percent) and are estimated at $3.9 billion in 1997 (50 percent).
  SBA also delegates servicing and liquidation authority in its LowDoc 
program. For defaulted loans, SBA requires that lenders liquidate all 
business chattel before SBA honors its guarantee. LowDoc loans accounted 
for 15 percent of 1996 7(a) loan volume (down from 21 percent in 1995.)
  Altogether, through PLPs, LowDoc, and other programs, SBA has moved 
from delegating approximately 30 percent of servicing and liquidation 
authority for loans approved in 1993 to over 60 percent in 1997.
  Liquidation improvement efforts. SBA has also strengthened its 
management of agency-serviced loan assets. In March 1996, SBA launched 
its Liquidation Improvement Project (LIP), an initiative to improve 
recoveries on agency-serviced defaulted business loan guarantees. Prior 
to LIP, agency field office performance was measured through lending 
goals, with no complementary goals for portfolio management, such as 
default and recovery levels. LIP established goals for loan servicing 
and liquidation--challenging field offices to increase recoveries by 20 
percent.
  Need for better oversight tools. Over the past four years, SBA has 
significantly increased loan volume, reduced staffing, and delegated 
authority to its private sector partners. During this same period, 
commercial small business lenders have become increasingly more 
sophisticated in identifying credit risk. Recognizing the profitability 
in small business lending, several lending institutions have recently 
announced aggressive small business lending goals. While these 
initiatives further expand small businesses' access to capital, they may 
also result in lending institutions making only higher risk loans 
through SBA loan guarantee programs.
  These trends reinforce SBA's need for improved portfolio oversight 
tools. SBA, like many Federal agencies, continues to struggle with 
antiquated financial systems. SBA managers also lack access to timely 
and accurate analysis of portfolio trends and information on the 
performance of its private sector partners.

  Reform Proposals. Recognizing the above trends, the Budget includes an 
aggressive plan to complete the shift of the SBA from a loan servicing 
to a lender over-

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sight financial institution. SBA's proposals include: 
(1) delegating remaining 7(a) servicing and liquidation to its lending 
partners, (2) selling all direct loans and defaulted guarantees, and (3) 
making strategic investments in improving portfolio oversight tools.
  Given the stringency of budgetary resources, these initiatives will 
allow SBA to focus on its performance goals of increasing access to 
capital, while relying on private lenders to perform functions where the 
private sector has historically been more efficient.
  7(a) loan servicing and liquidation. In 1998, SBA proposes completing 
this trend toward reliance on its 7(a) lending partners. For all lending 
approved after 1997, SBA will require its 7(a) lenders to service and 
liquidate all defaulted loans. In addition, SBA will defer making claim 
payments on defaulted loans until after lenders have liquidated business 
chattel, which will reduce the net present value cost of claim payments.
  Portfolio oversight. SBA will also invest $18 million in improving 
portfolio oversight. SBA's reduced staffing, growing portfolio, 
antiquated systems, and greater delegation of authority make a 
significant investment in portfolio management tools essential to ensure 
that the agency continues to meet its portfolio management 
responsibilities. This funding will allow SBA to recruit expertise in 
lender oversight, develop the necessary in-house systems to support 
lender monitoring, and create a centralized corporate database. Drawing 
on the experience of financial institutions such as Fannie Mae and 
Freddie Mac, SBA will establish loan servicing performance goals for its 
field offices and private sector partners.
  Loan asset sales. Completing its transition from loan servicing to 
lender oversight, SBA will sell its portfolio of defaulted guaranteed 
loans and direct loans in 1998 and 1999. The Disaster loan portfolio 
will be sold in 1999 and 2000, after an initial pilot sale of $100 
million in 1998. Drawing on the experience of Federal agencies, such as 
the Resolution Trust Corporation, and SBA's analysis of its portfolio 
value resulting from its Liquidation Improvement Plan, the 
Administration estimates that SBA's business loan assets (face value of 
over $2 billion) can be sold at a net gain to the Government. The 
Administration estimates that SBA's disaster loans (face value of $7 
billion) can also be sold to advantage.
  Doing more with less. These proposals will allow SBA to continue to 
``do more with less''. Through improved portfolio oversight, lender 
servicing of defaulted loans, and deferred claim payments, the 
Government's subsidy costs of SBA's 7(a) loan program is estimated to 
decline from 2.3 percent to 1.8 percent, reducing the Government's 
contribution to the cost of this program by $44 million. By investing 
$18 million in portfolio monitoring improvements in 1998, this proposal 
produces savings of $26 million in 1998 alone. Larger savings will be 
achieved in the following years as increasing reliance on lenders allows 
SBA to further reduce agency staffing. In a tight budgetary environment, 
these proposals ensure that SBA will continue to have the resources 
necessary to meet the agency's performance goals for expanding credit 
access.

USDA Rural Infrastructure and Business Development Programs

  The Department of Agriculture (USDA) provides financial assistance to 
rural communities and businesses to provide safe drinking water and 
adequate wastewater treatment facilities, increase rural employment, and 
further diversify the rural economy. Grants, loans, and loan guarantees 
are available to communities for constructing facilities, such as health 
care clinics and day care centers, and water and wastewater systems. 
Direct loans to construct community facilities and water and wastewater 
facilities are available at lower interest rates for lower income 
communities. These programs are targeted to rural communities with fewer 
than 10,000 residents. Each program has low default rates.
  USDA also provides grants, direct loans, and loan guarantees to assist 
small and large rural businesses in order to increase rural employment 
and further diversify the rural economy. Assistance amounts range from 
small grants up to $25 million loan guarantees. In December 1996, a 
regulation was published streamlining the application process for the 
Business and Industry loan guarantee program and shifting responsibility 
to private banks for the application process and credit analysis. A 
certified lender program was established to reduce the administrative 
burden for experienced lenders. In 1997, direct loans will be provided 
in areas where private lenders do not use the guarantee program, and to 
borrowers who do not qualify for guaranteed loans. USDA's assistance to 
rural businesses has grown significantly from $100 million in 1993 to 
over $700 million in 1996. At the lower program levels, the default rate 
for these programs was low; over the next year, a review of the current 
portfolio will be undertaken in order to verify whether that is 
continuing.
  The delivery of these programs is proposed to be significantly changed 
in the Budget. The 1996 Farm Bill enacted the ``Rural Community 
Assistance Program'' (RCAP), which builds on the Administration's 1996 
and 1997 budget proposals to modify the distribution of rural 
development funding in order to accommodate the diversity of rural 
America. Funding for 12 USDA rural development activities was 
consolidated into ``performance partnerships'' in order to target 
Federal assistance more flexibly to the highest-priority needs of the 
State. USDA State Directors will be authorized to allocate funding among 
programs, with advice from State Rural Development Councils, including 
representatives of Federal, State, local, and tribal governments, and 
the private sector. In addition to the flexible funding scheme proposed 
by the Administration, the RCAP includes authority for rural development 
block grants to the States.

Electric and Telecommunications Loans

  USDA's rural electric and telephone borrowers range from multi-billion 
dollar cooperatives to local telephone 

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companies with as little as one million dollars in assets. The intent of the program was to bring electric and telephone service to under-served rural areas. Today, over 99 percent of rural households have electricity, and 97 percent have telephones. The program makes new loans to maintain existing 
infrastructure and to modernize electric and telephone service.
  The Federal risk associated with the over $40 billion loan portfolio 
in electric and telephone loans has been small historically. Several 
large defaults have occurred in the electric program, primarily as a 
result of nuclear power construction loans; a total of nearly $1 billion 
was written off by USDA in 1996. However, both the telephone and 
electric industries are moving into a more competitive environment. In 
the electric industry in particular, the Federal Government can expect 
to be faced with managing a loan portfolio where the security erodes as 
the industry deregulates. USDA intends to propose legislative changes to 
restructure its outstanding $30 billion loan portfolio of rural electric 
loans. USDA's principal concerns are the impact of deregulation on loan 
security, the ability of borrowers to repay as the industry changes, and 
the goal of ``affordable, universal service''. Many rural cooperatives 
are by their very nature high cost providers of electricity, since there 
are fewer subscribers per line-mile than in urban areas.

Loans to Farm Operators

  Farm Service Agency (FSA) direct and guaranteed operating loans 
provide credit to farmers and ranchers for annual production expenses 
and purchases of livestock, machinery, and equipment. Direct and 
guaranteed farm ownership loans assist producers in acquiring their 
farming or ranching operations. As a condition of eligibility, direct 
loan borrowers must have been denied private credit at reasonable rates 
and terms, or they must be beginning or socially disadvantaged farmers. 
The program's goal is to serve those farmers who otherwise would not 
receive loans from the private sector at a reasonable cost. Loans are 
provided at Treasury rates or 5 percent. As a result, high defaults and 
delinquencies are inherent in the program.
  FSA guaranteed farm loans are made to more creditworthy borrowers who 
have access to private credit markets. Because the private loan 
originators must retain 10 percent of the risk, care is exercised in 
examining borrower repayment ability. As a result, guaranteed farm loans 
have not experienced losses as high as those on direct loans.
  The 1996 Farm Bill significantly changed many of the servicing 
requirements for delinquent borrowers. For example, the FSA no longer 
can make a new loan to a borrower who is delinquent on an existing loan. 
Borrowers who have previously received a FSA loan write-down or write-
off are no longer eligible for additional loans. The 1998 Budget 
proposes to temper this requirement by allowing farmers to become 
eligible for assistance after 7 years. The 7-year reinstatement is 
consistent with commercial terms. Property acquired through foreclosure 
on direct loans must now be sold at auction within 105 days of 
acquisition and leasing of inventory property is no longer permitted 
except to beginning farmers. These changes will limit losses to the 
Federal Government. Prior to these changes, acquired property remained 
in inventory on average for five years before the FSA could dispose of 
it.

The Farm Credit System and Farmer Mac

  The Farm Credit System (FCS) and the Federal Agricultural Mortgage 
Corporation (Farmer Mac) are GSEs that enhance credit availability for 
the agricultural sector. The FCS is a direct lender, financing its loans 
largely through bond sales in the national credit markets, while Farmer 
Mac facilitates a secondary market for agricultural loans. Both GSEs are 
exposed to agricultural commodity concentration risk, from which the FCS 
suffered in the 1980s. Direct lending institutions in the FCS are also 
geographically limited, often to areas dependent on one or a few 
commodities. In the 1980s, the downturn in the agricultural economy led 
the FCS to the brink of insolvency and precipitated legislation in 1987 
to bailout the FCS--legislation that also created Farmer Mac.
  The Nation's agricultural sector and its lenders are now on firmer 
ground: farm income and land prices have improved, increasing borrower 
repayment abilities and collateral values, and permitting lenders to 
augment their capital. Both interest rates and inflationary expectations 
are significantly lower. And management practices, especially with 
respect to credit usage by farmers and the credit standards used by 
lenders, are now applied more conservatively.
  Another sign of the increasing health of agricultural finance is the 
greater share of farm credit now provided by the private sector, 
particularly commercial banks. From 1985 to 1995, commercial banks' 
share of all farm debt (real estate and non-real estate) increased from 
23 percent to 39 percent, while the share for FCS declined from 29 
percent to 24 percent and for USDA from 12 percent to 7 percent. 
However, FCS's non-real estate loan growth has recently been faster than 
that of commercial banks. By 1995, the System's market share had begun 
to creep upwards for the first time in over a decade.

The Farm Credit System

  In 1995, FCS also had a record of annual income surpassing the $1 
billion level for three years in a row. System loan volume has been 
gradually increasing in recent years, but the $60.9 billion at the end 
of September 1996 is still far below the high of over $80 billion in the 
early 1980s. Increases in accruing loan volume, declines in the cost of 
funds, and increases in capital have widened the FCS's net interest 
margin from less than one percent in 1987 to more than three percent for 
the 1993-95 period. Nonperforming assets declined from $14.3 billion in 
1987 to $1.1 billion at the end of September 1996.
  Improved asset conditions and income enabled FCS to post record 
capital levels; by September 30, 1996, 

[[Page 158]]

capital stood at $10.6 billion. Two-thirds of this capital was surplus, rather than borrowed equity. Included in this capital are investments set aside to repay about $600 million of the $1.3 billion of 1987-authorized Federal assistance provided through the Financial Assistance Corporation (FAC), due 
beginning in 2003. The FCS has adopted an annual repayment mechanism to 
cover the remainder. It has retired all its high-coupon long-term debt, 
moved to marginal cost loan pricing, and adopted asset-liability 
management practices designed to reduce its interest rate risk.
  Operating risk is also being reduced. Substantial wholesale and retail 
level consolidation has occurred in the structure of the FCS. In January 
1988, there were 12 districts consisting of 36 banks plus 376 
associations; by October 1996, there were only 6 districts, 8 banks and 
227 associations. Due to restructuring implementation costs and the time 
required to make operating adjustments, the savings from this 
restructuring are just beginning to be realized. System staff levels 
declined by 14 percent over 1990-1995. With increasing loan volume and 
fewer problem assets, operating expenses as a percentage of loans 
outstanding have begun to decline.
  The 1987 Act established the FCS Insurance Corporation (FCSIC) to 
ensure timely payment of interest and principal on FCS obligations. This 
supplemented the financial strength provided by the System's capital, 
the joint and several liability of all System banks for FCS obligations, 
and the Farm Credit Administration's enforcement authorities. The FCSIC 
collects insurance premiums from the FCS's banks and earns investment 
income, thereby providing funds to fulfill its mission. As of December 
31, 1995, the assets in the Insurance Fund totaled $1.0 billion ($1.1 at 
September 30, 1996).

  The Changing Role of the FCS. The System's original mission was to 
serve as a market force to ensure an adequate supply of competitively 
priced credit to the benefit of farmers. Loans to farmers and other 
eligible borrowers still comprise 72 percent of the System's portfolio. 
While the largest segment of the FCS's portfolio is still in farm real 
estate loans, the share has been gradually declining and is now about 
two-thirds of the farm lending portfolio.
  Since its origination, FCS's authorities have been broadened, 
introducing 26 new types of lending such as expanded authorities for 
export and rural utilities financing, that have contributed to a growing 
volume of cooperative lending over the past 20 years. A surge in loans 
to finance processing, marketing, credit cooperatives, and rural 
utilities cooperatives increased the cooperatives' share of FCS's 
portfolio to almost 28 percent at year-end 1995.
  The Farm Credit System is stronger now than it has been in years and 
its strength continues to grow. But primarily due to its concentration 
in agriculture, it continues to be exposed to structural changes in the 
agricultural and commercial banking sectors. In banking, consolidation 
is driven by adoption of computer/communications technology and by the 
breakup of statutory structures that have provided geographic and 
product line separations. In agriculture, vertical integration in the 
food system and the growth of input suppliers and other nontraditional 
creditor suppliers have tied farms to nonfarm businesses, increased the 
importance of nontraditional creditors in agricultural markets, and 
changed the way credit is provided.

Farmer Mac

  Farmer Mac was established in 1987 to create and oversee a secondary 
market for, and to guarantee securities based on, farm real estate 
loans. The secondary market is intended to increase the availability of 
long-term credit for farmers and ranchers at stable interest rates, and 
improve the availability of credit for rural housing.
  Since the 1987 Act, Farmer Mac has been authorized to issue its own 
debt securities, and to operate a secondary market in real estate and 
operating loans guaranteed by the Farm Service Agency (``Farmer Mac 
II''). The Farm Credit System Reform Act of 1996 further expanded its 
powers, transforming Farmer Mac from just a guarantor of securities 
formed from loan pools into a direct purchaser of mortgages in order to 
form pools to securitize.
  The 1996 Act was passed in response to a steady erosion of Farmer 
Mac's capital base. Revenues from services as a guarantor, and a pooler 
under Farmer Mac II, did not meet expectations and showed no prospect of 
improvement. The new powers increase commercial banks' incentives to 
participate in Farmer Mac and allow Farmer Mac to serve as pooler.
  However, these powers also subject the Corporation to more credit 
risk. Prior to the 1996 Act, Farmer Mac had little risk from defaults in 
the loan pools since a 10-percent subordinated interest in loans pooled 
was required to be held by originators or other entities outside the 
pool. As a direct purchaser of loans with no required subordination, 
Farmer Mac will be exposed to such losses, and must estimate them 
accurately for fee setting and for determining the appropriate level of 
capital reserves. The 1996 Act gave Farmer Mac three additional years to 
reach its minimum and critical capital requirements, and 2 years to 
raise capital to $25 million.
  On December 20, 1996, Farmer Mac completed the public issuance and 
sale of approximately 1.4 million shares of non-voting common stock, 
generating new equity capital for the Corporation of about $32.4 
million. Previously, in April 1996, a private sale of 320 thousand 
shares of Farmer Mac's non-voting common stock raised about $2.56 
million. By year-end 1996, Farmer Mac's total capital was approximately 
$47.5 million, which exceeds the Corporation's regulatory minimum 
capital requirement ($6.4 million) and the 1996 statutory requirement 
($25 million).
  Additional steps have also been taken by Farmer Mac to minimize the 
potential for losses on securitized loans under the new authorities. 
These steps include: (1) establishment of a higher annual guarantee fee 
of 50 

[[Page 159]]

basis points on loans securitized, (2) maintenance of an adequate 
loan loss reserve to cover anticipated losses, and (3) applying loan 
underwriting standards that include a maximum loan-to-value ratio of 70 
percent for loans up to $2.3 million and only 60 percent for loans 
between $2.3 million and $3.3 million.

                      International Credit Programs

  Seven Federal agencies--the Departments of Agriculture, Defense, 
State, and Treasury and the Agency for International Development, the 
Export-Import Bank, and the Overseas Private Investment Corporation--
provide direct loans, loan guarantees, and insurance to a variety of 
foreign private and sovereign borrowers. In 1996, the amount outstanding 
was over $80 billion.

  Leveling the playing field. One important reason why the Federal 
Government provides credit in the international area is to help U.S. 
companies and organizations, large and small, win sales by matching the 
financial subsidies that foreign governments, largely in Europe and 
Japan, provide on behalf of their own national businesses in export and 
investment markets in the developing world. Export credit agencies 
(ECAs) have been established by many countries to provide official 
export credits; they often charge below market interest rates and fees 
to give their exporters a competitive advantage.
  The Export-Import Bank of the U.S. (Eximbank) attempts to ``level the 
playing field.'' Eximbank supports the sale of U.S. goods and services 
to foreign buyers to ensure that purchase decisions are based on market 
forces (i.e., price, quality, service, technology), and not on financial 
subsidies offered by other nations' ECAs or imperfections in private 
capital markets. Eximbank accounts for 30 percent of the $70 billion in 
medium- and long-term official export credits offered by G-7 ECAs in 
1994 (latest OECD data)--far ahead of the next competitor at 18 percent 
(Germany). Eximbank is also first among major ECAs in providing the most 
unrestricted financing in almost twice as many markets as its nearest 
competitor.
  Similarly, USDA's GSM-102 and 103 programs expand and maintain 
commercial agricultural exports by guaranteeing credit extended by 
private U.S. exporters or financial institutions. The GSM programs are 
targeted to countries where government guarantees are needed to help 
meet a ``credit gap'' between credit otherwise available from all 
sources and the desired level. The programs help to counter continuing 
competition from other countries that offer credit through ECAs or 
commodity marketing boards.
  The increase in world trade and the globalization of capital markets 
has made ECAs somewhat less important in recent years. Although ECA 
financing of the G-7 increased from $230 billion in 1990 to $270 billion 
in 1994, official credits are a diminishing share of global capital 
flows; private flows now far outweigh government financing. OECD data 
for 1994 show that official credits represent only 2 percent of net 
resource flows to developing countries. IMF data show that total capital 
flows to developing countries hit a record $228 billion in 1995, but 
$211 billion (or 93 percent) were private capital flows.

  Helping economies in transition. Another goal of the international 
credit programs is to provide financial assistance to foreign 
governments and private entities, largely in developing countries, where 
private financial organizations are reluctant to enter without 
government support.
  In particular, the dramatic economic transformation that has been 
underway in Eastern and Central Europe since the early 1990s presents 
U.S. businesses with unprecedented opportunities matched by 
unprecedented risks. The U.S. Government operates several programs to 
mitigate these risks.
  Since 1991, Eximbank has provided financing for exports to Russia and 
several Newly Independent States, as well as countries in Central 
Europe, to increase U.S. exports and assist the region's economic 
transformation. For example:
     In July 1993, Eximbank signed the Oil and Gas Framework 
          Agreement under which Eximbank may provide $2 billion or more 
          in financial assistance for purchases of U.S. equipment and 
          services to revitalize Russia's energy sector.
     On November 8, 1994, Eximbank signed a Memorandum of 
          Understanding with Gazprom, Russia's gas production and 
          distribution company, which will open the way for Eximbank to 
          support transactions involving at least $750 million in U.S. 
          equipment and services for the rehabilitation of Russia's 
          natural gas sector.
     On January 30, 1996, Eximbank signed a Memorandum of 
          Understanding with the Russian state timber industry 
          governmental entity, Roslesprom, which will open the way for 
          the export of U.S. goods and services for the modernization of 
          Russia's timber industry.
  Eximbank provided over $2.7 billion in loans, guarantees, and 
insurance for deals in Russia/NIS between 1994 and 1996. Eximbank 
expects to provide more than $1 billion of additional credit in 1997 and 
1998, primarily for oil, gas, timber, and various natural resource 
projects. In November 1996, Eximbank began considering applications from 
private Russian borrowers.
  USDA's GSM export credit guarantee program is being used in 
transitional economies to aid development, while stimulating markets for 
US agricultural exports. New initiatives beginning in 1993 have sought 
to leverage private sector involvement in Russia, Poland, Latvia, 
Lithuania and Estonia, and stress high-value U.S. exports. Credit 
guaranteed to non-sovereign borrowers totaled $122 million from 1993 to 
the present, and its annual level has quadrupled during this period, 
with Russia's being the largest single initiative. Guarantees of $166 
million are being offered in 1997, with a greater amount in 1998.
  In addition, the GSM program guaranteed more than $750 million of 
public sector credit to transitional 

[[Page 160]]

economies since 1993. Current levels of coverage will be made available in the future, commensurate with the shift to private sector activity in these economies.
  Eximbank has also helped the U.S. Agency for International Development 
(USAID) administer a special one-time program for Ukraine that has 
provided U.S. exporters with trade credit insurance to finance 
approximately $150 million in exports of U.S. agricultural supplies and 
inputs to Ukraine.
  Through its Urban and Environmental Credit Program (formerly entitled 
Housing Guaranty Program), USAID has also provided loan guarantees to 
Poland, the Czech Republic, and Hungary. These guarantees, which are 
accompanied by technical assistance, are designed to assist these 
countries in such areas as the development of mortgage instruments and 
lending procedures for the housing sector, in strengthening municipal 
finance through the development of new debt instruments, and in 
establishing market oriented systems for financing municipal 
infrastructure investments.

  Re-engineering credit delivery. Through the Trade Promotion 
Coordinating Committee (TPCC), agencies providing export credit have 
developed a unified National Export Strategy, and they are working 
together to make the delivery of trade promotion support more effective 
and convenient for U.S. exporters.
  U.S. Export Assistance Centers. A much stronger private-public 
partnership is being developed through the creation of the nationwide 
U.S. Export Assistance Centers (USEACs) Network. Eximbank teamed up with 
the Commerce Department and the Small Business Administration to 
establish these one-stop-shops. The USEACs have dramatically transformed 
the way Federal, state, and local international trade partners now work 
together and approach trade finance. By establishing a more rational, 
integrated network, leveraging resources and improving accessability to 
services, more small and medium-sized firms were able to obtain export 
financing through the USEACs in 1995-1996.
  New Mechanisms. Small and medium-sized enterprises (SMEs) often cite 
access to trade finance as the key to export success, yet only 75 of the 
over 9,000 banks in the U.S. do substantial export financing and most 
smaller businesses do not have relationships with them. Even if the SMEs 
were willing to seek out relationships with these larger banks, the 
small size of their transactions can make it difficult for banks to 
provide them with the adequate trade financing assistance. The White 
House is studying the development of a program--modeled after the home 
mortgage market--which will address the availability of reasonably 
priced export (buyer) financing. It will entail small banks taking 
exporter performance risk, larger banks assessing the credit risk of 
foreign buyers, and private capital markets providing increased 
liquidity to the export finance sector. Eximbank, the Small Business 
Administration, and OMB will be working in 1997 with other Executive 
Branch agencies and private sector parties to refine this proposal.
  Infrastructure Finance. The rapid privatization and deregulation of 
massive infrastructure projects--including power, telecommunications, 
and transportation systems--occurring in many developing countries has 
increased the demand for financing beyond what the private capital 
markets have been willing to provide. These project finance deals are 
complex transactions where the only source of debt repayment is the 
economic return generated by the project itself, rather than a sovereign 
nation or a private company. OPIC and Eximbank are often involved in the 
largest project financing transactions. In these cases, Eximbank and 
OPIC staff work to ensure that the project meets each agency's credit 
quality and other requirements. Eximbank and OPIC have been particularly 
successful at providing financial support for U.S. power generation 
suppliers in private power projects. Eximbank's and OPIC's support has 
provided several emerging markets with their initial success in private 
power. Since Eximbank's Project Finance Division was created in 1995, it 
has provided $2.3 billion of financing for nine private power projects 
with a total project cost of $8.3 billion and total generation capacity 
of 6,300 megawatts. Likewise in 1995, OPIC provided project finance or 
insurance support to ten power generation projects around the world.
  Greater Emphasis on Private Buyers. As countries around the world have 
shifted from public to private buying in recent years, the GSM programs 
in USDA have been re-engineered to meet changing commercial needs and to 
increase US exports while minimizing the risk of default. The programs 
now provide greater flexibility by offering shorter maturities, broader 
commodity coverage, regional programming, and third-country banking. Two 
new credit programs have been developed to meet commercial credit gaps 
not met by GSM-102 and GSM-103: the supplier and the facility credit 
guarantee programs, which cover exports of consumer-ready products and 
construction of handling facilities (such as refrigeration at the dock). 
At the same time, creditworthiness criteria and program terms and 
conditions (e.g., amount of exposure per risk rating) have been 
tightened to minimize the risk of default. There has not been a major 
default in the GSM program in three years.
  The U.S. Agency for International Development (USAID) is now exploring 
the possibility of using guarantees of private sector loans to finance 
up to $100 million of the approximately $280 million outstanding U.S. 
Government commitment to The U.S.-Russia Investment Fund (TUSRIF). Like 
other ``enterprise funds'' established by the U.S., TUSRIF is designed 
to assist the development of a market economy by providing financing and 
management support to businesses operating in Russia.

[[Page 161]]

                         III.  Insurance Programs

                            Deposit Insurance

  Federal deposit insurance was instituted in the 1930s to provide 
coverage against depositor losses from failures of insured institutions. 
Deposit insurance also serves as a form of protection against widespread 
disruption in financial markets by reducing the probability that the 
failure of one financial institution will lead to a cascade of other 
failures. The Federal Deposit Insurance Corporation (FDIC) insures the 
deposits of banks and thrifts through two separate insurance funds, the 
Bank Insurance Fund (BIF) and the Savings Association Insurance Fund 
(SAIF). Deposits of credit unions are insured through the National 
Credit Union Administration (NCUA). Deposits are currently insured up to 
a limit of $100,000 per account. The FDIC insures deposits at over 9,500 
commercial banks and almost 2,000 savings institutions, for a total of 
about $2.7 trillion in insured deposits. The NCUA insures about 11,500 
credit unions with about $260 billion in insured deposits.

  Current Industry and Insurance Fund Conditions. The 1980s and early 
1990s were a turbulent period for the bank and thrift industries, with 
over 1,400 bank failures and 1,100 thrift failures. The Federal 
Government responded with the Financial Institutions Reform, Recovery 
and Enforcement Act (FIRREA) of 1989 and the Federal Deposit Insurance 
Corporation Improvement Act (FDICIA) of 1991. These legislative reforms, 
combined with more favorable economic conditions, helped to restore the 
health of depository institutions and the deposit insurance system. The 
FDIC currently classifies only 125 institutions with $15 billion in 
assets as ``problem'' institutions, compared to over 1,400 institutions 
with $800 billion in assets just 5 years ago.
  During 1996, only 5 commercial banks with a total of $187 million in 
assets failed, and only 1 thrift with $34 million in assets failed. 
Eighteen credit unions with $15 million in assets failed during 1996. 
Although depository institutions and their Federal insurance funds are 
currently in good financial condition, an economic downturn could put 
significant pressure on the deposit insurance funds.
  Banks have achieved very strong levels of earnings in the last few 
years, which enabled the industry to recapitalize BIF. BIF reached its 
statutorily designated reserve ratio of 1.25 percent in mid-1995. As a 
result, the FDIC lowered deposit insurance premiums for banks to a range 
from zero for the healthiest banks to 27 cents per $100 of deposits for 
the riskiest banks. Currently, almost 95 percent of commercial banks pay 
nothing for deposit insurance.
  The earnings of the thrift industry have also showed significant 
improvement in the last few years. The industry remains in strong 
financial condition despite the imposition in the Deposit Insurance 
Funds Act of 1996 (DIFA) of a $4.5 billion special assessment to 
capitalize the SAIF. Thrifts paid $3.5 billion of the assessment, and 
banks with SAIF-insured deposits contributed $1 billion.
  During most of 1996, thrifts paid deposit insurance premiums of 23 
cents per $100 in deposits while most banks paid only the statutory 
minimum of $2,000 per year (this minimum has since been repealed). The 
DIFA was enacted to mitigate this disparity in deposit insurance 
premiums. DIFA required a special assessment on SAIF-insured deposits to 
immediately bring SAIF up to the required 1.25 percent reserve ratio. In 
addition, the Act required that the cost of interest on the Financing 
Corporation (FICO) bonds, which were issued in the late 1980s to pay for 
the early stages of the thrift crisis, be shared by banks and thrifts 
instead of being paid by thrifts alone. A small premium disparity will 
continue for the next 3 years because thrifts must bear a larger share 
of the FICO cost than banks until January 1, 2000, when banks and 
thrifts will begin to share the interest cost on a pro rata basis.
  The DIFA also merges the BIF and SAIF on January 1, 1999 provided that 
no savings associations exist at that time. In other words, the merger 
is conditional on subsequent legislation to combine the bank and thrift 
charters. As required by the DIFA, the Administration will present its 
recommendations on the development of a common depository institution 
charter to Congress by March 31, 1997.
  The National Credit Union Share Insurance Fund (NCUSIF) also remains 
strong with assets of $3.6 billion. Each insured credit union is 
required to deposit and maintain in the fund 1 percent of its member 
share accounts. In 1996, the income generated from the 1 percent deposit 
eliminated the need to assess an additional insurance premium. As of 
September 30, 1996, the Fund's equity ratio reached 1.32 percent, and in 
October 1996, the NCUA Board approved a $102 million dividend to reduce 
the Fund's equity ratio to the statutory ceiling of 1.30 percent. This 
was the second consecutive year in which the NCUA Board paid such a 
dividend. In addition, the NCUA Board waived insurance premiums for 
1997.

  Other Legislative and Regulatory Developments. The Economic Growth and 
Regulatory Paperwork Reduction Act of 1996 (EGRPRA) contained several 
provisions to ease the regulatory burden on depository institutions. For 
example, EGRPRA modified reporting requirements under the Real Estate 
Settlement Procedures Act and the Truth in Lending Act, provided for 
eventual repeal of civil liabilities under the Truth in Savings Act, 
expanded the exemption from Home Mortgage Disclosure Act reporting 
requirements, created expedited procedures for well-capitalized and 
well-managed bank holding companies to engage in non-banking activities, 
and expanded the number of small banks and thrifts that regulators are 
permitted to examine on an 18-month cycle instead of annually. The 
EGRPRA 

[[Page 162]]

also expanded the definition of ``qualified thrift investments'' 
to include small business, credit card, and education lending; thrifts 
generally must hold at least 65 percent of their assets in these 
qualified thrift investments, which previously were largely limited to 
real estate-related assets.
  In November 1996, the Office of the Comptroller of the Currency (OCC), 
which regulates national banks, finalized changes to its regulation on 
operating subsidiaries of national banks. The rule will allow national 
banks to conduct activities through operating subsidiaries that were 
formerly permissible only under a bank holding company structure. The 
extent of expanded powers that may be granted to national bank operating 
subsidiaries is still unclear, because the rule does not list specific 
activities that are approved; instead, the OCC will consider 
applications on a case-by-case basis.
  The Federal Reserve has also proposed allowing bank holding companies 
and their non-banking subsidiaries to engage in a wider range of non-
banking activities deemed ``closely related to banking.'' In addition, 
the Federal Reserve Board in December 1996 increased the revenue limit 
from underwriting securities in ``Section 20'' subsidiaries of bank 
holding companies from 10 percent to 25 percent of total revenue.

  Deposit Insurance in an Integrated Financial Services Market. Recent 
legislation and regulatory changes highlight the importance of financial 
modernization in a rapidly changing financial market. Depository 
institutions have faced increasing competition from non-bank providers 
of financial services in recent years. Legislative and regulatory 
changes that alter depository institution charters and/or expand the 
range of permissible activities for bank subsidiaries, holding 
companies, or affiliates will contribute toward the increasing 
integration and efficiency of the financial services industry.
  Financial services modernization promotes competition and efficiency 
within the industry, which can foster the creation of new products and 
services and benefit consumers. However, expanded powers also could lead 
to greater risks, especially to the deposit insurance funds, which are 
supported by the full faith and credit of the Federal Government. 
Changes to the financial services industry must be consistent with safe 
and sound practices, provide protection for consumers, and, ultimately, 
preserve the Federal deposit insurance guarantee.

                           Pension Guarantees

  The Pension Benefit Guaranty Corporation (PBGC) insures most defined 
benefit pension plans sponsored by private employers. PBGC steps in to 
pay the benefits guaranteed by law when a company with an underfunded 
pension plan becomes insolvent. PBGC's exposure to claims relates to the 
underfunding of pension plans, that is, to any amount by which expected 
future benefits exceed plan assets. In the near term, its loss exposure 
results from financially distressed firms with such underfunded plans. 
In the longer term, additional loss exposure results from firms which 
are currently healthy but become distressed, and from changes in the 
funding of plans and their investment results.
  The number of plans insured by PBGC has been declining as small 
companies with defined benefit plans terminate them and shift to defined 
contribution plans. At the same time, the number of workers whose 
pensions are insured by PBGC has increased. In particular, the number of 
defined benefit pension plans with 1,000 or more participants has 
increased consistently--to 4,600 compared to 3,600 in 1980.
  During the past four years, PBGC been working to prevent and mitigate 
losses. Under the Early Warning Program, it has negotiated more than 40 
major settlements providing more than $14 billion in new pension 
contributions from companies and improving pension security for nearly 
1.2 million people. In 1995, the Early Warning Program was one of the 
first six Federal programs to receive an award from the Ford Foundation 
and Harvard's Kennedy School of Government. The program also received 
the National Performance Review's Hammer Award. In 1996, PBGC expanded 
the Early Warning Program to include certain companies with single-
employer plans underfunded by at least $5 million, as opposed to $25 
million--the previous threshold. For the first time in PBGC's 22-year 
history, the single-employer insurance program will post a positive 
financial position for 1996.
  The Retirement Protection Act of 1994 (RPA) improved PBGC's early 
intervention capability and was an important factor in achieving a 
number of the settlements discussed above. The law is beginning to 
strengthen PBGC's financial condition in other ways and to improve its 
operations. The RPA:
     requires companies to increase their contributions to 
          underfunded plans over 10 to 15 years;
     relates more fairly the premiums that companies pay to 
          PBGC's exposure by increasing insurance premiums for those 
          pension plans that are the most underfunded;
     requires privately-held companies with seriously 
          underfunded plans to give PBGC advance notice of any 
          transactions that potentially are harmful to their plans. When 
          this ``Early Warning Program'' shows benefits to pensioners to 
          be seriously at risk, PBGC begins negotiating funding and 
          other arrangements in order to forestall its taking over the 
          plan.
     standardizes both the interest rates and the mortality 
          tables that companies use to calculate: (1) any underfunding, 
          (2) the premiums to PBGC, and (3) the companies' legally 
          required funding contributions to their plans.
     expands PBGC's ``missing participants'' program. Some 
          workers about to retire simply forget about the pensions they 
          have earned at a job many years past; some plans may have 
          become insolvent; and some plans may be unable to locate 
          retirees. When a company either has failed or cannot locate a 
          previous employee entitled to a pension, PBGC 

[[Page 163]]

          endeavors to locate the missing participant, and then pays the
          benefits owed.
  Overall, PBGC fared well in 1996. There were no major plan 
terminations during the year, and investment performance was strong. As 
part of the phase-in of the RPA, the most underfunded plans paid higher 
premiums. These risk-related premiums and higher pension underfunding 
increased premiums by more than 35 percent.
  The multi-employer program guarantees pension benefits of certain 
unionized plans offered by many employers in an industry. In May 1996, 
the Administration proposed to increase the maximum guarantee level on 
pension benefits paid to retirees with 30 years of service. This 
maximum, which has not changed since 1980, would be increased from 
$5,580 to $12,870 per year. Although it passed the Senate, this 
provision was not enacted and is being proposed again. PBGC also entered 
into an agreement with sponsors of a multi-employer plan to protect 
pensions of 70,000 workers and retirees in the men's clothing industry.
  Pension underfunding as estimated by PBGC increased from $31 billion 
as of December 1994 to $64 billion for December 1995. The increase was 
due largely to a sharp decline in interest rates from 7.2 percent at the 
end of 1994 to 5.3 percent at the end of 1995. This was the lowest year-
end interest rate in the agency's 22-year history and the largest 
percentage decline from a year earlier. To calculate its exposure (i.e., 
its liability), PBGC applies the same interest rate and mortality 
assumptions that would have been used to purchase annuities at year-end. 
It estimates the cost of annuities to provide guaranteed benefits if the 
underfunded plans all terminated.
  Two-thirds of all plans are sufficiently funded, and much of the 
underfunding is in plans sponsored by financially healthy firms. 
Underfunding is spread across all industries, with a heavier 
concentration in the steel, automobile, and transportation equipment 
industries. Over the long run, the recent reforms will improve pension 
funding.

                           Disaster Insurance

Flood Insurance

  The Federal Government provides flood insurance through the National 
Flood Insurance Program (NFIP) administered by the Federal Emergency 
Management Agency (FEMA). This insurance is available to property owners 
living in communities that have adopted and enforced appropriate 
floodplain management measures. Insurance policies for structures built 
before a community joined the flood insurance program are subsidized by 
law, while policies for structures built after a community joins the 
NFIP are actuarially rated.
  The Federal flood insurance program was created in the early 1970s 
when flood damage was increasing, and private insurance companies, with 
little information on flood risks by geographic area, had deemed the 
risk uninsurable. To address this concern, the NFIP was created to 
provide insurance coverage, to require building standards and other 
mitigation efforts to reduce losses, and to begin a flood hazard mapping 
project to quantify the risk of flooding in each geographic area. The 
program has been relatively successful in meeting these goals.
  Flood insurance premiums grew by nearly 30 percent from October 1994 
to October 1996, exceeding the growth goal set two years ago of 20 
percent. The NFIP's ``Cover America'' initiative, a major marketing and 
advertising campaign, should continue to increase awareness of flood 
insurance and educate people about the risks of floods. FEMA plans to 
increase significantly the number of policies in force using three 
strategies: lender compliance, program simplification, and marketing.
  The NFIP's Community Rating System (CRS) now allows policyholders in 
910 communities to receive discounts of at least 5 percent on their 
premiums as a result of undertaking activities beyond those required by 
the NFIP to reduce flood losses, facilitate accurate insurance rating, 
and promote public awareness of flood insurance.
  In 1997, the NFIP is implementing expanded mitigation insurance 
authorized by the National Flood Insurance Reform Act of 1994. The 
mandatory Increased Cost of Construction (ICC) coverage, which will take 
effect May 1, 1997, will allow substantially-damaged structures to be 
rebuilt in accordance with existing floodplain management requirements. 
This will reduce future losses and allow the structure to be actuarially 
rated.
  In 1998, FEMA will continue efforts to reduce flood damage by 
educating Federal regulators about mandatory flood insurance purchase 
requirements for federally backed home and business loans on property 
located in flood hazard areas; simplifying policy language; using 
mitigation insurance to enable flood victims to rebuild to code, thereby 
reducing the cost and amount of future flood damage; and using flood 
insurance premium adjustments to encourage community and State 
mitigation activities beyond those required by the NFIP.

Crop Insurance

  Subsidized Federal crop insurance administered by USDA assists farmers 
in managing catastrophic yield shortfalls due to adverse weather or 
other natural disasters. Private sector companies are unwilling to offer 
multi-peril crop insurance because losses tend to be correlated across 
geographic areas, and the companies are therefore exposed to large 
losses. For example, a drought will affect many farms at the same time. 
Damage from hail, on the other hand, tends to be more localized, and a 
private market for hail insurance has existed for over 100 years in the 
U.S..
  The USDA crop insurance program is a cooperative effort between the 
Federal Government and the private insurance industry. The Federal 
Government reimburses private insurance companies for the administrative 
expenses associated with extending crop insurance 

[[Page 164]]

and reinsures the private companies for excess insurance losses on all policies. Private companies sell and adjust crop insurance policies. The Federal Government also subsidizes premiums for farmers.
  A major program reform was enacted in 1994 to address a growing 
problem caused by the repeated provision of Federal ad hoc agricultural 
disaster payments. Between 1980 and 1994, participation in the crop 
insurance program was kept low by the availability of post-event 
disaster aid to farmers from the Federal Government. Because disaster 
payments were no-cost grants, farmers had little incentive to purchase 
Federal crop insurance. As a result, the cost of ad hoc disaster 
payments rose over the past seven years, and the crop insurance program 
accumulated an $8 billion actuarial deficit. The 1994 reform repealed 
existing agricultural disaster payment authorities and authorized a new 
basic ``catastrophic'' insurance policy that indemnifies farmers at a 
rate roughly equal to the previous free disaster payments. The 
catastrophic policy is free to farmers except for an administrative fee. 
Private companies may sell and adjust the catastrophic portion of the 
crop insurance program, and also provide higher levels of coverage 
(which are also federally subsidized.) The reform was implemented in 
crop year 1995. and no ad hoc crop disaster assistance bill has been 
enacted since 1994. In 1995, 82 percent of eligible acres participated 
in the program (140 percent over 1994) with a face value of $27 billion.
  The 1996 Farm Bill significantly changed the commodity programs and 
associated price and income support for farmers. The President's signing 
statement for the Farm Bill stated: ``The fixed payments in the bill do 
not adjust to changes in market conditions, which would leave farmers, 
and the rural communities in which they live, vulnerable to reductions 
in crop prices or yields. I am firmly committed to submitting 
legislation and working with the Congress next year to strengthen the 
farm safety net''. Accordingly, the 1998 Budget proposes to expand the 
crop insurance program to include ``revenue insurance'' coverage. 
Revenue insurance will protect farmers against lost revenue caused by 
low prices, low yields, or any combination of the two, thereby 
strengthening the farm income safety net. Currently, USDA is operating 
several pilot programs to test various revenue insurance products. These 
pilot products have been widely accepted by farmers in the areas where 
they are being tested, and the 1998 Budget would expand USDA's 
authorities to operate a revenue insurance program on a nationwide 
basis.



                                     

------------------------------------------------------------------------

                                                                                    Improving Debt Collection                                                                                   
                                                                                                                                                                                                
                                                                                                                                                                                                
                                                                                                                                                                                                
A critical element in the cost of credit programs is the timing and the amount of recoveries of defaulted loans. Recoveries are an important measure of program performance.                    
                                                                                                                                                                                                
At the end of 1996, total credit and other receivables of the Federal Government were $248 billion. Of that amount, $51 billion were delinquent; $43 billion have been delinquent for more than 
 a year and collectibility is considered doubtful. Total delinquencies and the amount of debt that is more than one year delinquent did not change significantly from 1995 to 1996.             
                                                                                                                                                                                                
At each stage in the Government's credit and debt management process, there are specific tools that can be used to prevent default, convert delinquent accounts into repayment, and, if         
 appropriate, enforce a claim through the judicial process. In 1996, over $3 billion was collected through offset, private collection agencies, and litigation.                                 
                                                                                                                                                                                                
The enactment of the Debt Collection Improvement Act significantly improves Treasury, Justice and loan making agencies' ability to maximize collections of delinquent debt by ensuring quick    
 action, such as referral to private collection agencies and sharing of payment and collection information within and among Federal agencies when an account is 180 days or more overdue.The Act
 also provides agencies incentives to consolidate and cross-service in order to improve account monitoring and customer servicing.                                                              
                                                                                                                                                                                                

------------------------------------------------------------------------

                                     


[[Page 166]]

           Table 8-1.  FACE VALUE AND ESTIMATED COST OF FEDERAL AND FEDERALLY ASSISTED CREDIT PROGRAMS          
                                            (in billions of dollars)                                            
----------------------------------------------------------------------------------------------------------------
                                                                         1997 Budget                   Current  
                                                                           Estim.                     Estimates 
                                                           Face Value      Present     Face Value      Present  
                         Program                              1995        Value of        1996        Value of  
                                                                        Future Costs                Future Costs
                                                                             \1\                         \1\    
----------------------------------------------------------------------------------------------------------------
Direct Loans: \2\                                                                                               
  Farm Service Agency (excl.CCC), Rural Devlpmt., Rural                                                         
   Housing..............................................         48         13-19            47         10-16   
  Rural Electrification Admin. and Rural Telephone Bank.         37           2-4            35           3-6   
  Agency for International Development..................         14           2-3            13           1-2   
  Public Law 480........................................         12           2-4            12           2-4   
  Disaster Assistance...................................          9           3-5             9          8-12   
  Foreign Military Financing............................          8           0-1             8           0-1   
  Export-Import Bank....................................          8           1-3             8           2-4   
  Federal Direct Student Loan Program...................          3           6-9            12           6-9   
  Small Business........................................          2           0-1             2           0-1   
  Other Direct..........................................         19           1-2            19           1-2   
                                                         -------------------------------------------------------
  Total Direct Loans....................................        161         30-51           165         33-57   
                                                         -------------------------------------------------------
Guaranteed Loans: \2\                                                                                           
  FHA MMI Fund..........................................        318        (12)-0           364        (12)-0   
  VA Mortgage...........................................        154           3-5           155           3-5   
  FHA GI/SRI Fund.......................................         83         11-14            91          7-10   
  Federal Family Education Loan Program.................         86          5-10           102          5-10   
  Small Business........................................         26           2-3            31           2-4   
  Export-Import Bank....................................         18           3-5            18           4-6   
  Farm Service Agency and Rural Housing.................          8           1-2            11           1-2   
  CCC Export Credits....................................          5           2-3             5           0-1   
  Other Guaranteed......................................         27           3-4            28           2-4   
                                                         -------------------------------------------------------
  Total Guaranteed Loans................................        727         18-46           805         12-42   
                                                         -------------------------------------------------------
  Total Federal Credit..................................        888         48-97           970         45-99   
                                                         -------------------------------------------------------
GSEs: \3\                                                                                                       
  Fannie Mae............................................        787     ............        929     ............
  Freddie Mac...........................................        552     ............        601     ............
  Federal Home Loan Banks \4\ ..........................        122     ............        153     ............
  Sallie Mae \5\ .......................................  ............  ............  ............  ............
  Farm Credit System....................................         53           0-1            56     ............
                                                         -------------------------------------------------------
  Total GSEs............................................      1,514           0-1         1,740     ............
                                                         =======================================================
      Total Federal and Federally Assisted Credit                                                               
       Programs.........................................      2,402         48-98         2,710         45-99   
----------------------------------------------------------------------------------------------------------------
\1\ Direct loan future costs are program account outlays projected over a period comparable to loan maturity    
  plus the embedded loss from outstanding loans. Loan guarantee costs are program account outlays plus          
  liquidating account outlays (and outlays from defaulted guaranteed loans that result in loans receivable)     
  projected over a period comparable to loan maturity.                                                          
\2\ Excludes loans and guarantees by deposit insurance agencies and programs not included under credit reform,  
  such as CCC farm supports. Defaulted guaranteed loans which become loans receivable are accounted for in      
  guaranteed loans.                                                                                             
\3\ Net of purchases of federally guaranteed loans.                                                             
\4\ The lending by the Federal Home Loans Banks measures their advances to member thrift and other financial    
  institutions. In addition, their investment in private financial instruments at the end of 1996 was $122.0    
  billion.                                                                                                      
\5\ The face value and Federal costs of Federal Family Education Loans in Sallie Mae's portfolio are included in
  the account of that program under guaranteed loans above.                                                     

[[Page 167]]

               TABLE 8-2.  REESTIMATES OF CREDIT SUBSIDIES ON LOANS DISBURSED, 1992--1996   \1\                 
                                            (In millions of dollars)                                            
----------------------------------------------------------------------------------------------------------------
                               Program                                   1994       1995       1996       1997  
----------------------------------------------------------------------------------------------------------------
Direct Loans:                                                                                                   
  P.L. 480 Title I loan program.....................................  .........  .........      -37    .........
  Agriculture credit insurance fund.................................      -72         28          2    .........
  Agricultural conservation.........................................       -1    .........  .........  .........
  Foreign military financing........................................  .........  .........  .........       23  
  Rural development loan program....................................  .........        1    .........  .........
  Rural economic development loans..................................  .........  .........  .........        1  
  Rural electrification and telephone loans.........................        *         61        -37    .........
  Rural telephone bank..............................................        1    .........  .........  .........
  Rural housing insurance fund......................................        2        152         46    .........
  Federal direct student loans......................................  .........  .........        3       -304  
  Veterans housing benefit program fund \2\.........................      -39         30         76        -84  
  Export-Import Bank direct loans...................................      -28        -16         37    .........
                                                                                                                
Loan Guarantees:                                                                                                
  AID housing guaranty..............................................       -2         -1         -7    .........
  P.L. 480 Title I Food for Progress credits........................  .........       84        -38    .........
  Agriculture credit insurance fund.................................        5         14         12    .........
  Commodity Credit Corporation export guarantees....................        3        103       -426    .........
  Rural housing insurance fund......................................        2         10          7    .........
  Rural development insurance fund..................................       49    .........  .........  .........
  Rural community facility guarantees...............................  .........  .........  .........        9  
  Federal family education (formerly GSL):                                                                      
     Technical reestimate...........................................       97        421         60     -2,410  
     Volume reestimate  \3\.........................................  .........  .........      535        222  
  FHA-General and special risk......................................     -175    .........     -110    .........
  BIA-Indian guaranteed loans.......................................  .........  .........  .........       18  
  SBA-Business loans................................................  .........  .........      257         38  
  Veterans housing benefit fund guarantees \4\ :                                                                
     Technical reestimate...........................................        1        343       -710       -715  
     Volume reestimate  \3\.........................................  .........  .........      315          2  
  Export-Import Bank guarantees.....................................      -11        -59         13    .........
                                                                     -------------------------------------------
    Total...........................................................     -168      1,171         35     -3,200  
----------------------------------------------------------------------------------------------------------------
* $500 million or less.                                                                                         
\1\ Additional information on credit reform subsidy rates is contained in the Federal Credit Supplement to the  
  budget for 1998.                                                                                              
\2\ In FY 1998, Veterans Housing Direct Loan Program, Loan Guaranty Program and Guaranty and Indemnity fund     
  direct loans are proposed to be consolidated.                                                                 
\3\ Volume reestimates in mandatory programs represent a change in volume of loans disbursed in the prior years.
  These estimates are the result of guarantee programs where data from loan issuers on actual disbursements of  
  loans are not received until after the close of the fiscal year.                                              
\4\ In FY 1998, Veterans Housing Loan Guaranty Program and Guaranty and Indemnity Fund loan guarantees are      
  proposed to be consolidated.                                                                                  

[[Page 168]]

      TABLE 8-3.  ESTIMATED 1998 SUBSIDY RATES, BUDGET AUTHORITY, AND LOAN LEVELS FOR DIRECT LOANS    \1\       
                                            (In millions of dollars)                                            
----------------------------------------------------------------------------------------------------------------
                                                                     1998 Weighted                              
                                                                        average      1998 Subsidy       1998    
                         Agency and Program                           subsidy as a      budget       Estimated  
                                                                       percent of     authority     loan levels 
                                                                     disbursements                              
----------------------------------------------------------------------------------------------------------------
Funds Appropriated to the President:                                                                            
  Foreign military financing.......................................        9.44           66             700    
  Overseas Private Investment Corporation..........................        3.00            4             133    
                                                                                                                
Agriculture:                                                                                                    
  Agricultural credit insurance program............................        8.08           43             532    
  Rural community advancement program..............................        9.05           90             993    
  Rural electrification and telephone..............................        2.18           31           1,285    
  Rural telephone bank.............................................        2.12            4             175    
  Distance learning and medical link program.......................        0.02            *             150    
  Rural housing insurance fund.....................................       17.86          218           1,221    
  Rural development loan fund......................................       48.25           17              35    
  Rural economic development loans.................................       23.91            6              25    
  P.L. 480 direct loans............................................       77.83           88             113    
                                                                                                                
Commerce:                                                                                                       
  Fisheries finance loans..........................................        1.00            *              24    
                                                                                                                
Education:                                                                                                      
  Federal direct student loans.....................................        4.44          751          16,929    
                                                                                                                
Interior:                                                                                                       
  Bureau of Reclamation loans......................................       32.26           10              31    
                                                                                                                
State Department:                                                                                               
  Repatriation loans...............................................       80.00            1               1    
                                                                                                                
Transportation:                                                                                                 
  Minority business resource center program........................       10.00            2              15    
  Transportation infrastructure loans..............................        8.60           99             851    
                                                                                                                
Treasury:                                                                                                       
  Community development financial institutions fund................       38.08           20              53    
                                                                                                                
Veterans Affairs:                                                                                               
  Veterans housing benefit program fund \2\........................        1.00           21           2,144    
  Miscellaneous veterans programs fund \3\.........................        6.99            1              17    
                                                                                                                
Other Independent Agencies:                                                                                     
  Export-Import Bank...............................................        1.69           28           1,660    
                                                                                                                
  Federal Emergency Management Agency:                                                                          
    Disaster assistance............................................        5.98            2              25    
                                                                                                                
  Small Business Administration:                                                                                
    Disaster loans.................................................       11.44           90           1,187    
    Business loans.................................................       10.28            2              19    
                                                                                                                
  Federal Communications Commission:                                                                            
    Spectrum auction loans.........................................       11.98          386           3,220    
                                                                    --------------------------------------------
    Total..........................................................        6.21        1,980          31,859    
----------------------------------------------------------------------------------------------------------------
* $500 thousand or less.                                                                                        
\1\ Additional information on credit reform subsidy rates is contained in the Federal Credit Supplement to the  
  budget for 1998.                                                                                              
\2\ In FY 1998, Veterans Housing Direct Loan Program, Loan Guaranty Program and Guaranty and Indemnity fund     
  direct loans are proposed to be consolidated.                                                                 
\3\ The FY 1998 budget presents the Education Loan Fund, Vocational Rehabilitation Fund, and Native American    
  Housing Program as a consolidated Miscellaneous Veterans Program account.                                     

[[Page 169]]

    TABLE 8-4.  ESTIMATED 1998 SUBSIDY RATES, BUDGET AUTHORITY, AND LOAN LEVELS FOR LOAN GUARANTEES    \1\      
                                            (In millions of dollars)                                            
----------------------------------------------------------------------------------------------------------------
                                                                     1998 Weighted-                             
                                                                        average      1998 Subsidy       1998    
                         Agency and Program                           subsidy as a      budget       Estimated  
                                                                       percent of     authority     loan levels 
                                                                     disbursements                              
----------------------------------------------------------------------------------------------------------------
Funds Appropriated to the President:                                                                            
  Microenterprise and other development............................        3.18            2              48    
  Urban and environmental..........................................        6.52            3              46    
  Overseas Private Investment Corporation..........................        3.00           56           1,800    
                                                                                                                
Agriculture:                                                                                                    
  Agricultural credit insurance fund...............................        2.37           55           2,300    
  Commodity Credit Corporation export loans........................        9.26          528           5,700    
  Rural community advancement......................................        0.08            7             894    
  Rural housing insurance fund.....................................        0.22            7           3,100    
                                                                                                                
Defense:                                                                                                        
  Export loan guarantees...........................................  .............  .............        250    
  Family housing improvement fund..................................       15.00     .............  .............
                                                                                                                
Education:                                                                                                      
  Federal family education loan program............................        9.03        2,078          22,995    
                                                                                                                
Health and Human Services:                                                                                      
  Health professions graduate student loan program.................        1.09            1              85    
  Health resources and services....................................        7.67            1              13    
                                                                                                                
Housing and Urban Development:                                                                                  
  Indian housing guarantee.........................................        8.13            3              37    
  Community development loan guarantees (Sec. 108).................        2.30           29           1,261    
  FHA mutual mortgage..............................................       -2.99       -1,893         110,000    
  FHA general and special risk.....................................       -0.22           81          17,400    
  GNMA secondary mortgage guarantees...............................       -0.32           -9         130,000    
                                                                                                                
Interior:                                                                                                       
  Indian loan guaranty.............................................       13.00            5              35    
                                                                                                                
Transportation:                                                                                                 
  MARAD guaranteed loans (Title XI)................................        7.00           35             477    
                                                                                                                
Veterans Affairs:                                                                                               
  Veterans housing benefit program fund \2\........................        0.49          142          28,945    
                                                                                                                
Other Independent Agencies:                                                                                     
  Export-Import Bank...............................................        3.85          594          15,413    
                                                                                                                
  Small Business Administration:                                                                                
    Business Loans.................................................        1.51          180          11,884    
                                                                    --------------------------------------------
    Total..........................................................        5.29        1,905         359,777    
----------------------------------------------------------------------------------------------------------------
\1\ Additional information on credit reform subsidy rates is contained in the Federal Credit Supplement to the  
  budget for 1998.                                                                                              
\2\ In FY 1998, Veterans Housing Loan Guaranty Program and Guaranty and Indemnity Fund loan guarantees are      
  proposed to be consolidated.                                                                                  

[[Page 170]]

                         TABLE 8-5.  SUMMARY OF FEDERAL DIRECT LOANS AND LOAN GUARANTEES                        
                                            (In billions of dollars)                                            
----------------------------------------------------------------------------------------------------------------
                                                                              Actual                 Estimate   
                                                                 -----------------------------------------------
                                                                   1993    1994    1995    1996    1997    1998 
----------------------------------------------------------------------------------------------------------------
Direct Loans:                                                                                                   
    Obligations.................................................    22.1    22.7    30.9    23.4    36.8    37.4
    Disbursements...............................................    27.1    19.3    22.0    23.6    37.6    37.5
    Subsidy budget authority \1\................................     2.1     2.8     2.6     1.8     2.2     2.0
                                                                                                                
Loan Guarantees: \2\                                                                                            
    Commitments.................................................   169.9   204.1   138.5   175.4   208.1   196.2
    Lender Disbursements........................................   144.3   194.2   117.9   143.9   164.0   158.9
    Subsidy budget authority \1\................................     4.1     2.4     4.6     4.0     2.3     1.9
----------------------------------------------------------------------------------------------------------------
\1\ Excludes subsidy reestimates for loans made in prior years.                                                 
\2\ GNMA secondary guarantees of loans that are guaranteed by FHA, VA and FmHA are excluded from the totals to  
  avoid double-counting.                                                                                        

[[Page 171]]

                TABLE 8-6.  DIRECT LOAN WRITE-OFFS AND GUARANTEED LOAN TERMINATIONS FOR DEFAULTS                
----------------------------------------------------------------------------------------------------------------
                                                         In millions of dollars     As percentage of outstanding
                                                     ------------------------------           loans \1\         
                  Agency or Program                                                -----------------------------
                                                        1996      1997      1998      1996      1997      1998  
                                                       actual   estimate  estimate   actual   estimate  estimate
----------------------------------------------------------------------------------------------------------------
                DIRECT LOAN WRITEOFFS                                                                           
                                                                                                                
Funds Appropriated to the President:                                                                            
  Foreign military financing loans..................  ........        47  ........  ........      0.71  ........
                                                                                                                
Agriculture:                                                                                                    
  Agricultural credit insurance fund................       677       616       517      6.26      6.34      5.97
  Rural development insurance fund..................         5         4         4      0.11      0.09      0.09
  Rural housing insurance fund......................       115       113       109      0.38      0.38      0.37
  P.L. 480..........................................  ........         9        14  ........      0.09      0.15
                                                                                                                
Commerce:                                                                                                       
  Economic development revolving fund (EDA).........         2         2         1      3.22      3.44      1.96
                                                                                                                
Education:                                                                                                      
  Student financial assistance......................         5         8         8      2.41      3.72      3.46
                                                                                                                
Health and Human Services:                                                                                      
  Health Resources and Services.....................         1         1         1      0.12      0.12      0.12
                                                                                                                
Housing and Urban Development:                                                                                  
  Revolving fund....................................         9         1  ........      2.74      0.32  ........
  FHA-Mutal mortgage insurance......................  ........  ........         3  ........  ........      1.50
                                                                                                                
Interior:                                                                                                       
  Revolving fund....................................         3         2         4      5.00      3.63      8.88
  Indian loan guaranty..............................         4         5         7     10.00     13.51     22.58
  Bureau of Indian Affairs direct loans.............  ........  ........         5  ........  ........     50.00
                                                                                                                
State:                                                                                                          
  Repatriation loans................................         1         1         1     25.00     25.00     25.00
                                                                                                                
Veterans Affairs:                                                                                               
  Veterans housing benefit program \2\..............        11        11        19      0.92      0.72      0.92
                                                                                                                
Other Independent Agencies:                                                                                     
  Small Business Administration.....................       290       251       116      2.70      2.38      1.16
  Tennesee Valley Authority.........................  ........         1         2  ........      0.57      0.90
                                                                                                                
                                                     -----------------------------------------------------------
    Total, direct loan writeoffs....................     1,123     1,072       811  ........  ........  ........
                                                     -----------------------------------------------------------
      GUARANTEED LOAN TERMINATIONS FOR DEFAULT                                                                  
                                                                                                                
Funds Appropriated to the President:                                                                            
  Foreign military financing........................  ........         4         4  ........      0.06      0.07
  Housing and other credit guaranty programs........        22        20        24      1.12      1.04      1.31
  Assistance for the New Independent States of the                                                              
   Soviet Union.....................................  ........  ........        15  ........  ........     14.56
                                                                                                                
Agriculture:                                                                                                    
  Agricultural credit insurance fund................        52        12         5      0.76      0.15      0.06
  CCC guaranteed loans..............................       221       248       330     15.96     16.05      3.63
  Rural development insurance fund..................        20        22        19      4.00      4.76      4.94
  Rural housing insurance fund......................         4        14        23      0.11      0.30      0.32
  Rural business and industry loans.................         1         1         2      0.13      0.10      0.14
                                                                                                                
Commerce:                                                                                                       
  Federal ship financing fund.......................        16  ........  ........     14.67  ........  ........
                                                                                                                
Education:                                                                                                      
  Federal family education loans....................     3,143     3,140     3,322      3.08      2.99      3.03
                                                                                                                
Health and Human Services:                                                                                      
  Health professions graduate student loans.........        34        47        42      1.17      1.59      1.43
  Health center guaranteed loans....................  ........  ........         1  ........  ........      1.42
                                                                                                                
Housing and Urban Development:                                                                                  
  FHA -General and special risk guaranteed loans....       904     1,328     2,536      2.10      1.35      2.37
  FHA -Mutual mortgage and cooperative housing loans     4,114     2,561     2,387      1.13      0.66      0.58
                                                                                                                
Interior:                                                                                                       
  Indian loan guaranty..............................         7        39         5      3.11     17.97      2.30
                                                                                                                
Transportation:                                                                                                 
  MARAD ship financing fund.........................  ........        24        24  ........      3.18      4.00
                                                                                                                
Veterans Affairs:                                                                                               
  Veterans housing benefit program  \3\.............     1,859     2,221       728      1.20      1.42      0.46
                                                                                                                
Other Independent Agencies:                                                                                     
  Small Business Administration.....................       600       546       513      2.70      2.38      1.98

[[Page 172]]

  Export-Import Bank................................       250         8         8      1.41      0.04      0.04
                                                                                                                
                                                     -----------------------------------------------------------
    Total, guaranteed loan terminations for default.    11,247    10,235     9,988  ........  ........  ........
                                                     -----------------------------------------------------------
    Total, direct loan writeoffs and guaranteed loan                                                            
     terminations...................................    12,370    11,307    10,799  ........  ........  ........
                                                     ===========================================================
                                                                                                                
  ADDENDUM: WRITEOFFS OF DEFAULTED GUARANTEED LOANS                                                             
           THAT RESULT IN LOANS RECEIVABLE                                                                      
                                                                                                                
Funds Appropriated to the President:                                                                            
  Housing and other credit guaranty programs........         5        49        28      1.07     10.81      6.10
                                                                                                                
Education:                                                                                                      
  Federal family education loans....................        15       224       242      0.09      1.39      1.43
                                                                                                                
Health and Human Services:                                                                                      
  Health professions graduate student loans.........         9         9         9      2.10      1.82      1.65
                                                                                                                
Housing and Urban Development:                                                                                  
  FHA -General and special risk guaranteed loans....     1,281       755       152     41.43     32.26      4.23
  FHA -Mutual mortgage and cooperative housing loans       763       702        28     40.97     63.24      8.04
                                                                                                                
Veterans Affairs:                                                                                               
  Veterans housing benefit program \3\..............       547       608       494     38.76     45.07     37.79
                                                                                                                
Other Independent Agencies:                                                                                     
  Small Business Administration.....................       102       105       107      5.28      4.96      4.83
                                                     -----------------------------------------------------------
    Total, writeoffs of loans receivable............     2,722     2,452     1,060  ........  ........  ........
                                                                                                                
----------------------------------------------------------------------------------------------------------------
\1\ Average of loans outstanding over year.                                                                     
\2\ In FY 1998, Veterans Housing Direct Loan Program, Loan Guaranty Program and Guaranty and Indemnity Fund     
  direct loans are proposed to be consolidated.                                                                 
\3\ In FY 1998, Veterans Housing Loan Guaranty Program and Guaranty and Indemnity Fund loan guarantees are      
  proposed to be consolidated.                                                                                  

[[Page 173]]

                      TABLE 8-7.  APPROPRIATIONS ACTS LIMITATIONS ON CREDIT LOAN LEVELS \1\                     
                                            (In millions of dollars)                                            
----------------------------------------------------------------------------------------------------------------
                                                                                                 Estimate       
                              Agency or Program                                  1996    -----------------------
                                                                                Actual       1997        1998   
----------------------------------------------------------------------------------------------------------------
                   LIMITATIONS ON DIRECT LOAN OBLIGATIONS                                                       
                                                                                                                
Funds Appropriated to the President:                                                                            
  Foreign military financing................................................         544         540         700
                                                                                                                
Housing and Urban Development:                                                                                  
  FHA-General and special risk loans........................................         120         120         120
  FHA-Mutual mortgage insurance loans.......................................         200         200         200
                                                                                                                
Interior:                                                                                                       
  Bureau of Reclamation direct loans........................................          37          37          31
                                                                                                                
State Department:                                                                                               
  Repatriation loans........................................................           1           1           1
                                                                                                                
Transportation:                                                                                                 
  Minority business resource center loans...................................          15          15          15
  Orange County (CA) toll road demonstration................................  ..........          25  ..........
  Direct loan financing (Alameda)...........................................  ..........         400  ..........
                                                                                                                
Treasury:                                                                                                       
  Community development financial institutions fund.........................          28  ..........          53
                                                                                                                
Veterans Affairs:                                                                                               
  Miscellaneous veterans programs loan fund.................................           8          15          17
                                                                                                                
Federal Emergency Management Agency:                                                                            
  Disaster assistance loans.................................................         153          25          25
                                                                             -----------------------------------
      Total, limitations on direct loan obligations.........................       1,106       1,378       1,162
                                                                             -----------------------------------
                 LIMITATIONS ON GUARANTEED LOAN COMMITMENTS                                                     
                                                                                                                
Funds Appropriated to the President:                                                                            
  Loan guarantees to Israel.................................................       2,000       2,000  ..........
                                                                                                                
Defense:                                                                                                        
  Defense export loan guarantee.............................................  ..........      15,000      15,000
                                                                                                                
Health and Human Services:                                                                                      
  Health professions graduate student loan insurance........................         210         140          85
  Health center guaranteed loans............................................  ..........         160  ..........
                                                                                                                
Housing and Urban Development:                                                                                  
  Indian housing loan guarantee fund........................................          37          37          37
  Community development loan guarantees (Sec. 108)..........................       1,500       1,380       1,261
  FHA-General and special risk..............................................      17,400      17,400      17,400
  FHA-Mutual mortgage insurance.............................................     110,000     110,000     110,000
  FHA-Loan recovery fund....................................................  ..........          10  ..........
                                                                                                                
Interior:                                                                                                       
  Indian guaranteed loans...................................................          35          35          35
                                                                                                                
Transportation:                                                                                                 
  MARAD guaranteed loans (Title XI).........................................       1,000       1,000         500
                                                                             -----------------------------------
    Total, limitations on guaranteed loan commitments.......................     132,182     147,162     144,318
                                                                             ===================================
                                  ADDENDUM                                                                      
                                                                                                                
Secondary guaranteed loan commitment limitations:                                                               
  GNMA, mortgage-backed securities..........................................     130,000     110,000     130,000
----------------------------------------------------------------------------------------------------------------
\1\ Data represents loan level limitations enacted or proposed to be enacted in appropriations acts. For        
  information on actual and estimated loan levels supportable by new subsidy budget authority requested, see    
  Table 8-3 and Table 8-4.                                                                                      

[[Page 174]]


                          Table 8-8. DIRECT LOAN TRANSACTIONS OF THE FEDERAL GOVERNMENT                         
                                            (in millions of dollars)                                            
----------------------------------------------------------------------------------------------------------------
                                                                         Estimate                               
      Agency or Program          1996    -----------------------------------------------------------------------
                               Actual        1997        1998        1999        2000        2001        2002   
----------------------------------------------------------------------------------------------------------------
  Funds Appropriated to the                                                                                     
          President                                                                                             
                                                                                                                
   International Security                                                                                       
         Assistance                                                                                             
                                                                                                                
Foreign military loan                                                                                           
 liquidating account:                                                                                           
   Obligations..............  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Loan disbursements.......          35          14           9           8           8           7           7
   Change in outstandings...        -890        -925        -767        -591        -497        -430        -379
   Outstandings.............       7,021       6,096       5,329       4,738       4,241       3,811       3,432
                                                                                                                
Foreign military financing                                                                                      
 direct loan financing                                                                                          
 account:                                                                                                       
   Obligations..............         544         540         700         700         700         700         700
   Loan disbursements.......         559         568         560         903         785         690         700
   Change in outstandings...         559         545         400         640         470         317         267
   Outstandings.............       1,098       1,643       2,043       2,683       3,153       3,470       3,737
                                                                                                                
Military debt reduction                                                                                         
 financing account:                                                                                             
   Obligations..............  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Loan disbursements.......  ..........          20  ..........  ..........  ..........  ..........  ..........
   Change in outstandings...  ..........          20  ..........  ..........  ..........  ..........  ..........
   Outstandings.............  ..........          20          20          20          20          20          20
                                                                                                                
   Multilateral Assistance                                                                                      
                                                                                                                
International organizations                                                                                     
 and programs:                                                                                                  
   Obligations..............  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Loan disbursements.......  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Change in outstandings...          -2          -2  ..........  ..........  ..........  ..........  ..........
   Outstandings.............          34          32          32          32          32          32          32
                                                                                                                
  Agency for International                                                                                      
         Development                                                                                            
                                                                                                                
Economic assistance loans--                                                                                     
 liquidating account:                                                                                           
   Obligations..............  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Loan disbursements.......           3           4  ..........  ..........  ..........  ..........  ..........
   Change in outstandings...        -629        -672        -577        -532        -525        -529        -529
   Outstandings.............      12,649      11,977      11,400      10,868      10,343       9,814       9,285
                                                                                                                
Debt reduction, financing                                                                                       
 account:                                                                                                       
   Obligations..............  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Loan disbursements.......  ..........          35           5           1  ..........  ..........  ..........
   Change in outstandings...         -57         -26         -48         -49         -50         -50         -50
   Outstandings.............         396         370         322         273         223         173         123
                                                                                                                
Microenterprise and other                                                                                       
 development credit direct                                                                                      
 loan financing account:                                                                                        
   Obligations..............  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Loan disbursements.......           1  ..........           1  ..........  ..........  ..........  ..........
   Change in outstandings...           1  ..........           1  ..........  ..........  ..........  ..........
   Outstandings.............           2           2           3           3           3           3           3
                                                                                                                
 Overseas Private Investment                                                                                    
         Corporation                                                                                            
                                                                                                                
Overseas Private Investment                                                                                     
 Corporation liquidating                                                                                        
 account:                                                                                                       
   Obligations..............  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Loan disbursements.......           8           3  ..........  ..........  ..........  ..........  ..........
   Change in outstandings...         -31         -22         -15         -12          -4  ..........  ..........
   Outstandings.............          53          31          16           4  ..........  ..........  ..........
                                                                                                                
Overseas private investment                                                                                     
 corporation direct loan                                                                                        
 financing account:                                                                                             
   Obligations..............          49         133         133         133         133         133         133
   Loan disbursements.......          22          60          60          60          60          60          60
   Change in outstandings...          20          58          57          45          40          30          20
   Outstandings.............          72         130         187         232         272         302         322
                                                                                                                
  Department of Agriculture                                                                                     
                                                                                                                
     Farm Service Agency                                                                                        
                                                                                                                
Agricultural credit                                                                                             
 insurance fund liquidating                                                                                     
 account:                                                                                                       
   Obligations..............  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Loan disbursements.......           5           5           5           5           4           4           4
   Change in outstandings...      -1,451      -1,285      -1,085      -1,086        -887        -898        -688
   Outstandings.............       8,783       7,498       6,413       5,327       4,440       3,542       2,854
                                                                                                                
[[Page 175]]

Agricultural credit                                                                                             
 insurance fund direct loan                                                                                     
 financing account:                                                                                             
   Obligations..............         833         663         532         604         681         760         788
   Loan disbursements.......         801         667         540         601         677         756         786
   Change in outstandings...         371         196          23          46         111         161         149
   Outstandings.............       2,026       2,222       2,245       2,291       2,402       2,563       2,712
                                                                                                                
Commodity credit corporation                                                                                    
 fund:                                                                                                          
   Obligations..............       5,137       6,174       7,922       7,844       7,500       6,797       6,256
   Loan disbursements.......       5,137       6,174       7,922       7,844       7,500       6,797       6,256
   Change in outstandings...      -1,114        -236         229         -27         -92         -66         -43
   Outstandings.............       1,672       1,436       1,665       1,638       1,546       1,480       1,437
                                                                                                                
   Rural Utilities Service                                                                                      
                                                                                                                
Rural communication                                                                                             
 development fund                                                                                               
 liquidating account:                                                                                           
   Obligations..............  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Loan disbursements.......  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Change in outstandings...          -1  ..........          -1  ..........          -1          -1  ..........
   Outstandings.............           9           9           8           8           7           6           6
                                                                                                                
Distance learning and                                                                                           
 medical link direct loan                                                                                       
 financing account:                                                                                             
   Obligations..............  ..........         150         150         150         150         150         150
   Loan disbursements.......  ..........          45         120         150         150         150         150
   Change in outstandings...  ..........          42         107         124         111          98          82
   Outstandings.............  ..........          42         149         273         384         482         564
                                                                                                                
Rural development insurance                                                                                     
 fund liquidating account:                                                                                      
   Obligations..............  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Loan disbursements.......          12          35           3  ..........  ..........  ..........  ..........
   Change in outstandings...        -123        -165        -189        -184        -175        -168        -159
   Outstandings.............       4,348       4,183       3,994       3,810       3,635       3,467       3,308
                                                                                                                
Rural electrification and                                                                                       
 telecommunications direct                                                                                      
 loan financing account:                                                                                        
   Obligations..............         865       1,319       1,235       1,335       1,431       1,495       1,511
   Loan disbursements.......         861       1,479       1,379       1,305       1,369       1,380       1,451
   Change in outstandings...         766       1,415       1,297       1,195       1,234       1,275       1,262
   Outstandings.............       3,506       4,921       6,218       7,413       8,647       9,922      11,184
                                                                                                                
Rural telephone bank direct                                                                                     
 loan financing account:                                                                                        
   Obligations..............         126         176         175  ..........  ..........  ..........  ..........
   Loan disbursements.......          45         173         238  ..........  ..........  ..........  ..........
   Change in outstandings...          40         170         231        -592  ..........  ..........  ..........
   Outstandings.............         191         361         592  ..........  ..........  ..........  ..........
                                                                                                                
Rural development insurance                                                                                     
 fund direct loan financing                                                                                     
 account:                                                                                                       
   Obligations..............  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Loan disbursements.......  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Change in outstandings...      -1,218  ..........  ..........  ..........  ..........  ..........  ..........
   Outstandings.............  ..........  ..........  ..........  ..........  ..........  ..........  ..........
                                                                                                                
Rural water and waste                                                                                           
 disposal direct loans                                                                                          
 financing account:                                                                                             
   Obligations..............         605         755         734         754         775         796         820
   Loan disbursements.......         650         759         706         656         695         761         648
   Change in outstandings...       1,615         747         690         634         668         726         605
   Outstandings.............       1,615       2,362       3,052       3,686       4,354       5,080       5,685
                                                                                                                
Rural electrification and                                                                                       
 telecommunications                                                                                             
 liquidating account:                                                                                           
   Obligations..............  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Loan disbursements.......         114         940         596         302       1,151         281          59
   Change in outstandings...      -2,642        -650        -523        -917        -984        -823      -1,036
   Outstandings.............      30,459      29,809      29,286      28,369      27,385      26,562      25,526
                                                                                                                
Rural telephone bank                                                                                            
 liquidating account:                                                                                           
   Obligations..............  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Loan disbursements.......          31          60          30  ..........  ..........  ..........  ..........
   Change in outstandings...         -86         -45         -95      -1,188  ..........  ..........  ..........
   Outstandings.............       1,328       1,283       1,188  ..........  ..........  ..........  ..........
                                                                                                                
    Rural Housing Service                                                                                       
                                                                                                                
[[Page 176]]

Rural housing insurance fund                                                                                    
 liquidating account:                                                                                           
   Obligations..............  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Loan disbursements.......           3           1           1  ..........  ..........  ..........  ..........
   Change in outstandings...      -1,490      -1,309      -1,258      -1,213      -1,169      -1,126      -1,083
   Outstandings.............      22,185      20,876      19,618      18,405      17,236      16,110      15,027
                                                                                                                
Rural housing insurance fund                                                                                    
 direct loan financing                                                                                          
 account:                                                                                                       
   Obligations..............       1,218         993       1,221       1,523       1,874       2,210       2,316
   Loan disbursements.......       1,153       1,138       1,211       1,455       1,784       2,121       2,271
   Change in outstandings...       1,003         986       1,014       1,204       1,460       1,721       1,776
   Outstandings.............       7,800       8,786       9,800      11,004      12,464      14,185      15,961
                                                                                                                
Rural community facility                                                                                        
 direct loans financing                                                                                         
 account:                                                                                                       
   Obligations..............         208         137         209         209         208         208         208
   Loan disbursements.......         118         161         180         177         206         196         183
   Change in outstandings...         348         153         170         164         189         175         158
   Outstandings.............         348         501         671         835       1,024       1,199       1,357
                                                                                                                
 Rural Business--Cooperative                                                                                    
           Service                                                                                              
                                                                                                                
Rural economic development                                                                                      
 loans liquidating account:                                                                                     
   Obligations..............  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Loan disbursements.......  ..........           1  ..........  ..........  ..........  ..........  ..........
   Change in outstandings...          -1          -1          -2          -2          -2  ..........  ..........
   Outstandings.............           7           6           4           2  ..........  ..........  ..........
                                                                                                                
Rural economic development                                                                                      
 direct loan financing                                                                                          
 account:                                                                                                       
   Obligations..............           9          12          25          25          25          25          25
   Loan disbursements.......           7          13          14          23          23          24          23
   Change in outstandings...           4           9           8          16          13          11           8
   Outstandings.............          35          44          52          68          81          92         100
                                                                                                                
Rural development loan fund                                                                                     
 direct loan financing                                                                                          
 account:                                                                                                       
   Obligations..............          38          37          35          35          35          35          35
   Loan disbursements.......          57          67          46          44          36          35          35
   Change in outstandings...          57          66          44          42          33          31          30
   Outstandings.............         131         197         241         283         316         347         377
                                                                                                                
Rural business and industry                                                                                     
 direct loans financing                                                                                         
 account:                                                                                                       
   Obligations..............  ..........          50          50          50          50          50          50
   Loan disbursements.......  ..........          12          33          42          48          50          50
   Change in outstandings...  ..........          12          33          42          47          48          47
   Outstandings.............  ..........          12          45          87         134         182         229
                                                                                                                
Rural development loan fund                                                                                     
 liquidating account:                                                                                           
   Obligations..............  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Loan disbursements.......           3           2           1  ..........  ..........  ..........  ..........
   Change in outstandings...          -1          -2          -2          -3          -3          -3          -3
   Outstandings.............          84          82          80          77          74          71          68
                                                                                                                
Foreign Agricultural Service                                                                                    
                                                                                                                
Expenses, Public Law 480,                                                                                       
 foreign assistance                                                                                             
 programs, Agriculture                                                                                          
 liquidating account :                                                                                          
   Obligations..............  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Loan disbursements.......  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Change in outstandings...        -310        -329        -559        -351        -301        -307        -309
   Outstandings.............       9,767       9,438       8,879       8,528       8,227       7,920       7,611
                                                                                                                
P.L. 480 Direct credit                                                                                          
 financing account:                                                                                             
   Obligations..............         291         227         113         113         113         113         113
   Loan disbursements.......         240         228         169         123         113         113         113
   Change in outstandings...         240         210         125         123         113         113         113
   Outstandings.............       1,264       1,474       1,599       1,722       1,835       1,948       2,061
                                                                                                                
P.L. 480 Title I Food for                                                                                       
 Progress Credits, financing                                                                                    
 account:                                                                                                       
   Obligations..............  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Loan disbursements.......  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Change in outstandings...  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Outstandings.............         508         508         508         508         508         508         508
                                                                                                                

[[Page 177]]

Debt reduction--financing                                                                                       
 account:                                                                                                       
   Obligations..............  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Loan disbursements.......  ..........  ..........          34  ..........  ..........  ..........  ..........
   Change in outstandings...  ..........  ..........          34  ..........  ..........  ..........  ..........
   Outstandings.............          66          66         100         100         100         100         100
                                                                                                                
   Department of Commerce                                                                                       
                                                                                                                
    Economic Development                                                                                        
       Administration                                                                                           
                                                                                                                
Economic development                                                                                            
 revolving fund liquidating                                                                                     
 account:                                                                                                       
   Obligations..............  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Loan disbursements.......  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Change in outstandings...          -6          -8          -6          -4          -5          -3          -3
   Outstandings.............          62          54          48          44          39          36          33
                                                                                                                
    National Oceanic and                                                                                        
 Atmospheric Administration                                                                                     
                                                                                                                
Fisheries finance, financing                                                                                    
 account:                                                                                                       
   Obligations..............  ..........  ..........          24          24          24          24          24
   Loan disbursements.......  ..........  ..........  ..........          24          24          24          24
   Change in outstandings...  ..........  ..........  ..........          22          19          17          14
   Outstandings.............  ..........  ..........  ..........          22          41          58          72
                                                                                                                
   Department of Defense--                                                                                      
          Military                                                                                              
                                                                                                                
  Revolving and Management                                                                                      
            Funds                                                                                               
                                                                                                                
Defense working capital                                                                                         
 funds:                                                                                                         
   Obligations..............  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Loan disbursements.......  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Change in outstandings...         -49         -75         -83         -86  ..........  ..........  ..........
   Outstandings.............       1,384       1,309       1,226       1,140       1,140       1,140       1,140
                                                                                                                
   Department of Education                                                                                      
                                                                                                                
   Office of Postsecondary                                                                                      
          Education                                                                                             
                                                                                                                
Student financial                                                                                               
 assistance:                                                                                                    
   Obligations..............  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Loan disbursements.......  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Change in outstandings...          20          16          17          16          17          16          15
   Outstandings.............         207         223         240         256         273         289         304
                                                                                                                
College housing and academic                                                                                    
 facilities loans                                                                                               
 liquidating account:                                                                                           
   Obligations..............  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Loan disbursements.......          13  ..........  ..........  ..........  ..........  ..........  ..........
   Change in outstandings...         -36         -41         -40         -38         -35         -34         -31
   Outstandings.............         646         605         565         527         492         458         427
                                                                                                                
College housing and academic                                                                                    
 facilities loans financing                                                                                     
 account:                                                                                                       
   Obligations..............  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Loan disbursements.......           7           6           3           1           6           6  ..........
   Change in outstandings...           7           6           3           1           6           5          -1
   Outstandings.............          13          19          22          23          29          34          33
                                                                                                                
Federal direct student loan                                                                                     
 program, financing account:                                                                                    
   Obligations..............       9,262      12,527      15,377      18,666      20,857      21,253      22,523
   Loan disbursements.......       9,100      11,978      14,533      17,635      20,156      21,730      23,076
   Change in outstandings...       8,872      11,588      13,676      16,050      17,551      17,810      17,541
   Outstandings.............      11,565      23,153      36,829      52,879      70,430      88,240     105,781
                                                                                                                
Historically Black College                                                                                      
 and University Capital                                                                                         
 financing--direct loan                                                                                         
 finance account:                                                                                               
   Obligations..............  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Loan disbursements.......  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Change in outstandings...  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Outstandings.............  ..........  ..........  ..........  ..........  ..........  ..........  ..........
                                                                                                                
    Department of Energy                                                                                        
                                                                                                                
       Power Marketing                                                                                          
       Administration                                                                                           
                                                                                                                
Bonneville Power                                                                                                
 Administration fund:                                                                                           
   Obligations..............  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Loan disbursements.......  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Change in outstandings...  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Outstandings.............           3           3           3           3           3           3           3
                                                                                                                

[[Page 178]]

  Department of Health and                                                                                      
       Human Services                                                                                           
                                                                                                                
    Health Resources and                                                                                        
   Services Administration                                                                                      
                                                                                                                
Health Resources and                                                                                            
 Services:                                                                                                      
   Obligations..............  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Loan disbursements.......          25          20  ..........  ..........  ..........  ..........  ..........
   Change in outstandings...           2  ..........         -20         -19         -19         -19         -19
   Outstandings.............         800         800         780         761         742         723         704
                                                                                                                
Health loan funds:                                                                                              
   Obligations..............  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Loan disbursements.......  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Change in outstandings...         -11         -11          -7          -7          -5          -4  ..........
   Outstandings.............          34          23          16           9           4  ..........  ..........
                                                                                                                
  Department of Housing and                                                                                     
      Urban Development                                                                                         
                                                                                                                
  Public and Indian Housing                                                                                     
          Programs                                                                                              
                                                                                                                
Low-rent public housing--                                                                                       
 loans and other expenses:                                                                                      
   Obligations..............  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Loan disbursements.......  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Change in outstandings...         -62         -65         -65         -65         -65         -65         -65
   Outstandings.............       1,627       1,562       1,497       1,432       1,367       1,302       1,237
                                                                                                                
   Community Planning and                                                                                       
         Development                                                                                            
                                                                                                                
Revolving fund (liquidating                                                                                     
 programs):                                                                                                     
   Obligations..............  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Loan disbursements.......  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Change in outstandings...         -60         -46         -40         -40         -35         -30         -30
   Outstandings.............         328         282         242         202         167         137         107
                                                                                                                
Community development loan                                                                                      
 guarantees liquidating                                                                                         
 account:                                                                                                       
   Obligations..............  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Loan disbursements.......  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Change in outstandings...         -50          -4          -4          -4          -4          -4          -4
   Outstandings.............          39          35          31          27          23          19          15
                                                                                                                
      Housing Programs                                                                                          
                                                                                                                
Nonprofit sponsor assistance                                                                                    
 liquidating account:                                                                                           
   Obligations..............  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Loan disbursements.......  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Change in outstandings...  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Outstandings.............           1           1           1           1           1           1           1
                                                                                                                
Flexible Subsidy Fund:                                                                                          
   Obligations..............  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Loan disbursements.......          93          95          73           8  ..........  ..........  ..........
   Change in outstandings...          91          93          70           5          -3          -3          -3
   Outstandings.............         675         768         838         843         840         837         834
                                                                                                                
FHA-Mutual mortgage and                                                                                         
 cooperative housing                                                                                            
 insurance funds liquidating                                                                                    
 account:                                                                                                       
   Obligations..............  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Loan disbursements.......  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Change in outstandings...          -8          -2  ..........  ..........  ..........  ..........  ..........
   Outstandings.............           7           5           5           5           5           5           5
                                                                                                                
FHA-General and special risk                                                                                    
 insurance funds liquidating                                                                                    
 account:                                                                                                       
   Obligations..............  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Loan disbursements.......  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Change in outstandings...         -10         -12          -9         -10         -10          -8          -7
   Outstandings.............          97          85          76          66          56          48          41
                                                                                                                
FHA-General and special risk                                                                                    
 direct loan financing                                                                                          
 account:                                                                                                       
   Obligations..............  ..........          40         120          20          20          20  ..........
   Loan disbursements.......  ..........          40         120          20          20          20          20
   Change in outstandings...  ..........          40         100         -20         -40         -20         -20
   Outstandings.............  ..........          40         140         120          80          60          40
                                                                                                                

[[Page 179]]

Housing for the elderly or                                                                                      
 handicapped fund                                                                                               
 liquidating account:                                                                                           
   Obligations..............  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Loan disbursements.......           2         189  ..........  ..........  ..........  ..........  ..........
   Change in outstandings...         -25         118         -72         -71         -70         -70         -69
   Outstandings.............       8,306       8,424       8,352       8,281       8,211       8,141       8,072
                                                                                                                
FHA-Mutual mortgage                                                                                             
 insurance direct loan                                                                                          
 financing account:                                                                                             
   Obligations..............           3         200         200  ..........  ..........  ..........  ..........
   Loan disbursements.......           3         200         200  ..........  ..........  ..........  ..........
   Change in outstandings...           2         143         110  ..........  ..........  ..........  ..........
   Outstandings.............           2         145         255         255         255         255         255
                                                                                                                
Government National Mortgage                                                                                    
         Association                                                                                            
                                                                                                                
Guarantees of mortgage-                                                                                         
 backed securities                                                                                              
 liquidating account:                                                                                           
   Obligations..............  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Loan disbursements.......         128         144         111          81          44          18           5
   Change in outstandings...         -12           6           2           4           4           2           1
   Outstandings.............         321         327         329         333         337         339         340
                                                                                                                
Guarantees of mortgage-                                                                                         
 backed securities financing                                                                                    
 account:                                                                                                       
   Obligations..............  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Loan disbursements.......  ..........  ..........           5          18          42          60          70
   Change in outstandings...  ..........  ..........  ..........           1           3           7           9
   Outstandings.............  ..........  ..........  ..........           1           4          11          20
                                                                                                                
 Department of the Interior                                                                                     
                                                                                                                
    Bureau of Reclamation                                                                                       
                                                                                                                
Bureau of reclamation loan                                                                                      
 liquidating account:                                                                                           
   Obligations..............  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Loan disbursements.......  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Change in outstandings...  ..........          -3          -3          -3          -3          -4          -4
   Outstandings.............          80          77          74          71          68          64          60
                                                                                                                
Bureau of Reclamation direct                                                                                    
 loan financing account:                                                                                        
   Obligations..............          27          37          31          31          31          31          31
   Loan disbursements.......          24          37          35          36          37          39          40
   Change in outstandings...          24          37          35          36          37          39          40
   Outstandings.............          55          92         127         163         200         239         279
                                                                                                                
    National Park Service                                                                                       
                                                                                                                
Construction:                                                                                                   
   Obligations..............  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Loan disbursements.......  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Change in outstandings...  ..........          -1  ..........  ..........          -1  ..........  ..........
   Outstandings.............           7           6           6           6           5           5           5
                                                                                                                
  Bureau of Indian Affairs                                                                                      
                                                                                                                
Revolving fund for loans                                                                                        
 liquidating account:                                                                                           
   Obligations..............  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Loan disbursements.......  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Change in outstandings...          -7          -9         -11         -10          -8          -7          -7
   Outstandings.............          60          51          40          30          22          15           8
                                                                                                                
Indian loan guaranty and                                                                                        
 insurance fund liquidating                                                                                     
 account:                                                                                                       
   Obligations..............  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Loan disbursements.......           4  ..........  ..........  ..........  ..........  ..........  ..........
   Change in outstandings...  ..........          -5          -7          -5          -3          -2          -2
   Outstandings.............          40          35          28          23          20          18          16
                                                                                                                
Indian direct loan financing                                                                                    
 account:                                                                                                       
   Obligations..............  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Loan disbursements.......  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Change in outstandings...          -5          -3          -7          -2          -2  ..........  ..........
   Outstandings.............          17          14           7           5           3           3           3

                                                                                                                
[[Page 180]]

       Insular Affairs                                                                                          
                                                                                                                
Assistance to territories:                                                                                      
   Obligations..............  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Loan disbursements.......  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Change in outstandings...          -1          -1          -1          -1          -1          -1          -2
   Outstandings.............          20          19          18          17          16          15          13
                                                                                                                
     Department of State                                                                                        
                                                                                                                
  Administration of Foreign                                                                                     
           Affairs                                                                                              
                                                                                                                
Repatriation loans financing                                                                                    
 account:                                                                                                       
   Obligations..............           1           1           1           1           1           1           1
   Loan disbursements.......           1           1           1           1           1           1           1
   Change in outstandings...  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Outstandings.............           4           4           4           4           4           4           4
                                                                                                                
Department of Transportation                                                                                    
                                                                                                                
   Office of the Secretary                                                                                      
                                                                                                                
Minority business resource                                                                                      
 center direct loan                                                                                             
 financing account:                                                                                             
   Obligations..............          15          15          15          15          15          15          15
   Loan disbursements.......           6          15          15          15          15          15          15
   Change in outstandings...  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Outstandings.............           9           9           9           9           9           9           9
                                                                                                                
       Federal Highway                                                                                          
       Administration                                                                                           
                                                                                                                
Orange County (CA) toll road                                                                                    
 demonstration project                                                                                          
 direct loan financing                                                                                          
 account:                                                                                                       
   Obligations..............  ..........          25  ..........  ..........  ..........  ..........  ..........
   Loan disbursements.......  ..........           6           6          13          13          13          13
   Change in outstandings...  ..........           7           6          13          13          13          13
   Outstandings.............  ..........           7          13          26          39          52          65
                                                                                                                
High priority corridors loan                                                                                    
 financing account:                                                                                             
   Obligations..............  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Loan disbursements.......  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Change in outstandings...  ..........         -37  ..........  ..........  ..........  ..........  ..........
   Outstandings.............          37  ..........  ..........  ..........  ..........  ..........  ..........
                                                                                                                
Transportation                                                                                                  
 infrastructure credit                                                                                          
 direct loan financing                                                                                          
 account:                                                                                                       
   Obligations..............  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Loan disbursements.......  ..........  ..........         425         638         851         851         851
   Change in outstandings...  ..........  ..........         425         638         851         851         851
   Outstandings.............  ..........  ..........         425       1,063       1,914       2,765       3,616
                                                                                                                
Right-of-way revolving fund                                                                                     
 liquidating account:                                                                                           
   Obligations..............  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Loan disbursements.......          41          28         -20         -20         -16  ..........  ..........
   Change in outstandings...          29          13         -38         -40         -40         -24         -24
   Outstandings.............         183         196         158         118          78          54          30
                                                                                                                
      Federal Railroad                                                                                          
       Administration                                                                                           
                                                                                                                
Amtrak corridor improvement                                                                                     
 loans liquidating account:                                                                                     
   Obligations..............  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Loan disbursements.......  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Change in outstandings...          -1          -1          -1  ..........  ..........  ..........  ..........
   Outstandings.............           6           5           4           4           4           4           4
                                                                                                                
Amtrak corridor improvement                                                                                     
 direct loan financing                                                                                          
 account:                                                                                                       
   Obligations..............  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Loan disbursements.......  ..........           2  ..........  ..........  ..........  ..........  ..........
   Change in outstandings...  ..........           2  ..........  ..........  ..........  ..........  ..........
   Outstandings.............           3           5           5           5           5           5           5
                                                                                                                
Direct loan financing                                                                                           
 account:                                                                                                       
   Obligations..............  ..........         400  ..........  ..........  ..........  ..........  ..........
   Loan disbursements.......  ..........         140         140         120  ..........  ..........  ..........
   Change in outstandings...  ..........         140         140         120  ..........  ..........  ..........
   Outstandings.............  ..........         140         280         400         400         400         400
                                                                                                                

[[Page 181]]

Railroad rehabilitation and                                                                                     
 improvement liquidating                                                                                        
 account:                                                                                                       
   Obligations..............  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Loan disbursements.......  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Change in outstandings...          -5          -5         -11          -4          -5          -4          -4
   Outstandings.............          72          67          56          52          47          43          39
                                                                                                                
Railroad rehabilitation and                                                                                     
 improvement direct loan                                                                                        
 financing account:                                                                                             
   Obligations..............  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Loan disbursements.......  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Change in outstandings...  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Outstandings.............           4           4           4           4           4           4           4
                                                                                                                
   Maritime Administration                                                                                      
                                                                                                                
Federal ship financing fund                                                                                     
 liquidating account:                                                                                           
   Obligations..............  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Loan disbursements.......  ..........          25          25          25  ..........  ..........  ..........
   Change in outstandings...         -33          18          18          18  ..........  ..........  ..........
   Outstandings.............  ..........          18          36          54          54          54          54
                                                                                                                
 Department of the Treasury                                                                                     
                                                                                                                
    Departmental Offices                                                                                        
                                                                                                                
Community development                                                                                           
 financial institutions fund                                                                                    
 direct loan financing                                                                                          
 account:                                                                                                       
   Obligations..............           7          33          53          55          69          98         152
   Loan disbursements.......  ..........           7          23          45          57          67          93
   Change in outstandings...  ..........           7          23          45          57          67          93
   Outstandings.............  ..........           7          30          75         132         199         292
                                                                                                                
   Department of Veterans                                                                                       
           Affairs                                                                                              
                                                                                                                
      Veterans Benefits                                                                                         
       Administration                                                                                           
                                                                                                                
Veterans Housing Benefit                                                                                        
 Program Fund Direct Loan                                                                                       
 Financing Account:                                                                                             
   Obligations..............       1,336       1,887       2,144       2,203       2,247       2,263       2,247
   Loan disbursements.......       1,396       1,887       2,144       2,203       2,247       2,263       2,247
   Change in outstandings...           1         675         449         402         390         360         329
   Outstandings.............         723       1,398       1,847       2,249       2,639       2,999       3,328
                                                                                                                
Veterans Housing Benefit                                                                                        
 Program Fund Liquidating                                                                                       
 Account:                                                                                                       
   Obligations..............  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Loan disbursements.......          38          31          28          26          24          22          20
   Change in outstandings...        -106         -36         -33         -30         -28         -26         -24
   Outstandings.............         449         413         380         350         322         296         272
                                                                                                                
Miscellaneous veterans                                                                                          
 programs loan fund direct                                                                                      
 loan financing account:                                                                                        
   Obligations..............           8          15          17          20           2           2           2
   Loan disbursements.......           8          15          17          20           2           2           2
   Change in outstandings...           6          13          15          17          -1          -1          -1
   Outstandings.............          13          26          41          58          57          56          55
                                                                                                                
Miscellaneous veterans                                                                                          
 programs loan fund                                                                                             
 liquidating account:                                                                                           
   Obligations..............  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Loan disbursements.......  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Change in outstandings...  ..........          -1  ..........  ..........          -1  ..........  ..........
   Outstandings.............           3           2           2           2           1           1           1
                                                                                                                
  Environmental Protection                                                                                      
           Agency                                                                                               
                                                                                                                
  Environmental Protection                                                                                      
           Agency                                                                                               
                                                                                                                
Abatement, control, and                                                                                         
 compliance direct loan                                                                                         
 liquidating account:                                                                                           
   Obligations..............  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Loan disbursements.......  ..........           2  ..........  ..........  ..........  ..........  ..........
   Change in outstandings...          -9          -7          -9          -9          -9          -8          -8
   Outstandings.............          87          80          71          62          53          45          37
                                                                                                                
Abatement, control, and                                                                                         
 compliance direct loan                                                                                         
 financing account:                                                                                             
   Obligations..............  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Loan disbursements.......          10           6           3           1  ..........  ..........  ..........
   Change in outstandings...           5           1          -2          -4          -5          -5          -5
   Outstandings.............          65          66          64          60          55          50          45
                                                                                                                

[[Page 182]]

       Small Business                                                                                           
       Administration                                                                                           
                                                                                                                
       Small Business                                                                                           
       Administration                                                                                           
                                                                                                                
Business direct loan                                                                                            
 financing account:                                                                                             
   Obligations..............           9          24          19          20          21          21          22
   Loan disbursements.......          12          12          13          13          13          14          14
   Change in outstandings...          -6          -6         -23         -23          -6          -6          -6
   Outstandings.............         161         155         132         109         103          97          91
                                                                                                                
Disaster direct loan                                                                                            
 financing account:                                                                                             
   Obligations..............         867         747       1,188  ..........  ..........  ..........  ..........
   Loan disbursements.......         946         874       1,041         746         878         902         936
   Change in outstandings...         479         164         264      -2,970      -3,124          46          51
   Outstandings.............       7,227       7,391       7,655       4,685       1,561       1,607       1,658
                                                                                                                
Disaster loan fund                                                                                              
 liquidating account:                                                                                           
   Obligations..............  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Loan disbursements.......  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Change in outstandings...        -242        -260        -320        -654        -442  ..........  ..........
   Outstandings.............       1,676       1,416       1,096         442  ..........  ..........  ..........
                                                                                                                
Business loan fund                                                                                              
 liquidating account:                                                                                           
   Obligations..............  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Loan disbursements.......         152         117          90          69  ..........  ..........  ..........
   Change in outstandings...        -366        -340        -565        -548         -25         -23         -20
   Outstandings.............       1,671       1,331         766         218         193         170         150
                                                                                                                
 Other Independent Agencies                                                                                     
                                                                                                                
    District of Columbia                                                                                        
                                                                                                                
Loans to the District of                                                                                        
 Columbia for capital                                                                                           
 projects:                                                                                                      
   Obligations..............  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Loan disbursements.......  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Change in outstandings...         -12         -12         -12         -12         -12         -15  ..........
   Outstandings.............          63          51          39          27          15  ..........  ..........
                                                                                                                
Repayable advances to the                                                                                       
 District of Columbia direct                                                                                    
 loan financing account:                                                                                        
   Obligations..............         379         461  ..........  ..........  ..........  ..........  ..........
   Loan disbursements.......         379         461  ..........  ..........  ..........  ..........  ..........
   Change in outstandings...         232          82        -461  ..........  ..........  ..........  ..........
   Outstandings.............         379         461  ..........  ..........  ..........  ..........  ..........
                                                                                                                
  Export-Import Bank of the                                                                                     
        United States                                                                                           
                                                                                                                
Export-Import Bank of the                                                                                       
 United States liquidating                                                                                      
 account:                                                                                                       
   Obligations..............  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Loan disbursements.......          22          80          80  ..........  ..........  ..........  ..........
   Change in outstandings...        -627        -906        -536        -352        -268        -247        -196
   Outstandings.............       5,511       4,605       4,069       3,717       3,449       3,202       3,006
                                                                                                                
Debt reduction financing                                                                                        
 account:                                                                                                       
   Obligations..............  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Loan disbursements.......  ..........          72          29  ..........  ..........  ..........  ..........
   Change in outstandings...  ..........          72          29  ..........  ..........  ..........  ..........
   Outstandings.............  ..........          72         101         101         101         101         101
                                                                                                                
Export-Import Bank direct                                                                                       
 loan financing account:                                                                                        
   Obligations..............       1,236       1,900       1,660       1,660       1,660       1,660       1,660
   Loan disbursements.......       1,023       1,293       1,155       1,218       1,308       1,255       1,255
   Change in outstandings...         886         789         636         714         845         820         872
   Outstandings.............       2,376       3,165       3,801       4,515       5,360       6,180       7,052
                                                                                                                
Farm Credit System Financial                                                                                    
   Assistance Corporation                                                                                       
                                                                                                                
Financial assistance                                                                                            
 corporation assistance                                                                                         
 fund, liquidating account:                                                                                     
   Obligations..............  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Loan disbursements.......  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Change in outstandings...  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Outstandings.............       1,261       1,261       1,261       1,261       1,261       1,261       1,261
                                                                                                                

[[Page 183]]

   Federal Communications                                                                                       
         Commission                                                                                             
                                                                                                                
Spectrum auction direct loan                                                                                    
 financing account:                                                                                             
   Obligations..............         115       6,980       3,220  ..........  ..........  ..........  ..........
   Loan disbursements.......         115       6,980       3,220  ..........  ..........  ..........  ..........
   Change in outstandings...         115       6,858       2,759  ..........  ..........  ..........  ..........
   Outstandings.............         115       6,973       9,732       9,732       9,732       9,732       9,732
                                                                                                                
       Bank Insurance                                                                                           
                                                                                                                
Bank insurance fund:                                                                                            
   Obligations..............  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Loan disbursements.......  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Change in outstandings...         -32  ..........  ..........  ..........  ..........  ..........  ..........
   Outstandings.............         100         100         100         100         100         100         100
                                                                                                                
      FSLIC Resolution                                                                                          
                                                                                                                
FSLIC resolution fund:                                                                                          
   Obligations..............  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Loan disbursements.......  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Change in outstandings...         -32         -32         -94  ..........  ..........  ..........  ..........
   Outstandings.............         126          94  ..........  ..........  ..........  ..........  ..........
                                                                                                                
Federal Emergency Management                                                                                    
           Agency                                                                                               
                                                                                                                
Disaster assistance direct                                                                                      
 loan liquidating account:                                                                                      
   Obligations..............  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Loan disbursements.......  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Change in outstandings...  ..........          -1          -1  ..........  ..........  ..........  ..........
   Outstandings.............          59          58          57          57          57          57          57
                                                                                                                
Disaster assistance direct                                                                                      
 loan financing account:                                                                                        
   Obligations..............         138          25          25          25          25          25          25
   Loan disbursements.......          90         105          25          25          25          25          25
   Change in outstandings...          41          60          17           9          -1          -7          -5
   Outstandings.............         142         202         219         228         227         220         215
                                                                                                                
    National Credit Union                                                                                       
       Administration                                                                                           
                                                                                                                
Community development credit                                                                                    
 union revolving loan fund:                                                                                     
   Obligations..............  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Loan disbursements.......           2           3           2           2           1           1           1
   Change in outstandings...  ..........           1  ..........  ..........  ..........  ..........  ..........
   Outstandings.............           6           7           7           7           7           7           7
                                                                                                                
 Tennessee Valley Authority                                                                                     
                                                                                                                
Tennessee Valley Authority                                                                                      
 fund:                                                                                                          
   Obligations..............          61         107         118         124         143         153         172
   Loan disbursements.......          61         107         118         124         143         153         172
   Change in outstandings...           1          48          49          47          56          56          60
   Outstandings.............         150         198         247         294         350         406         466
                             ===================================================================================
Total, Direct loan                                                                                              
 transactions:                                                                                                  
   Obligations..............      23,387      36,790      37,446      36,339      38,790      39,038      39,979
   Loan disbursements.......      23,566      37,642      37,523      36,806      40,500      40,906      41,676
   Change in outstandings...       3,978      18,027      15,704      10,655      15,372      19,774      19,567
   Outstandings.............     166,534     184,561     200,265     210,920     226,292     246,066     265,633
----------------------------------------------------------------------------------------------------------------


                        Table 8-9. GUARANTEED LOAN TRANSACTIONS OF THE FEDERAL GOVERNMENT                       
                                            (in millions of dollars)                                            
----------------------------------------------------------------------------------------------------------------
                                                                         Estimate                               
      Agency or Program          1996    -----------------------------------------------------------------------
                               Actual        1997        1998        1999        2000        2001        2002   
----------------------------------------------------------------------------------------------------------------

[[Page 184]]

  Funds Appropriated to the                                                                                     
          President                                                                                             
                                                                                                                
   International Security                                                                                       
         Assistance                                                                                             
                                                                                                                
Foreign military loan                                                                                           
 liquidating account:                                                                                           
   Commitments..............  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   New guaranteed loans.....  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Change in outstandings...        -481        -435        -389        -384        -377        -361        -355
   Outstandings.............       6,129       5,694       5,305       4,921       4,544       4,183       3,828
                                                                                                                
  Agency for International                                                                                      
         Development                                                                                            
                                                                                                                
Loan guarantees to Israel                                                                                       
 financing account:                                                                                             
   Commitments..............       2,000       2,000  ..........  ..........  ..........  ..........  ..........
   New guaranteed loans.....       1,751       2,000  ..........  ..........  ..........  ..........  ..........
   Change in outstandings...       1,751       2,000  ..........  ..........  ..........  ..........  ..........
   Outstandings.............       6,564       8,564       8,564       8,564       8,564       8,564       8,564
                                                                                                                
Housing and other credit                                                                                        
 guaranty programs                                                                                              
 liquidating account:                                                                                           
   Commitments..............  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   New guaranteed loans.....           2          33           2  ..........  ..........  ..........  ..........
   Change in outstandings...         -64         -75        -107        -104        -105        -108        -105
   Outstandings.............       1,950       1,875       1,768       1,664       1,559       1,451       1,346
                                                                                                                
Private sector revolving                                                                                        
 fund liquidating account:                                                                                      
   Commitments..............  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   New guaranteed loans.....  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Change in outstandings...          -3         -12  ..........  ..........  ..........  ..........  ..........
   Outstandings.............          16           4           4           4           4           4           4
                                                                                                                
Microenterprise and other                                                                                       
 development guaranteed loan                                                                                    
 financing account:                                                                                             
   Commitments..............  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   New guaranteed loans.....           2           4  ..........  ..........  ..........  ..........  ..........
   Change in outstandings...           2           4  ..........  ..........  ..........  ..........  ..........
   Outstandings.............          26          30          30          30          30          30          30
                                                                                                                
Urban and environmental                                                                                         
 credit guaranteed loan                                                                                         
 financing account:                                                                                             
   Commitments..............          82          42          46  ..........  ..........  ..........  ..........
   New guaranteed loans.....          60          75          50  ..........  ..........  ..........  ..........
   Change in outstandings...          60          75          50  ..........  ..........  ..........  ..........
   Outstandings.............         239         314         364         364         364         364         364
                                                                                                                
Assistance for the New                                                                                          
 Independent States of the                                                                                      
 Former Soviet Union:                                                                                           
 Ukraine export credit                                                                                          
 insurance financing                                                                                            
 account:                                                                                                       
   Commitments..............          81          63  ..........  ..........  ..........  ..........  ..........
   New guaranteed loans.....          81          63  ..........  ..........  ..........  ..........  ..........
   Change in outstandings...          81          63         -81         -63  ..........  ..........  ..........
   Outstandings.............          81         144          63  ..........  ..........  ..........  ..........
                                                                                                                
 Overseas Private Investment                                                                                    
         Corporation                                                                                            
                                                                                                                
Overseas Private Investment                                                                                     
 Corporation liquidating                                                                                        
 account:                                                                                                       
   Commitments..............  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   New guaranteed loans.....           8          20           5  ..........  ..........  ..........  ..........
   Change in outstandings...         -71         -55         -70         -40         -30         -21  ..........
   Outstandings.............         216         161          91          51          21  ..........  ..........
                                                                                                                
Overseas private investment                                                                                     
 corporation guaranteed loan                                                                                    
 financing account:                                                                                             
   Commitments..............       2,000       2,250       1,800       1,800       1,800       1,800       1,800
   New guaranteed loans.....         847       1,500       1,900       2,400       2,700       2,400       2,400
   Change in outstandings...         820       1,446       1,400       1,400       1,200         700         400
   Outstandings.............       1,335       2,781       4,181       5,581       6,781       7,481       7,881
                                                                                                                
  Department of Agriculture                                                                                     
                                                                                                                
     Farm Service Agency                                                                                        
                                                                                                                
Agricultural credit                                                                                             
 insurance fund liquidating                                                                                     
 account:                                                                                                       
   Commitments..............  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   New guaranteed loans.....           2           2  ..........  ..........  ..........  ..........  ..........
   Change in outstandings...        -143        -210        -105         -55         -44         -32         -22
   Outstandings.............       1,173         963         858         803         759         727         705
                                                                                                                

[[Page 185]]

Agricultural credit                                                                                             
 insurance fund guaranteed                                                                                      
 loan financing account:                                                                                        
   Commitments..............       1,851       2,547       2,300       2,277       2,273       2,269       2,268
   New guaranteed loans.....       1,768       2,378       2,375       2,288       2,274       2,270       2,269
   Change in outstandings...         726       1,123       1,009         564         426         328         255
   Outstandings.............       5,705       6,828       7,837       8,401       8,827       9,155       9,410
                                                                                                                
Commodity credit corporation                                                                                    
 export guarantee financing                                                                                     
 account:                                                                                                       
   Commitments..............       5,700       5,500       5,700       5,700       5,700       5,700       5,700
   New guaranteed loans.....       3,312       5,500       5,700       5,700       5,700       5,700       5,700
   Change in outstandings...         449       2,729       2,034       1,083         210         117          49
   Outstandings.............       5,323       8,052      10,086      11,169      11,379      11,496      11,545
                                                                                                                
Commodity credit corporation                                                                                    
 guaranteed loans                                                                                               
 liquidating account:                                                                                           
   Commitments..............  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   New guaranteed loans.....  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Change in outstandings...        -115         -85          -6  ..........  ..........  ..........  ..........
   Outstandings.............          91           6  ..........  ..........  ..........  ..........  ..........
                                                                                                                
      Natural Resources                                                                                         
    Conservation Service                                                                                        
                                                                                                                
Agricultural resource                                                                                           
 conservation demonstration                                                                                     
 guaranteed loan financing                                                                                      
 account:                                                                                                       
   Commitments..............  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   New guaranteed loans.....  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Change in outstandings...  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Outstandings.............          17          17          17          17          17          17          17
                                                                                                                
   Rural Utilities Service                                                                                      
                                                                                                                
Rural communication                                                                                             
 development fund                                                                                               
 liquidating account:                                                                                           
   Commitments..............  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   New guaranteed loans.....  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Change in outstandings...  ..........  ..........          -1  ..........  ..........  ..........  ..........
   Outstandings.............           5           5           4           4           4           4           4
                                                                                                                
Rural development insurance                                                                                     
 fund liquidating account:                                                                                      
   Commitments..............  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   New guaranteed loans.....           1          18  ..........  ..........  ..........  ..........  ..........
   Change in outstandings...        -103         -74         -81         -64         -52         -42         -34
   Outstandings.............         499         425         344         280         228         186         152
                                                                                                                
Rural water and waste water                                                                                     
 disposal guaranteed loans                                                                                      
 financing account:                                                                                             
   Commitments..............          59          75          75          75          75          75          75
   New guaranteed loans.....           1          24          50          60          79          75          75
   Change in outstandings...        -486          23          49          57          74          67          64
   Outstandings.............           8          31          80         137         211         278         342
                                                                                                                
Rural electrification and                                                                                       
 telecommunications                                                                                             
 liquidating account:                                                                                           
   Commitments..............  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   New guaranteed loans.....  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Change in outstandings...         -14         -21         -24  ..........  ..........  ..........  ..........
   Outstandings.............         691         670         646         646         646         646         646
                                                                                                                
    Rural Housing Service                                                                                       
                                                                                                                
Rural housing insurance fund                                                                                    
 liquidating account:                                                                                           
   Commitments..............  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   New guaranteed loans.....  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Change in outstandings...          -4          -2          -3          -2          -2          -1          -2
   Outstandings.............          32          30          27          25          23          22          20
                                                                                                                
Rural housing insurance fund                                                                                    
 guaranteed loan financing                                                                                      
 account:                                                                                                       
   Commitments..............       1,713       2,713       3,100       3,050       2,800       2,589       2,497
   New guaranteed loans.....       1,496       2,319       2,944       3,018       2,831       2,612       2,488
   Change in outstandings...       1,418       2,179       2,718       2,682       2,379       2,036       1,784
   Outstandings.............       3,503       5,682       8,400      11,082      13,461      15,497      17,281
                                                                                                                
Rural community facility                                                                                        
 guaranteed loans financing                                                                                     
 account:                                                                                                       
   Commitments..............          56          74         209         209         208         208         208
   New guaranteed loans.....          45          54          77         129         153         184         208
   Change in outstandings...          94          49          69         118         135         159         174
   Outstandings.............          94         143         212         330         465         624         798
                                                                                                                
 Rural Business--Cooperative                                                                                    
           Service                                                                                              
                                                                                                                

[[Page 186]]

Rural business and industry                                                                                     
 guaranteed loans financing                                                                                     
 account:                                                                                                       
   Commitments..............         638         688         610         609         607         606         606
   New guaranteed loans.....         339         543         609         621         616         610         454
   Change in outstandings...         290         462         476         436         384         336         143
   Outstandings.............         723       1,185       1,661       2,097       2,481       2,817       2,960
                                                                                                                
   Department of Commerce                                                                                       
                                                                                                                
    Economic Development                                                                                        
       Administration                                                                                           
                                                                                                                
Economic development                                                                                            
 revolving fund liquidating                                                                                     
 account:                                                                                                       
   Commitments..............  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   New guaranteed loans.....  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Change in outstandings...          -4          -1          -1          -1          -2          -4  ..........
   Outstandings.............          15          14          13          12          10           6           6
                                                                                                                
    National Oceanic and                                                                                        
 Atmospheric Administration                                                                                     
                                                                                                                
Fishing vessel obligations                                                                                      
 guarantees financing                                                                                           
 account:                                                                                                       
   Commitments..............          36          25  ..........  ..........  ..........  ..........  ..........
   New guaranteed loans.....          25          25  ..........  ..........  ..........  ..........  ..........
   Change in outstandings...          19          19          -6          -6          -6          -6          -6
   Outstandings.............          73          92          86          80          74          68          62
                                                                                                                
Federal ship financing fund,                                                                                    
 fishing vessels liquidating                                                                                    
 account:                                                                                                       
   Commitments..............  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   New guaranteed loans.....  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Change in outstandings...         -33         -15         -13         -12         -10          -9          -8
   Outstandings.............         109          94          81          69          59          50          42
                                                                                                                
   Department of Defense--                                                                                      
          Military                                                                                              
                                                                                                                
         Procurement                                                                                            
                                                                                                                
Defense export loan                                                                                             
 guarantee financing                                                                                            
 account:                                                                                                       
   Commitments..............  ..........         125         250         250         250         250         250
   New guaranteed loans.....  ..........          50         150         200         200         200         200
   Change in outstandings...  ..........          50         150         200         200         200         200
   Outstandings.............  ..........          50         200         400         600         800       1,000
                                                                                                                
       Family Housing                                                                                           
                                                                                                                
Department of Defense,                                                                                          
 Family Housing Improvement,                                                                                    
 Guaranteed Loan Financing                                                                                      
 Account:                                                                                                       
   Commitments..............  ..........         118         138         307         600         600         600
   New guaranteed loans.....  ..........  ..........         100         300         600         600         600
   Change in outstandings...  ..........  ..........         100         287         574         548         496
   Outstandings.............  ..........  ..........         100         387         961       1,509       2,005
                                                                                                                
   Department of Education                                                                                      
                                                                                                                
   Office of Postsecondary                                                                                      
          Education                                                                                             
                                                                                                                
Federal family education                                                                                        
 loan liquidating account:                                                                                      
   Commitments..............  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   New guaranteed loans.....  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Change in outstandings...         753      -6,743      -6,847      -4,351      -4,062      -2,497      -1,806
   Outstandings.............      30,326      23,583      16,736      12,385       8,323       5,826       4,020
                                                                                                                
Federal family education                                                                                        
 loan program, financing                                                                                        
 account:                                                                                                       
   Commitments..............      22,311      23,038      22,995      11,995      12,260      13,119      14,031
   New guaranteed loans.....      19,816      20,948      21,241      20,533      20,520      21,518      22,872
   Change in outstandings...      13,991      12,669      10,348       6,680       3,674       2,070       1,264
   Outstandings.............      71,548      84,217      94,565     101,245     104,919     106,989     108,253
                                                                                                                
Historically Black College                                                                                      
 and University Capital                                                                                         
 financing--Financing                                                                                           
 account:                                                                                                       
   Commitments..............  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   New guaranteed loans.....  ..........          10          15          15          20          20  ..........
   Change in outstandings...  ..........          10          15          15          19          19          -1
   Outstandings.............  ..........          10          25          40          59          78          77
                                                                                                                

[[Page 187]]

  Department of Health and                                                                                      
       Human Services                                                                                           
                                                                                                                
    Health Resources and                                                                                        
   Services Administration                                                                                      
                                                                                                                
Health Resources and                                                                                            
 Services:                                                                                                      
   Commitments..............  ..........          80  ..........  ..........  ..........  ..........  ..........
   New guaranteed loans.....  ..........          67          13  ..........  ..........  ..........  ..........
   Change in outstandings...  ..........          66          13  ..........          -2          -2          -2
   Outstandings.............          10          76          89          89          87          85          83
                                                                                                                
Health professions graduate                                                                                     
 student loan guaranteed                                                                                        
 loan financing account:                                                                                        
   Commitments..............         210         140          85  ..........  ..........  ..........  ..........
   New guaranteed loans.....         210         140          85  ..........  ..........  ..........  ..........
   Change in outstandings...         203         132          73         -17         -23         -28         -33
   Outstandings.............       1,366       1,498       1,571       1,554       1,531       1,503       1,470
                                                                                                                
Health professions graduate                                                                                     
 student loan insurance fund                                                                                    
 liquidating account:                                                                                           
   Commitments..............  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   New guaranteed loans.....  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Change in outstandings...         -71         -95         -85         -90         -99        -103        -109
   Outstandings.............       1,549       1,454       1,369       1,279       1,180       1,077         968
                                                                                                                
Health center guaranteed                                                                                        
 loan financing account:                                                                                        
   Commitments..............  ..........          80  ..........  ..........  ..........  ..........  ..........
   New guaranteed loans.....  ..........          67           7           6  ..........  ..........  ..........
   Change in outstandings...  ..........          67           6           4          -2          -2          -2
   Outstandings.............  ..........          67          73          77          75          73          71
                                                                                                                
Health loan funds :                                                                                             
   Commitments..............  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   New guaranteed loans.....  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Change in outstandings...         -73         -50         -40         -40         -30         -28  ..........
   Outstandings.............         188         138          98          58          28  ..........  ..........
                                                                                                                
  Department of Housing and                                                                                     
      Urban Development                                                                                         
                                                                                                                
  Public and Indian Housing                                                                                     
          Programs                                                                                              
                                                                                                                
Low-rent public housing--                                                                                       
 loans and other expenses:                                                                                      
   Commitments..............  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   New guaranteed loans.....  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Change in outstandings...        -271        -354        -280        -280        -280        -280        -280
   Outstandings.............       3,861       3,507       3,227       2,947       2,667       2,387       2,107
                                                                                                                
Indian housing loan                                                                                             
 guarantee fund financing                                                                                       
 account:                                                                                                       
   Commitments..............          37          37          37          37          37          37          37
   New guaranteed loans.....           5           5          17          34          40          40          37
   Change in outstandings...           5           5          17          34          40          40          37
   Outstandings.............           6          11          28          62         102         142         179
                                                                                                                
   Community Planning and                                                                                       
         Development                                                                                            
                                                                                                                
Revolving fund (liquidating                                                                                     
 programs):                                                                                                     
   Commitments..............  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   New guaranteed loans.....  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Change in outstandings...          -1          -1          -1          -1  ..........  ..........  ..........
   Outstandings.............           3           2           1  ..........  ..........  ..........  ..........
                                                                                                                
Community development loan                                                                                      
 guarantees financing                                                                                           
 account:                                                                                                       
   Commitments..............         434       1,380       1,261       1,261       1,261       1,261       1,261
   New guaranteed loans.....         360         750       1,150       1,200       1,200       1,250       1,250
   Change in outstandings...         320         675       1,015       1,050       1,000       1,000         950
   Outstandings.............         750       1,425       2,440       3,490       4,490       5,490       6,440
                                                                                                                
Community development loan                                                                                      
 guarantees liquidating                                                                                         
 account:                                                                                                       
   Commitments..............  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   New guaranteed loans.....          44          15          10          10           7           5  ..........
   Change in outstandings...          -3         -40         -23         -20         -18         -20         -20
   Outstandings.............         243         203         180         160         142         122         102
                                                                                                                

[[Page 188]]

      Housing Programs                                                                                          
                                                                                                                
FHA-Mutual mortgage and                                                                                         
 cooperative housing                                                                                            
 insurance funds liquidating                                                                                    
 account:                                                                                                       
   Commitments..............  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   New guaranteed loans.....  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Change in outstandings...      25,442     -14,213     -12,510  ..........  ..........  ..........  ..........
   Outstandings.............     121,587     107,374      94,864      94,864      94,864      94,864      94,864
                                                                                                                
FHA-General and special risk                                                                                    
 insurance funds liquidating                                                                                    
 account:                                                                                                       
   Commitments..............  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   New guaranteed loans.....  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Change in outstandings...      -4,410      -3,099      -2,951      -3,659      -3,249      -3,172      -3,119
   Outstandings.............      49,346      46,247      43,296      39,637      36,388      33,216      30,097
                                                                                                                
FHA-General and special risk                                                                                    
 guaranteed loan financing                                                                                      
 account:                                                                                                       
   Commitments..............      12,751      17,400      17,400      17,400      17,400      17,400      17,400
   New guaranteed loans.....      12,220      14,652      15,005      14,887      14,940      14,940      14,940
   Change in outstandings...       6,373      10,246      11,439      10,734       9,635       9,342       9,345
   Outstandings.............      41,830      52,076      63,515      74,249      83,884      93,226     102,571
                                                                                                                
FHA-Loan guarantee recovery                                                                                     
 fund--financing account:                                                                                       
   Commitments..............  ..........          10  ..........  ..........  ..........  ..........  ..........
   New guaranteed loans.....  ..........           7           3  ..........  ..........  ..........  ..........
   Change in outstandings...  ..........           7           3  ..........  ..........  ..........  ..........
   Outstandings.............  ..........           7          10          10          10          10          10
                                                                                                                
FHA-Mutual mortgage                                                                                             
 insurance guaranteed loan                                                                                      
 financing account:                                                                                             
   Commitments..............      74,324      93,173      83,450      88,563      88,701      90,553      91,856
   New guaranteed loans.....      59,221      65,440      60,718      61,710      62,687      63,694      64,712
   Change in outstandings...      38,993      41,198      36,498      30,595      26,572      25,378      22,828
   Outstandings.............     242,407     283,605     320,103     350,698     377,270     402,648     425,476
                                                                                                                
Government National Mortgage                                                                                    
         Association                                                                                            
                                                                                                                
Guarantees of mortgage-                                                                                         
 backed securities                                                                                              
 liquidating account:                                                                                           
   Commitments..............  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   New guaranteed loans.....     101,540      79,560  ..........  ..........  ..........  ..........  ..........
   Change in outstandings...      33,585      35,900     -45,465     -73,832     -40,659     -65,283     -61,800
   Outstandings.............     497,433     533,333     487,868     414,036     373,377     308,094     246,294
                                                                                                                
Guarantees of mortgage-                                                                                         
 backed securities financing                                                                                    
 account:                                                                                                       
   Commitments..............     110,000     110,000     130,000  ..........  ..........  ..........  ..........
   New guaranteed loans.....  ..........  ..........      75,799      74,582      75,357      77,233      79,128
   Change in outstandings...  ..........  ..........      75,799      67,002      61,077      56,845      53,056
   Outstandings.............  ..........  ..........      75,799     142,801     203,878     260,723     313,779
                                                                                                                
 Department of the Interior                                                                                     
                                                                                                                
  Bureau of Indian Affairs                                                                                      
                                                                                                                
Indian loan guaranty and                                                                                        
 insurance fund liquidating                                                                                     
 account:                                                                                                       
   Commitments..............  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   New guaranteed loans.....  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Change in outstandings...         -25         -19         -15         -10          -5          -2          -2
   Outstandings.............          78          59          44          34          29          27          25
                                                                                                                
Indian guaranteed loan                                                                                          
 financing account:                                                                                             
   Commitments..............          35          35          35          35          35          35          35
   New guaranteed loans.....          49          50          45          35          35          35          35
   Change in outstandings...          38           4          30          10  ..........         -10         -20
   Outstandings.............         147         151         181         191         191         181         161
                                                                                                                
Department of Transportation                                                                                    
                                                                                                                
      Federal Aviation                                                                                          
       Administration                                                                                           
                                                                                                                
Aircraft purchase loan                                                                                          
 guarantee program:                                                                                             
   Commitments..............  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   New guaranteed loans.....  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Change in outstandings...          -2  ..........  ..........  ..........  ..........  ..........  ..........
   Outstandings.............  ..........  ..........  ..........  ..........  ..........  ..........  ..........
                                                                                                                

[[Page 189]]

   Maritime Administration                                                                                      
                                                                                                                
Federal ship financing fund                                                                                     
 liquidating account:                                                                                           
   Commitments..............  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   New guaranteed loans.....  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Change in outstandings...        -150        -154        -154        -124        -104         -84         -84
   Outstandings.............         831         677         523         399         295         211         127
                                                                                                                
Maritime guaranteed loan                                                                                        
 (Title XI) financing                                                                                           
 account:                                                                                                       
   Commitments..............       1,000       1,000         500         500         500         500         500
   New guaranteed loans.....       1,102       1,065         477         477         477         477         477
   Change in outstandings...       1,022         913         299         271         242         213         185
   Outstandings.............       1,764       2,677       2,976       3,247       3,489       3,702       3,887
                                                                                                                
   Department of Veterans                                                                                       
           Affairs                                                                                              
                                                                                                                
      Veterans Benefits                                                                                         
       Administration                                                                                           
                                                                                                                
Veterans Housing Benefit                                                                                        
 Program Fund Guaranteed                                                                                        
 Loan Financing Account:                                                                                        
   Commitments..............      28,676      30,230      28,948      25,458      25,032      24,566      24,059
   New guaranteed loans.....      28,676      30,230      28,948      25,458      25,032      24,566      24,059
   Change in outstandings...       8,721       8,013       6,998         699         121        -402        -868
   Outstandings.............     130,031     138,044     145,042     145,741     145,862     145,460     144,592
                                                                                                                
Veterans Housing Benefit                                                                                        
 Program Fund Liquidating                                                                                       
 Account:                                                                                                       
   Commitments..............  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   New guaranteed loans.....  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Change in outstandings...      -7,614      -6,072      -4,654      -3,561      -2,712      -2,056      -1,557
   Outstandings.............      24,731      18,659      14,005      10,444       7,732       5,676       4,119
                                                                                                                
       Small Business                                                                                           
       Administration                                                                                           
                                                                                                                
       Small Business                                                                                           
       Administration                                                                                           
                                                                                                                
Pollution control equipment                                                                                     
 fund liquidating account:                                                                                      
   Commitments..............  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   New guaranteed loans.....  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Change in outstandings...         -14         -13         -11  ..........  ..........  ..........  ..........
   Outstandings.............          86          73          62          62          62          62          62
                                                                                                                
Business guaranteed loan                                                                                        
 financing account:                                                                                             
   Commitments..............      10,154      10,641      11,887      11,660      11,660      11,660      11,660
   New guaranteed loans.....       6,773       6,955       7,143       7,336       7,534       7,738       7,947
   Change in outstandings...       3,723       3,822       3,926       4,032       4,142       4,253       4,368
   Outstandings.............      24,630      28,452      32,378      36,410      40,552      44,805      49,173
                                                                                                                
Business loan fund                                                                                              
 liquidating account:                                                                                           
   Commitments..............  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   New guaranteed loans.....           1           1           1           1           1           1           1
   Change in outstandings...      -1,292      -1,042        -850        -698        -579        -484        -406
   Outstandings.............       6,383       5,341       4,491       3,793       3,214       2,730       2,324
                                                                                                                
 Other Independent Agencies                                                                                     
                                                                                                                
  Export-Import Bank of the                                                                                     
        United States                                                                                           
                                                                                                                
Export-Import Bank of the                                                                                       
 United States liquidating                                                                                      
 account:                                                                                                       
   Commitments..............  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   New guaranteed loans.....         211         275  ..........  ..........  ..........  ..........  ..........
   Change in outstandings...        -809        -283        -536        -534        -513        -478        -417
   Outstandings.............       3,201       2,918       2,382       1,848       1,335         857         440
                                                                                                                
Export-Import Bank                                                                                              
 guaranteed loan financing                                                                                      
 account:                                                                                                       
   Commitments..............      10,281      14,643      15,413      15,413      15,413      15,413      15,413
   New guaranteed loans.....       5,456       8,722      10,102      10,693      11,036      11,302      11,600
   Change in outstandings...         848         497         329          23        -240        -711        -918
   Outstandings.............      14,584      15,081      15,410      15,433      15,193      14,482      13,564
                                                                                                                
    National Credit Union                                                                                       
       Administration                                                                                           
                                                                                                                
Credit union share insurance                                                                                    
 fund:                                                                                                          
   Commitments..............           1           1  ..........  ..........  ..........  ..........  ..........
   New guaranteed loans.....           1  ..........  ..........  ..........  ..........  ..........  ..........
   Change in outstandings...           1  ..........  ..........  ..........  ..........  ..........  ..........
   Outstandings.............           1           1           1           1           1           1           1
                                                                                                                

[[Page 190]]

 Tennessee Valley Authority                                                                                     
                                                                                                                
Tennessee Valley Authority                                                                                      
 fund:                                                                                                          
   Commitments..............  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   New guaranteed loans.....  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Change in outstandings...  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Outstandings.............  ..........  ..........  ..........  ..........  ..........  ..........  ..........
                             -----------------------------------------------------------------------------------
Subtotal, Guaranteed loans                                                                                      
 (gross)                                                                                                        
   Commitments..............     284,430     318,108     326,239     186,599     186,612     188,641     190,256
   New guaranteed loans.....     245,425     243,567     234,741     231,693     234,039     237,470     241,452
   Change in outstandings...     123,472      91,283      79,554      40,028      58,899      27,425      23,622
   Outstandings.............   1,303,537   1,394,820   1,474,374   1,514,402   1,573,301   1,600,726   1,624,348
                                                                                                                
Less, secondary guaranteed                                                                                      
 loans: \1\                                                                                                     
                                                                                                                
GNMA guarantees of FmHA/VA/                                                                                     
 FHA pools:                                                                                                     
   Commitments..............    -110,000    -110,000    -130,000  ..........  ..........  ..........  ..........
   New guaranteed loans.....    -101,540     -79,560     -75,799     -74,582     -75,357     -77,233     -79,128
   Change in outstandings...     -33,585     -35,900     -30,334       6,830     -20,418       8,438  ..........
   Outstandings.............    -497,433    -533,333    -563,667    -556,837    -577,255    -568,817    -560,073
                             ===================================================================================
Total, primary guaranteed                                                                                       
 loans: \2\                                                                                                     
   Commitments..............     174,430     208,108     196,239     186,599     186,612     188,641     190,256
   New guaranteed loans.....     143,885     164,007     158,942     157,111     158,682     160,237     162,324
   Change in outstandings...      89,887      55,383      49,220      46,858      38,481      35,863      32,366
   Outstandings.............     806,104     861,487     910,707     957,565     996,046   1,031,909   1,064,275
----------------------------------------------------------------------------------------------------------------
\1\ Loans guaranteed by FHA, VA, or FmHA are included above. GNMA places a secondary guarantee on these loans,  
  so they are deducted here to avoid double counting.                                                           
\2\ When guaranteed loans result in loans receivable, they are shown in the direct loan table.                  

[[Page 191]]


                TABLE 8-10.  LENDING AND BORROWING BY GOVERNMENT-SPONSORED ENTERPRISES (GSEs) \1\               
                                            (In millions of dollars)                                            
----------------------------------------------------------------------------------------------------------------
                                                                                                Estimate        
               Enterprise                                                      1996    -------------------------
                                                                              actual        1997         1998   
----------------------------------------------------------------------------------------------------------------
                 LENDING                                                                                        
                                                                                                                
Student Loan Marketing Association......  New transactions................       9,984        9,845        9,190
                                          Net change......................      -4,245       -1,819       -2,040
                                          Outstandings....................      37,391       35,572       33,532
Federal National Mortgage Association:                                                                          
  Corporation Accounts..................  New transactions................      66,802       67,301       77,506
                                          Net change......................       9,173       37,563       39,999
                                          Outstandings....................     201,428      238,991      278,990
  Mortgage-backed securities............  New transactions................     159,830      128,618      141,293
                                          Net change......................      76,777       59,205       66,453
                                          Outstandings....................     636,362      695,567      762,020
Federal Home Loan Mortgage Corporation:                                                                         
  Corporation accounts..................  New transactions................      46,267       57,253       70,848
                                          Net change......................       6,960       46,923       63,935
                                          Outstandings....................      55,129      102,052      165,987
  Participation certificate pools.......  New transactions................     123,808      127,522      131,348
                                          Net change......................      14,264       14,709       15,168
                                          Outstandings....................     471,310      486,019      501,187
Farm Credit System:                                                                                             
  Banks for cooperatives................  New transactions................      12,992       11,837       11,683
                                          Net change......................         -51         -258           84
                                          Outstandings....................       2,222        1,964        2,048
  Farm Credit Banks.....................  New transactions................      29,077       28,967       30,201
                                          Net change......................       2,661        1,959        1,515
                                          Outstandings....................      39,197       41,156       42,671
  Agricultural Credit Banks.............  New transactions................      48,117       46,000       47,000
                                          Net change......................         683          669          634
                                          Outstandings....................      14,914       15,583       16,217
Federal home loan banks \2\.............  New transactions................     796,853      800,000      800,000
                                          Net change......................      31,174         -302  ...........
                                          Outstandings....................     153,302      153,000      153,000
    Subtotal, lending (gross)...........  New transactions................   1,293,730    1,277,343    1,319,069
                                          Net change......................     137,396      158,649      185,748
                                          Outstandings....................   1,611,255    1,769,904    1,955,652
Less guaranteed loans purchased by:                                                                             
  Student Loan Marketing Association \3\  Net change......................      -4,245       -1,819       -2,040
                                          Outstandings....................      37,391       35,572       33,532
  Federal National Mortgage Association.  Net change......................       2,420  ...........  ...........

[[Page 192]]

                                          Outstandings....................      25,447       25,447       25,447
  Other.................................  Net change......................       3,376  ...........  ...........
                                          Outstandings....................      16,878       16,878       16,878
                                         -----------------------------------------------------------------------
    Total GSE lending (net).............  New transactions................   1,049,898    1,164,505    1,160,614
                                          Net change......................     135,845      160,468      187,788
                                          Outstandings....................   1,531,539    1,692,007    1,879,795
                BORROWING                                                                                       
                                                                                                                
Student Loan Marketing Association......  Net change......................      -6,708       -1,516       -1,677
                                          Outstandings....................      44,964       43,448       41,771
Federal National Mortgage Association...  Net change......................      85,248      100,038      112,726
                                          Outstandings....................     863,906      963,944    1,076,670
Federal Home Loan Mortgage Corporation..  Net change......................      22,130       61,246       76,442
                                          Outstandings....................     543,966      605,212      681,654
Farm Credit System:                                                                                             
  Banks for cooperatives................  Net change......................        -124         -300           58
                                          Outstandings....................       2,371        2,071        2,129
  Farm credit banks.....................  Net change......................       3,344        1,598        1,040
                                          Outstandings....................      41,936       43,534       44,574
  Agricultural credit banks.............  Net change......................         806          152          572
                                          Outstandings....................      16,328       16,480       17,052
Federal home loan banks.................  Net change......................      17,127       11,467  ...........
                                          Outstandings....................     243,533      255,000      255,000
The Financing Corporation \3\...........  Net change......................           1            2            1
                                          Outstandings....................       8,142        8,144        8,145
Resolution Funding Corporation \3\......  Net change......................          -2           -2           -3
                                          Outstandings....................      30,074       30,072       30,069
    Subtotal, borrowing (gross).........  Net change......................     125,285      176,782      184,396
                                          Outstandings....................   1,787,647    1,964,429    2,148,825
Less borrowing from other GSEs..........  Net change......................       6,632  ...........  ...........
                                          Outstandings....................      50,735       50,735       50,735
Less purchase of Federal debt             Net change......................        -519          374          467
 securities:.                                                                                                   
                                          Outstandings....................       6,969        7,343        7,810
Less borrowing to purchase guaranteed                                                                           
 loans by:                                                                                                      
  Student Loan Marketing Association \4\  Net change......................      -4,245       -1,819       -2,040
                                          Outstandings....................      37,391       35,572       33,532
  Federal National Mortgage Association.  Net change......................       2,420  ...........  ...........
                                          Outstandings....................      25,447       25,447       25,447
  Other.................................  Net change......................       3,376  ...........  ...........
                                          Outstandings....................      16,878       16,878       16,878
                                         -----------------------------------------------------------------------
    Total GSE borrowing (net)...........  Net change......................     117,621      178,227      185,969
                                          Outstandings....................   1,650,227    1,828,454    2,014,423
----------------------------------------------------------------------------------------------------------------
\1\ The estimates of borrowing and lending were developed by the GSEs based on certain assumptions but are      
  subject to periodic review and revision and do not represent official GSE forecasts of future activity. The   
  data for all years include programs of mortgage-backed securities. In cases where a GSE owns securities issued
  by the same GSE, including mortgage-backed securities, the borrowing and lending data for that GSE are        
  adjusted, with some degree of approximation, to remove double-counting.                                       
\2\ The lending by the Federal Home Loans Banks measures their advances to member thrift and other financial    
  institutions. In addition, their investment in private financial instruments at the end of 1996 was $122.0    
  billion.                                                                                                      
\3\ The change in debt outstanding is due solely to the amortization of discounts and premiums. No sale or      
  redemption of debt securities is estimated to occur in 1997 or 1998.                                          
\4\ All SLMA loans acquired are guaranteed by the Federal Government and therefore also counted as guaranteed   
  loans.