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


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              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 $6.2 trillion 
outstanding at the end of 1997. Of this, $181 billion is direct loans, 
$822 billion is loan guarantees, and $5.2 trillion is insurance. 
Including Government-sponsored enterprises (GSEs), the total Federal and 
federally assisted credit and insurance outstanding is $7.9 trillion.
  These diverse financial programs offer credit for housing, education, 
business, and exports, and insurance for deposits, pensions, and other 
risks. They face two challenges. Like other programs, they are operating 
under 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 while 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 assessment 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. This section also 
          describes the recent simplification of credit reform and the 
          intent to increase loan sales.
     The second section reviews Federal credit programs and GSEs 
          in four sectors: housing, education, business and community 
          development, and exports, noting the rationale and goals of 
          these programs. It highlights a new housing consortium to help 
          program managers integrate with evolving private sector 
          practices, and efforts to improve the effectiveness of 
          student, business, and international credit programs.
     The final section 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.
  Moreover, funds are flowing more readily to their most productive uses 
across the country and around the world. Interstate banking and 
branching are almost nationwide. 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 are 
helping to funnel funds from capital markets to small clients in cities 
and in rural areas.
  Faster 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.

Impact on Federal Programs

  These changes are affecting the roles, risks, and operations of 
Federal credit and insurance programs.
     In some cases, private credit and insurance markets may 
          evolve sufficiently to take over functions 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

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sophisticated services, including many off-balance sheet activities, 
often on a world-wide basis. Depository institutions have become 
increasingly vulnerable to adverse shocks in foreign financial markets 
through loans, investments, foreign exchange transactions, and off-
balance-sheet activities. In pensions, the Government guarantees defined 
benefit plans, but defined contribution plans play an increasing role--
attracting the support of younger workers in an aging workforce. This 
trend may accelerate as the retirement of the baby boom generation 
nears. In disaster insurance, 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 they are 
achieving their goals? And finally, could they be re-engineered to 
achieve greater benefits in relation to costs? A new consortium of 
housing program managers, and managers of student, business, and 
international credit programs will be working intensively on this third 
question 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, Federal intervention may improve on the market 
outcome in some situations. The following are six standard situations 
where this may be the case,\1\ together with some examples of Federal 
programs that 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 
          party, 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 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 in the 1970s, 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 to cover long-term 
          cost. 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 regions 
          or segments of the population.
  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 make room for 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 need

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ed 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.

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 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 Branch, 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 assess 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 home 
ownership, a net increase in higher education graduates, 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). They need to reach their legislatively targeted populations 
(e.g., students, veterans). Federal lending is often 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. Home ownership requires mortgage 
repayment. Education that enhances income is associated with repayment 
of student loans. 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 helping certain 
groups or 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 mean that private lenders are displaced. Loans must have 
certain characteristics in order to achieve the desired outcomes and net 
impacts; these characteristics are therefore part of the 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

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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. 
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 important in view of the rapid changes 
in financial markets discussed above and the increasingly complex 
financial instruments.
  The 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 policy making or systems development.
  The relationship between these inputs is also crucial for 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 assisting 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 into meeting Federal 
goals.

Principles for Re-engineering

  In order to improve the effectiveness of Federal credit programs, OMB 
will be working with agencies to identify ways to re-engineer credit 
management. 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 data for management and subsidy 
estimation.
  The focus will be on managing the servicing, workout, and sale of any 
collateral efficiently. 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?
  OMB has developed a tentative set of principles for re-engineering 
credit programs that builds on OMB Circular A-129 and initial research. 
These will be modified by lessons learned as they are put into practice. 
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?           
                                                                        

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  3.            Credit assistance should be provided only when its      
                benefits exceed its cost. Analyze benefits and costs in 
                accordance with OMB Circular A-94.                      
                                                                        
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 participation in     
                Federal loan guarantee programs by lenders, servicers,  
                and providers of workout and asset disposition services.
                 These criteria 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, 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.             
                                                                        

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  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.                              
                                                                        


Simplification of Credit Reform

  The Balanced Budget Act of 1997 amended the Federal Credit Reform Act 
of 1990 (FCRA) to make several technical changes, some of which codified 
OMB guidance. Among the provisions were:
     Requiring agencies to use the same discount rate to 
          calculate the subsidy when they obligate budget authority for 
          direct loans and loan guarantees as when they prepare the 
          President's Budget. Previously, agencies switched at 
          obligation to interest rates during the preceding calendar 
          quarter. Analysis showed that quarterly rates predicted actual 
          annual average rates slightly better than the President's 
          Budget assumptions from the previous year. However, the 
          increased accuracy was not great enough to justify the 
          additional complexity and the change in loan volume from what 
          Congress had assumed when it appropriated subsidy budget 
          authority for the program.
     Requiring agencies to use the same forecast assumptions 
          (e.g., default and recovery rates) to calculate subsidy rates 
          when they obligate for direct loans and loan guarantees as 
          when they prepare the President's Budget. This provision also 
          was enacted in response to the Budget and Appropriations 
          Committees' desire for loan volumes consistent with 
          Congressional intent in appropriations acts. While agencies 
          must use the same forecast assumptions, they will continue to 
          calculate subsidy estimates at obligation using cash flows 
          that have been adjusted to reflect the actual terms and 
          conditions (explicit technical assumptions) of the direct loan 
          and loan guarantee contracts, rather than the estimated terms 
          and conditions assumed in the President's Budget.
     Strengthening the requirement that agencies to transfer 
          end-of-year unobligated balances in liquidating accounts 
          (revolving funds for direct loans and loan guarantees made 
          prior to the effective date of the FCRA) to the general fund 
          as soon as practicable after the close of the fiscal year. 
          Because permanent appropriations are available to pay claims 
          in excess of the liquidating account balance, these 
          unobligated balances do not need to be carried forward between 
          fiscal years.
     Requiring the interest rate paid on financing account debt 
          to Treasury, and earned on financing account balances, to be 
          identical to the discount rate used to calculate subsidy 
          costs. These interest rates must be equal in order for the 
          financing accounts to have exactly enough resources to pay 
          default claims or repay debt to Treasury.
  OMB also has simplified the reestimate process by requiring only one 
reestimate for differences between the interest rate assumptions in the 
President's Budget and the actual interest rate when the loan is 
disbursed. This reestimate is to be made when at least 90 percent of the 
dollar volume of loans in a cohort has been disbursed. Previously, 
agencies were required to perform interest rate reestimates after the 
close of each fiscal year in which disbursements occurred. For programs 
disbursing over multiple years, the true discount rate for a cohort is 
not known for several years; meanwhile, calculations using a combination 
of estimated and actual rates resulted in wide fluctuations in 
reestimates that provided no useful information.

Debt Collection and Loan Asset Sales

  The Federal Government's inventory of delinquent loans and loan 
receivables was $37 billion at the end of 1997. Usually, this debt is 
worked by the agency that made the direct loans or loan guarantees. 
Little progress has been made in reducing this debt, whereas the private 
sector has developed sophisticated tools for collecting delinquent debt 
and quickly disposing of assets acquired through default. A major theme 
of credit program re-engineering will be to work delinquent debt more 
aggressively and take advantage of private sector efficiencies by:
    Fully implementing the Debt Collection Improvement Act of 
          1996.  Agencies must send debt that is over 180 days overdue 
          to Treasury for offset against Federal payments to the 
          delinquent borrower and to a debt collection center designated 
          by the Secretary of the Treasury.
    Requiring private lenders to liquidate collateralized 
          defaulted loan assets. The Rural Housing Service of USDA, and 
          its farm and business loan guarantee programs, require lenders 
          to dispose of defaulted assets. This better aligns private 
          lenders' incentives with the Federal Government's interest in 
          maximizing collections, and takes advantage of private sector 
          efficiencies to maximize collections and reduce the net cost 
          of credit programs. The Government avoids acquiring delinquent 
          debt and having to dispose of the collateral.
    Requiring agencies to sell delinquent debt over one year 
          overdue. Government policy will presume that sales of 
          delinquent debt over one year overdue will be in the best 
          financial interest of the Government unless demonstrated 
          otherwise. Exemptions will be made for debt that is producing 
          collections, owned by foreign Governments or entities, is in 
          structured forbearance, or is in adjudication or bankruptcy. 
          HUD's aggressive program of selling delinquent assets over the 
          past three years has demonstrated that agencies can 
          significantly reduce their delinquent debt in a way that 
          furthers program objectives and increases the return to the

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          Government. SBA also will sell delinquent assets in 1998, 
          1999, and 2000.
  The Federal Credit Policy Working Group, together with the General 
Services Administration, is developing a government-wide Financial 
Advisor Request for Proposal, which by June 1998 will make available to 
all agencies a list of financial advisors through a basic ordering 
agreement. Each credit agency will be expected to contract with a 
financial advisor to conduct a valuation of their loan asset portfolio. 
For all agencies, the results of the asset valuation study will be used 
to adjust baseline subsidy rates in the FY 2000 Budget. These rates will 
also reflect estimated proceeds from the sale of delinquent assets.

                       II.  CREDIT IN FOUR SECTORS

                    Housing Credit Programs and GSEs

  The Federal Government provides loans and loan guarantees to expand 
access to home ownership to people who lack the savings, income, or 
credit history to qualify for a conventional home mortgage and to 
finance rental housing for low-income persons. The Departments of 
Housing and Urban Development (HUD), Veterans Affairs (VA), and 
Agriculture (USDA) made $102 billion of loan and loan guarantee 
commitments in 1997, helping 1.3 million households.
  Each Department has a program to guarantee single-family mortgages; 
together, they guaranteed [XX] percent of the single-family mortgages 
originated in the United States last year.
     HUD's Federal Housing Administration (FHA) runs a Mutual 
          Mortgage Insurance Fund that guaranteed $61 billion in 
          mortgages for 740,000 households in 1997. Over three-fourths 
          of these went to first-time homebuyers.
     The VA assists veterans, members of the Selected Reserve, 
          and active duty personnel to purchase homes as a recognition 
          of their service to the Nation. The program substitutes the 
          Federal guarantee for the borrower's down payment. In 1997, VA 
          provided $24 billion in guarantees to 239,000 borrowers.
     USDA's Rural Housing Service (RHS) guarantees up to 90 
          percent of an unsubsidized home loan. The program's emphasis 
          is on reducing the number of rural residents living in 
          substandard housing. In 1997, nearly $2 billion of guarantees 
          went to 40,000 households.
  In addition, RHS has direct loan programs for single-family and multi-
family mortgages, and FHA guarantees mortgages for multi-family housing 
and other specialized properties. The VA makes vendee loans when it 
sells collateral from defaults.

The Housing Consortium

  Private banks, thrifts, and mortgage bankers, which originate the 
mortgages that FHA, VA, and RHS guarantee, may deal with all three 
programs, as well as with the Government National Mortgage Association 
(Ginnie Mae), which guarantees timely payment on securities based on 
pools of these mortgages. In addition, the same private firms originate 
conventional mortgages, many of which are securitized by Government-
sponsored enterprises--the Federal National Mortgage Association (Fannie 
Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac).
  Many of these firms already use or are planning to use electronic loan 
origination and are moving toward electronic underwriting. Behind such 
underwriting are data warehouses showing default experience by type of 
loan, borrower characteristics, home location, originator, and servicer, 
and models relating these factors to default cost. ``Web lending'' is 
also on the horizon.
  These changes offer both challenges and opportunities to the Federal 
mortgage guarantors and Ginnie Mae. They are challenged to make 
themselves electronically accessible to their clients and loan 
originators. They are challenged to assess and monitor their risks 
closely, now that private firms are reaching out to the better risks 
among their potential clients. They also have an opportunity to provide 
better service, and to improve the effectiveness and efficiency of their 
programs.
  The FHA, VA, and RHS housing guarantee programs and Ginnie Mae are 
forming a Housing Consortium to adapt to the rapid shift to electronic 
underwriting in the private sector. This Consortium will become the 
focus of agency efforts to keep abreast of changes in the housing credit 
market, accelerate adoption of best practices, establish common 
standards where possible, and make government systems compatible with 
the private sector. The Consortium will become the ``board of 
directors'' for a common data warehouse and analysis center on housing 
loan performance--using it to monitor the changing risk and cost of 
guarantees and the performance of guaranteed loan originators and 
servicers. Learning from each other and from the private sector, the 
Housing Consortium will seek to improve loan origination, data systems, 
performance measurement, risk sharing and pricing, and asset 
disposition.

  Loan Origination. Electronic underwriting provides convenient, faster 
service at a lower cost to both lenders and borrowers. Freddie Mac and 
Fannie Mae are among the leaders in developing such systems and 
encouraging their use.
  The VA recently entered into a ``memorandum of understanding'' with 
Freddie Mac to use its ``Loan Prospector'' electronic underwriting 
system. VA customized the scoring for its applicants based upon the 
actual profile of its veteran borrowers. As a result, VA will improve 
its risk management capability by focusing servicing on its high-risk 
borrowers to reduce losses to the government, lenders, and borrowers. VA 
expects that less required lender documentation, faster processing, and 
fewer errors will improve efficiency of loan

[[Page 172]]

origination. In 1999, VA will propose legislation to charge lenders a 
fee that will be used to develop Electronic Data Interchange (EDI) 
capability with lenders to automate loan processing and servicing.
  The FHA is also collaborating with Freddie Mac to pilot Loan 
Prospector, adapting it to FHA's clients. The RHS is examining the 
potential benefits of electronic underwriting for its guaranteed loan 
program. Meanwhile, RHS will develop the ability to offer electronic 
origination using off-the-shelf software. Building on new systems for 
both its direct and guarantee programs, RHS will introduce electronic 
origination into its 502 Guarantee program by 1999.

  Data Systems. Ginnie Mae guarantees timely payment of principal and 
interest on securities based on pools of mortgages guaranteed by FHA and 
VA. The issuers of these securities are almost always FHA and VA 
servicers. To track experience on these loans and issuers, Ginnie Mae 
created two data bases starting in 1990 that draw monthly input from 
issuers based on private standards.
  The Issuer Portfolio Analysis Database System (IPADS) and the 
Correspondence Portfolio Analysis Database System (CPADS) monitor 
current performance by loan, originator, servicer, mortgage pool, 
security, and security issuer. Performance can be tracked and compared, 
taking account of differences between region, economic conditions, size 
and type of business, and age of portfolio.
  The current analytical system is designed fill Ginnie Mae's needs. 
IPADS allows quick access to information, such as yearly changes in the 
size of business an issuer has with Ginnie Mae, delinquency ratio, 
twelve-month collection history, portfolio age, and average mortgage 
rate. IPADS will generate twenty-four month trend analyses of key 
performance indicators and compare an issuer's portfolio data against 
established Ginnie Mae norms.
  But the same data and much the same system could be very useful to the 
loan guarantee programs. For example, CPADS is similar to IPADS but 
organizes the data by loan servicer and can compare performance by loan 
originator regardless of how often a loan is sold. Thus, CPADS could 
enable FHA and VA to monitor and assess how well the firms that 
originate and service the loans they guarantee are doing their jobs.
  These systems can also report promptly on the payment status of 
individual loans, enabling quick follow-up to late payments. If 
federally guaranteed loans were originated electronically, useful data 
on the loan, borrower, and home characteristics could be ``warehoused'' 
in conjunction with information on the monthly payment history. This 
could be the basis for models that determine which loans are most likely 
to become delinquent or default. Servicer attention could focus on those 
borrowers.
  FHA is currently a participant in Ginnie Mae's data monitoring 
systems. VA and RHS will soon become participants. RHS will require all 
of its lenders to file reports electronically in IPADS before FY 1999, 
and will become a full user of that system to track its guaranteed 
loans.

  Performance Measurement. Measuring loan servicing performance 
establishes a baseline for assessing changes to servicing practice. 
Monthly data will not only give housing programs a better understanding 
of how their guarantee portfolio behaves, but also how the federally 
guaranteed housing market as a whole performs. This information is 
critical for developing good performance standards.
  HUD has begun to rank servicers based on a combination of loan default 
rates and the ratio of actual to potential losses on defaults. The 
rankings are adjusted for each state. Bonus points are given for 
servicers with portfolios emphasizing social objectives. Servicers are 
divided into categories based on their size. Those in the top 25 percent 
of their category receive higher reimbursement rates for certain 
servicing-related activities.
  The rankings move FHA away from reviewing compliance with procedures 
and toward evaluating servicing performance. Ranking criteria can be 
refined as more experience is gained with the system. For example, the 
system could include the effects of proactive servicing techniques that 
would prevent delinquency. The most effective use of performance-based 
incentives to encourage better servicing could also be analyzed. 
Aggressive use of such measures would allow FHA to identify best 
practices of top servicers and to sanction poorly-performing servicers.
  RHS reviews at least 10 percent of the loans serviced by a lender 
every two years. If deficiencies in loan servicing or underwriting are 
noted, the lender is requested to take corrective action; its 
eligibility will be terminated if it does not comply. RHS is now 
instituting an annual external audit of servicing at a representative 
sample of lenders for compliance with requirements and to pinpoint 
weaknesses contributing to loan delinquencies.
  RHS is re-writing program regulation to enhance program delivery, and 
is considering a legislative proposal to augment the guarantee fee 
structure in order to reward or penalize lenders based on performance.

  Risk Sharing and Pricing.  Risk-based pricing is emerging in the 
conventional mortgage market as an important means by which lenders can 
take on more risk. Technology is giving lenders much more precise 
ability to assess the initial default risk associated with making a 
particular loan. This increasingly precise underwriting technology, in 
turn, allows lenders and insurers to adjust fees or loan rates and/or 
raise insurance premiums to reflect risk and loan cost accurately.
  If, as expected, risk-based pricing becomes common in the private 
sector in the next few years, Federal loan guarantee programs will need 
to assess the impact on their loan portfolios. They may need to adopt a 
similar pricing structure or face adverse selection and larger losses. 
Currently, premiums are fixed in statute and vary only slightly with one 
dimension of risk, the

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initial loan-to-value ratio. New risk-based pricing might help maintain 
the actuarial soundness of these programs in the context of adverse 
selection. On the other hand, risk-based pricing might reduce the 
effectiveness of these programs in serving the needs of lower-income, 
minority, and traditionally underserved borrowers. Further study of 
these competing concerns in light of actual market developments is 
required.
  Under its current limited risk-sharing demonstration authority, FHA 
may assess risk-sharing proposals to test a scheme that partners a 
housing credit program with a private guarantor. The purpose is to lower 
the government's share of risk while, under a pre-arranged contract, the 
private guarantor picks up the remainder. The private guarantor, perhaps 
a large private mortgage insurer with experience and superior skills, 
would have an incentive to help loan programs push loan servicers to 
manage risks efficiently. FHA and a partner assume a large majority of 
the risk while holding the lender accountable for a small portion, so 
the lender's willingness to underwrite high-risk borrowers is not 
significantly reduced compared with current practice.

  Asset Disposition. Common wisdom in the mortgage industry is to avoid 
foreclosure because that is when significant losses pile up, including 
costs for maintenance and marketing. Federal guarantee programs have 
found that the best practice is to avoid taking the property into 
possession, and instead make it the responsibility of the lender.
  Of the three Federal mortgage guarantee programs, RHS is the only one 
that currently operates under the ``best practice'' for asset 
disposition. The lender is paid the loss claim, which includes costs 
incurred for up to six months from the time of the default. After the 
loss claim is paid, RHS has no involvement in the loan, and it becomes 
the sole responsibility of the lender. RHS will shorten the loss claim 
period from six months to three months through regulation changes to 
encourage lenders to dispose of properties as efficiently as possible.
  VA and FHA will also be making improvements in asset disposition. VA 
will propose legislation to eliminate the vendee loan program, which 
provides public financing on foreclosed properties. In addition, VA will 
explore initiatives that outsource its asset disposition.

RHS Direct Housing Loans

  RHS also provides subsidized single-family direct loans to very-low 
and low-income borrowers unable to get credit elsewhere to purchase, 
rehabilitate, or repair homes. In October 1997, RHS completed 
implementation of the Dedicated Loan Origination Service System (DLOS), 
which centralized servicing of the whole loan portfolio. Whereas all 
origination and servicing had been done in over 2,000 field offices, 
these now only handle origination and some specific liquidation duties. 
Everything else is handled at the centralized servicing center.
  DLOS has been a major improvement. Along with two major regulations in 
1996 and 1997, it reduced RHS' direct loan subsidy rate by 40 percent. 
RHS is also exploring what economies of scale could be realized in the 
area of asset disposition. Legislative proposals for 1999 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.

Fannie Mae and Freddie Mac

  Because Fannie Mae and Freddie Mac, the largest Government-sponsored 
enterprises (GSEs), are the dominant firms in the secondary mortgage 
market, changes in their business practices can have a significant 
impact on the housing finance sector of the U.S. economy. As of 
September 1997, Fannie Mae and Freddie Mac had $1.5 trillion outstanding 
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 
manage the Government's exposure to risk by conducting examinations and 
enforcing minimum and risk-based capital requirements. The risk-based 
capital requirements will be 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 (NPR) on risk-based capital. OFHEO expects to 
publish its second NPR in early 1999.
  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 housing 
credit for lower-income families and under-served communities. For 1997 
through 1999, the regulation requires each GSE 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 central 
          cities, rural areas, and other metropolitan areas with low and 
          moderate median family income 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, and in 
1996, they were subject to interim goals that were slightly lower than 
the goals for

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1997-99. Fannie Mae and Freddie Mac each achieved all three goals in 
1996.
  The growth of the GSEs' core mortgage businesses has slowed, but they 
have maintained the growth in their earnings by expanding the range of 
their activities and increasing their on-balance sheet holdings of 
mortgages and MBS. These changes may, however, increase their risk. The 
GSEs' exposure to changes in interest rates increases as their on-
balance sheet holdings of mortgages and MBS grow.
  By contrast, some of the GSEs' new business activities and innovations 
may improve their risk profiles. The GSEs' use of credit scores and 
automated underwriting may improve risk measurement and therefore 
mitigate the credit risks inherent in purchasing and securitizing 
mortgages. Similarly, the advent of risk-based pricing may mitigate risk 
by pricing more precisely for expected losses. For holders of mortgage 
credit risk, sophisticated risk measurement and pricing tools are 
leading to shifts in the distribution of risk among the GSEs, private 
mortgage insurers, lenders, and mortgage investors.

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. Member institutions primarily use 
advances to finance residential mortgages and other housing related 
assets. Federally chartered thrifts are required to be FHLBS members, 
but membership is open to state-chartered thrifts, commercial banks, 
credit unions, and insurance companies on a voluntary basis. As of 
September 30, 1997, 6,418 financial institutions were FHLBS members, an 
increase of 395 over September 1996. About 69 percent of members are 
commercial banks, 28 percent are thrifts, and the remaining 3 percent 
are credit unions and insurance companies; however, almost 70 percent of 
outstanding FHLBS advances were held by thrifts as of September 30.
  The FHLBS reported net income of $1.5 billion for the year ending 
September 30, 1997, up from $1.3 billion in the previous 12 months. 
Total System capital rose from $16.5 billion to $18.4 billion, and the 
ratio of capital to assets fell from 5.8 percent to 5.7 percent. Average 
return on equity was about 6.8 percent, after adjustment for payment of 
interest to the Resolution Funding Corporation (REFCorp). Outstanding 
advances to members reached $182 billion at September 30, 1997, a 19 
percent increase over the $153 billion outstanding a year earlier. 
System investments other than advances stood at $138 billion, or about 
42 percent of total assets, as of September 30, 1997; compared to a year 
earlier, investments have increased in dollar terms but declined 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 and the greater of 10 percent of net income or $100 
million to the Affordable Housing Program (AHP). In addition, the 
FHLBanks are required by law to provide discounted advances for targeted 
housing and community investment lending through a Community Investment 
Program (CIP). The need to generate income to meet the REFCorp and AHP 
obligations and still provide a competitive return on members' 
investment was a driving force behind the substantial increase in the 
System's investment activity in recent years. The System also needs to 
service a capital requirement which is based on members' asset size, 
mortgage holdings, and advances, rather than the amount of risk in the 
System.
  In the past, the FHLBS' exposure to credit risk was virtually 
nonexistent. All advances to member institutions 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. While the System's expanding investment activities have created 
new sources of risk, the FHLBanks have taken measures to manage these 
risks. Indeed, the FHLBS' investment activities also pose important 
public policy issues as to the degree to which the composition of assets 
on the FHLBS' balance sheet adequately reflects the mission of the 
System. New pilot programs allowing the FHLBanks to underwrite mortgages 
jointly with their members have been approved by the Federal Housing 
Finance Board, the System's regulator. Through these programs, the FHLBS 
is expanding its traditional role as a wholesale lender as a means of 
promoting housing finance and community investment.
  Significant developments in housing finance markets over the past two 
decades, such as increasing securitization, have reduced the role of 
portfolio lenders. Of about $4 trillion in residential mortgage debt 
outstanding, only about 14 percent of loans are held directly by thrifts 
and 18 percent are held by commercial banks. Together, Fannie Mae, 
Freddie Mac, and Ginnie Mae hold or guarantee an additional 47 percent. 
As a result of GSE and Federal agency sponsorship of secondary markets 
and the increasing presence of private securitizers, lenders have access 
to liquidity sources other than FHLBS advances. In addition, the Deposit 
Insurance Funds Act of 1996 called for merging the Bank Insurance Fund 
and the Savings Association Insurance Fund in 1999, contingent on 
legislation to abolish the Federal thrift charter, which requires a 
significant degree of specialization in housing finance. Like other 
GSEs, the role and risks of the FHLBS must continue to be examined and 
monitored in the face of rapidly changing financial markets and 
potential changes in the structure and activities of the industry served 
by the FHLBS.

                   Education Credit Programs and GSEs

Student Loans


[[Page 175]]


  The Department of Education helps to finance student loans through two 
major programs: the Federal Family Education Loan (FFEL) program and the 
William D. Ford Federal Direct Student Loan (FDSL) program. Eligible 
institutions of higher education may choose to participate in either 
program. Loans are available to students and their parents regardless of 
income. Borrowers with low family incomes are eligible for higher 
interest subsidies.
  In 1999, about 6 million borrowers will receive $40 billion in loans, 
of which $34 billion is for new loans and the remainder to consolidate 
existing loans. Loan levels have risen dramatically over the past 10 
years as a result of rising educational costs, higher loan limits, and 
more eligible borrowers. The upward trend is expected to continue for 
the next five years.
  The Federal Family Education Loan program provides loans through a 
complex administrative structure involving over 4,800 lenders, 36 State 
and private guaranty agencies, 50 participants in the secondary markets, 
and nearly 7,000 participating schools. Under FFEL, banks and other 
eligible lenders loan private capital to students and parents, guaranty 
agencies insure the loans, and the Federal Government reinsures the 
loans against borrower default. Lenders bear two percent of the default 
risk, and the government is responsible for the remainder. The 
Department also makes administrative payments to guaranty agencies and 
pays interest subsidies to lenders on need-based loans while a student 
is in school and during certain grace and deferment periods.
  The Federal Direct Student Loan program was authorized by the Student 
Loan Reform Act of 1993 to enable students and parents to obtain and 
repay loans more easily than under the FFEL program. Under FDSL, the 
Federal Government provides loan capital directly to schools, which then 
disburse loan funds to students--greatly streamlining loan delivery for 
students, parents, and schools. The program offers a variety of flexible 
repayment plans including income-contingent repayment, under which 
annual repayment amounts vary based on the income of the borrower and 
payments can be made over 25 years.

  Reform proposals. The Administration is proposing legislation to 
restructure and improve the efficiency of the guaranteed loan system and 
to reduce fees for students and parents. Proposed changes will save $1.8 
billion over five years.
  The General Accounting Office and Federal courts have acknowledged 
that the Federal Government is the actual guarantor of the loans. The 
State and non-profit intermediaries in FFEL act as agents of the Federal 
Government. Guaranty agencies are not independent guarantors, but are in 
fact administrators of the Federal guarantee. The Administration 
proposes that direct Federal payments be used to pay default claims, 
eliminating the need for guaranty agencies to hold Federal funds in 
reserve from which to pay claims. This will make possible the return to 
the Treasury of over $1 billion in reserve funds between 2000 and 2003.
  To improve accountability for the Federal guarantee, the Secretary's 
agreements with guaranty agencies will be revised and 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. Over 
the next five years, the Secretary expects 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 improve program integrity and 
reduce default costs. The Department will use newly automated systems to 
review and analyze institutional eligibility information, and will 
target its regulatory and enforcement efforts on high-risk institutions. 
Over the past several years, improvements in oversight and termination 
of schools with high default rates have led to the removal of 
approximately 1,000 schools, of which 203 were eliminated from the 
student loan programs. This has helped reduce the national student loan 
cohort default rate from 10.7 percent for 1994 to 10.4 percent for 1995, 
the fifth straight year of decline. This rate is the percentage of 
borrowers who enter repayment in a given year and for whom a default 
claim is paid before the end of the following year.
  Modernizing student aid benefit delivery is one of the Department's 
key priorities. To improve the management of both loan programs, 
attention will be given to re-engineering information systems and 
expanding electronic data exchange to improve customer service, enhance 
data quality, and lower costs. The Department will support adoption of 
private sector best practices to improve servicing in both programs.

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.
  Pursuant to legislation enacted in 1996, Sallie Mae shareholders voted 
in July 1997 to approve a plan to reorganize the corporation as a fully 
private, state-chartered entity. Under the reorganization, which became 
effective in August, shares of Sallie Mae common stock were converted on 
a one-for-one basis into shares of a new holding company, the SLM 
Holding Corporation. Sallie Mae, which retains its status as a GSE, is 
now a wholly owned subsidiary of the holding corporation. According to 
the authorizing legislation, the GSE must wind down and be liquidated by 
September 30, 2008.

Connie Lee

  The College Construction Loan Insurance Association was created by the 
Higher Education Amendments of

[[Page 176]]

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 $19 million of newly issued 
common stock. Subsequently, the corporation sold additional stock to 
institutional investors. By 1996, Connie Lee had insured over $2 billion 
of debt service on bonds benefitting colleges, universities, and 
teaching hospitals. Legislation was enacted in 1996 that privatized 
Connie Lee by repealing its legislation and requiring the Government to 
sell, and Connie Lee to purchase, the corporation's federally owned 
stock. This sale was completed in February 1997.

         Business and Rural Development Credit Programs and GSEs

Small Business Administration

  SBA has successfully expanded small businesses' access to capital, 
increasing its annual loan volume 46 percent over the past five years 
(from $7.4 billion in 1993 to $10.9 billion in 1997), while also 
reducing agency staff by about 20 percent.
  In its principal program, Section 7(a) General Business loans, SBA has 
improved access to capital for the Nation's most under-served small 
businesses in several ways. The Low Documentation (LowDoc) initiative 
reduced the application form for 7(a) loans under $100,000 to a single 
sheet. The FA$TRACK pilot allows lenders to use their own forms and 
processes in exchange for a reduced Government guarantee. These 
initiatives--and aggressive lending goals--have helped to increase 7(a) 
loan volume to minority- and women-owned businesses from $1.8 billion 
(27 percent of 7(a) loan volume) in 1993 to $3.8 billion (40 percent) in 
1997.

  Reliance on private sector partners. With its portfolio growing from 
$20.7 billion in 1993 to $35.0 billion in 1997, 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.
  Prior to 1996, SBA's most experienced lenders had authority to 
approve, service, and liquidate SBA-guaranteed loans under the Preferred 
Lender Program (PLP) in exchange for a lower SBA guaranty (70 percent 
compared to 80 or 90 percent for other lenders). In 1996, Congress set 
the maximum guaranty for all 7(a) loans at 80 percent for loans under 
$100,000, and 75 percent for most others. Congress also authorized PLP 
lenders to service and liquidate their loans. In 1997, SBA issued a new 
policy requiring all lenders to service and liquidate loans approved on 
or after Oct. 1, 1997.
  These changes in legislation, together with SBA's goal of increasing 
its use of PLP lenders, have led to a large increase in lending. Loans 
approved through PLP lenders grew from $3.0 billion in 1996 (39 percent 
of all 7(a) loans approved) to $4.9 billion in 1997 (52 percent of 
approvals) and are currently estimated at $5.5 billion in 1998.
  SBA also delegates servicing and liquidation authority in its LowDoc 
program. LowDoc loans accounted for 33 percent of all 7(a) loans in 1997 
(down from 45 percent in 1996.)

  Need for better oversight tools. Over the past four years, SBA has 
significantly increased loan volume, reduced staffing, and delegated 
additional authorities to its private sector partners. During this 
period, commercial small business lenders have become increasingly more 
sophisticated in identifying credit risk, and some of them now pursue 
aggressive small business lending goals. This expands small businesses' 
access to capital, but may also concentrate higher risk loans in SBA 
loan guarantee programs.
  These trends reinforce SBA's need to improve oversight tools. SBA 
continues to struggle with antiquated financial systems. Its managers 
need improved access to timely and accurate analysis of portfolio trends 
and information on the performance of its private sector partners. SBA 
will begin a new initiative in 1998 to improve its lender monitoring and 
oversight tools.

  Reform initiatives. In 1998, SBA will implement a plan to complete its 
shift from a loan servicing to a lender oversight financial institution. 
These initiatives include: (1) delegating remaining 7(a) servicing and 
liquidation to its lending partners, including requiring them to service 
and liquidate all defaulted loans, (2) selling all direct loans and 
defaulted guarantees, and (3) making strategic investments in better 
portfolio oversight tools. This will allow SBA to focus on its goals of 
increasing access to capital, while relying on private lenders to 
perform functions where they have historically been more efficient.
  Portfolio oversight. To ensure that the agency meets its portfolio 
management responsibilities, SBA will invest $8 million in 1998 to 
improve portfolio oversight. An additional $12 million is requested for 
1999. 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 also 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, 1999, and 2000. The Disaster loan 
portfolio will be sold in 1999 and 2000. Drawing on the experience of 
Federal agencies such as the Resolution Trust Corporation and the 
Department of Housing and Urban Development, and SBA's analysis of its 
portfolio value stemming from its Liquidation Improvement Project, the 
Administration estimates that SBA's business loan assets (face value of 
approximately $2 billion) can be

[[Page 177]]

sold at a gain to the government. It is estimated that disaster loans 
can be sold at their current value. These sales are also expected to 
yield future operational cost savings.
  Criminal background checks. In 1999, $1 million is requested for SBA 
to conduct criminal background checks of loan applicants prior to the 
disbursement of the loans. According to recent research conducted by 
SBA's Office of Inspector General (OIG), loans made to borrowers with an 
undisclosed criminal record are approximately 2.5 times more likely to 
become delinquent or to default. This proposal will likely result in 
future subsidy rate reductions for SBA's credit programs.
  Doing more with less. These initiatives will allow SBA to continue to 
``do more with less''. Through improved portfolio oversight and lender 
servicing of defaulted loans, the Government's subsidy cost of SBA's 
7(a) loan program is estimated to decline from 2.14 percent in 1998 to 
1.39 percent in 1999, reducing the Government's contribution to the cost 
of this program by nearly $83 million. Additional savings may be 
achieved in the future if increasing reliance on lenders allows SBA to 
further reduce agency staffing.

USDA Rural Infrastructure and Business Development Programs

  USDA provides grants, loans, and loan guarantees to communities for 
constructing facilities such as health-care clinics, day-care centers, 
and water and wastewater systems. Direct loans 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 
rural businesses, including cooperatives, to increase employment and 
diversify the rural economy. In 1999, USDA proposes to provide $1 
billion in loan guarantees to rural businesses, and $50 million in 
direct loans. USDA's assistance to rural businesses has grown from $100 
million in 1993 to almost $800 million in 1998. The default rate for 
these programs is low.
  The 1996 Farm Bill enacted the ``Rural Community Assistance Program'' 
(RCAP). Funding for 12 USDA rural development activities was 
consolidated into a ``performance partnership'' to provide more 
flexibility in targeting Federal assistance to the highest-priority 
needs of States. In FY 1997, Congress provided increased flexibility 
through three funding ``streams,'' but blocked transfers among streams. 
In FY 1998, Congress consolidated the three streams into one RCAP 
account, but still did not allow transfers between funding streams. The 
budget proposes $715 million for a fully flexible RCAP.

Electric and Telecommunications Loans

  USDA's rural electric and telephone program makes new loans to 
maintain existing infrastructure and to modernize electric and telephone 
service. Historically, the Federal risk associated with the over $40 
billion loan portfolio in electric and telephone loans has been small, 
although several large defaults occurred in the electric program, 
primarily as a result of nuclear power construction loans, and $400 
million was written off in 1997. However, both the telephone and 
electric industries are moving into a more competitive environment.
  In the electric industry, deregulation may erode loan security and the 
ability of borrowers to repay. Maintaining the goal of ``affordable, 
universal service'' is also of concern to USDA. Many rural cooperatives 
are by nature high cost providers of electricity, since there are fewer 
subscribers per line-mile than in urban areas. USDA will propose 
legislation to restructure its outstanding $30 billion portfolio of 
rural electric loans. This Budget includes a legislative proposal for a 
new direct Electric Loan Program with a loan level of $400 million. 
Borrowers would pay an interest rate tied to the Treasury rate. The 
demand for loans to rural electric co-ops will continue to rise as 
borrowers replace many of the 40-year-old electric plants.
  The Rural Telephone Bank (RTB) provides financing for rural 
telecommunications systems. The FY 1998 Budget proposed, but did not 
achieve, privatization of the RTB. The 1999 Budget proposes legislation 
to charter the RTB as a Performance-Based Organization (PBO). As a PBO, 
the RTB would remain under the Secretary of Agriculture through majority 
Federal membership on the RTB Board of Directors. The RTB's managers 
would be required to set strategic and financial goals. A key goal would 
be to achieve privatization within 10 years; the RTB would be on-budget 
until fully privatized.
  As a PBO, the RTB would have authority to hire its own personnel, and 
appoint its own CEO and CFO. It could seek waivers from government-wide 
regulations, policies, and procedures. Funding for both administrative 
expenses and subsidy budget authority would be provided from the RTB 
liquidating account balances beginning in 1999. It could establish its 
interest rates, charge administrative fees, and retain proceeds from any 
negative subsidies for RTB operations. It would also have authority to 
prepay its outstanding Treasury borrowing without penalty. This approach 
would allow the RTB to establish a private governance structure and 
demonstrate its ability to be financially self-sufficient, which should 
help prepare it for privatization. A privatization feasibility study 
would be required within 3 years.

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

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their farming or ranching operations. These loans are proposed to 
increase as part of USDA's Civil Rights Initiative. As a condition of 
eligibility for direct loans, borrowers must have been denied private 
credit at reasonable rates and terms, or they must be beginning or 
socially disadvantaged farmers. Loans are provided at Treasury rates or 
5 percent. High defaults and delinquencies are inherent in the direct 
loan 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, they exercise care 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 changed many of the servicing requirements for 
delinquent borrowers. 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 1999 Budget proposes to allow farmers 
to become eligible for assistance after 7 years, which 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. 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 
face the risk of concentration in certain agricultural commodities. The 
Farm Credit Banks are also geographically limited, often to areas 
dependent on one or a few commodities. The downturn in the agricultural 
economy in the 1980s led the FCS to the brink of insolvency. Legislation 
in 1987 bailed out the FCS and created Farmer Mac.
  The Nation's agricultural sector and its lenders are now on much 
firmer ground. Strong farm income has enabled borrowers to repay debt, 
and lenders to augment their capital. Farmland prices have regained most 
of their previous levels and continue to increase. Interest rates and 
inflationary expectations are significantly lower. Credit usage by 
farmers and credit standards of lenders are more conservative.
  Another sign of the increasing health of agricultural finance is the 
greater share of credit provided by commercial banks. From 1986 to 1996, 
commercial banks' share of all farm debt increased from 24 percent to 39 
percent, while the share for FCS declined from 29 percent to 25 percent 
and for USDA from 12 percent to 6 percent. In 1995, however, FCS's share 
of farm operating loans began to creep up--a trend that continued in 
1996 and 1997.

The Farm Credit System

  The Farm Credit System earned income every year in the past decade, 
including over $1 billion in each of the last four years. Nonperforming 
loans have been reduced to 1.5 percent of the portfolio. Loan volume has 
been gradually increasing since 1992, although the $63.0 billion in 
September 1997 is far below the high of over $80 billion in the early 
1980s. Increases in 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 2.99 for 1996.
  Improved asset condition and income enabled FCS to post record capital 
levels; by September 30, 1997, capital stood at $11.4 billion--half 
again larger than five years ago, primarily as a result of retained 
earnings. Included in this capital are investments set aside to repay 
about $600 million of the $1.3 billion of Federal assistance provided 
through the Financial Assistance Corporation (FAC) due beginning in 
2003. The System has adopted an annual repayment mechanism to cover the 
remainder. The FCS has retired all of 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 consolidation has 
occurred in the structure of the FCS. In January 1988, there were 12 
districts with 36 banks plus 376 associations; by October 1997, there 
were only 6 districts, 8 banks and 206 associations. System staff 
declined by 14 percent over 1990-1995. Operating expenses as a percent 
of loans outstanding have begun to decline.
  The 1987 Act established the FCS Insurance Corporation (FCSIC) to 
insure timely payment of interest and principal on FCS obligations. 
Insurance fund balances, largely comprised of premiums from FCS 
institutions, supplements the System's capital, the joint and several 
liability of all System banks for FCS obligations, and the Farm Credit 
Administration's enforcement authorities. On September 30, 1997, the 
Insurance Fund's assets were $1.3 billion, and are estimated to attain 
the statutorially required level of two percent of outstanding debt in 
1998.
  Improvement in the FCS's financial condition is also reflected in the 
evaluations of the Farm Credit Administration (FCA), its Federal 
regulator. The FCA rates each of the System's institutions for capital, 
asset quality, management, earnings, and liquidity (CAMEL). At the end 
of 1990, 94 institutions carried the best ``CAMEL'' ratings of ``1'' or 
``2,'' and 40 were rated in the problem range of ``4'' or ``5.'' By 
September 1997, in contrast, 203 institutions were given the top 
ratings, only 9 received the mid-range rating of ``3,'' and one 
institution was rated ``4.'' Enforcement actions to correct illegal or 
unsafe operations were applied to 77 institutions, with 80 percent of 
the FCS's assets, in 1991,

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but only 5 institutions, with 3.9 percent of the FCS's assets, in 1997.
  Loans to farmers and other eligible producers comprise 73 percent of 
the System's portfolio. Lending secured by farm land has been stagnant 
since 1990, but farm operating loans have increased by 41 percent since 
1992, with most of the gain since 1994. Loans to finance processing, 
marketing, credit cooperatives, and rural utilities cooperatives 
increased the cooperatives' share of FCS's portfolio to almost 27 
percent at year-end 1996.
  During 1997, the FCA published regulations that expand the loan-making 
authority of Farm Credit System banks. Previously, System banks could 
only lend to businesses that provided custom services performed on the 
customer's farm. Under the revised rules, farm- related businesses are 
eligible for full-firm financing if more than 50 percent of their income 
is derived from farm-related services. Furthermore, if less than 50 
percent of the firm's income is farm-service related, then at least the 
farm-related service portion of the firm's business is eligible for 
financing. The rule also permits Farm Credit banks to finance non-farm, 
single-family, moderately priced homes for residents of rural areas 
(population does not exceed 2,500 in a village or town).
  The Farm Credit System is stronger now than it has been in years. But 
primarily due to its concentration in agriculture, it is exposed to 
risks arising from natural disasters, changes in Government policies 
toward agriculture, and to structural changes in the agricultural and 
commercial banking sectors. During 1995 and 1996, FCS's loan growth rate 
accelerated, in part due to more aggressive lending as its capital 
strengthened. This coincided with a surge in agricultural exports and a 
rise in crop prices, which have propelled land values upward in regions 
with export concentration. The volatility of these forces will be a risk 
factor for future repayment and collateral capacity.

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 and 
rural housing loans. Since the 1987 Act, Farmer Mac has been authorized 
to issue its own debt securities, and to purchase and securitize the 
guaranteed portions of farm program, rural business, and community 
development loans guaranteed by the USDA (``Farmer Mac II''). The Farm 
Credit System Reform Act of 1996 transformed 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 had not met expectations and showed no 
prospect of improvement. The new powers increase commercial banks' 
incentives to participate in Farmer Mac. However, these powers also 
subject the Corporation to more credit risk. As a direct purchaser of 
loans with no required subordination, Farmer Mac will be exposed to 
losses, and must estimate them accurately to set fees and decide the 
appropriate level of capital reserves.
  The 1996 Act gave Farmer Mac three additional years to reach its 
capital requirements, and 2 years to raise capital to $25 million. In 
December 1996, Farmer Mac sold 1.4 million shares of Class C common 
stock, generating $32 million of new equity. In November 1997, Farmer 
Mac completed its second public offering, selling 400,000 shares of 
Class C common stock and raising $23 million of new equity. Farmer Mac's 
year-end 1997 capital is estimated to be about $75 million--three times 
greater than the 1996 statutory capital requirement well ahead of the 
deadline.
  Farmer Mac has also taken steps to minimize losses on securitized 
loans under the new authorities. These steps include: (1) a higher 
annual guarantee fee of 50 basis points on securitized loans, (2) a loan 
loss reserve adequate to cover anticipated losses, and (3) loan 
underwriting standards that include a maximum loan-to-value ratio of 70 
percent for loans up to $2.3 million and 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. At the end of 1997, the amount 
outstanding was about $130 billion.
  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.

  Leveling the playing field. The Federal Government provides credit to 
U.S. exporters to offset the subsidies that foreign governments, largely 
in Europe and Japan, provide their exporters usually through export 
credit agencies (ECAs). Although the Arrangement on Official Export 
Credits of the Organization for Economic Cooperation and Development 
(OECD) has significantly constrained direct interest rate subsidies and 
tied-aid grants, foreign ECAs continue to provide implicit subsidies (by 
charging interest rates or fees that do not fully compensate for risk).
  The Export-Import Bank (Eximbank) attempts to ``level the playing 
field'' and to fill gaps in the availability of private export credit. 
Compared to the other major ECAs, Eximbank provides the most 
unrestricted financing, and provides this financing in almost twice as 
many markets as its nearest competitor.
  USDA's GSM-102 and 103 programs guarantee credit extended by private 
U.S. exporters and U.S. or foreign financial institutions to expand 
agricultural exports. The GSM programs are targeted to countries where 
government guarantees are needed to counter competi

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tion from countries that offer credit through ECAs or commodity 
marketing boards.
  The increase in world trade and the globalization of capital markets 
have made ECAs somewhat less important in recent years. During 1993-95, 
ECA credit from G-7 countries averaged $70 billion annually. In 
comparison, private credit to developing countries was $230 billion in 
1996.

  Stabilizing international financial markets. In today's global 
economy, the health and prosperity of the American economy depend 
importantly on the stability of the global financial system and the 
economic health of our major trading partners. The United States has 
several ways in which it can help to stabilize world financial markets. 
It can provide resources on a multilateral basis through the IMF 
(discussed in other sections of the President's Budget), or through a 
bilateral loan provided by the Exchange Stabilization Fund (ESF).
  The ESF provides ``bridge loans'' to other countries in times of 
short-term liquidity problems and financial crises. In the past, 
``bridge loans'' from ESF have usually provided dollars to a country 
over the short period before the first disbursement under an IMF loan. A 
$12.5 billion ``bridge loan'' of ESF was provided to Mexico during its 
crisis in 1995. This loan was essential in helping to stabilize Mexico, 
as well as the global financial markets. Mexico paid back its loan ahead 
of schedule in 1997, and the loan didn't cost the taxpayers any money.
  Use of the ESF is also being considered in response to the crises in 
some Asian economies. In particular, an ESF agreement with South Korea 
is near completion, as part of a broader undertaking by 13 countries to 
provide ``second line'' support to that country. This ESF facility will 
carry interest rates that will result in zero subsidy cost for the 
United States as defined under credit reform.

  Helping economies in transition. The dramatic transformation that has 
been underway in Eastern and Central Europe in recent years presents 
U.S. businesses with unprecedented opportunities matched by 
unprecedented risks. Since 1991, Eximbank has provided financing for 
exports to Russia and other New Independent States, as well as countries 
in Central Europe, to increase U.S. exports and assist the region's 
economic transformation. Eximbank provided $3.2 billion in financing 
from FY 1995 through 1997, and expects to provide $1.5 billion in 
additional credits each year for exports to the region in FYs 1998 and 
1999.
  For example:
     In July 1993, Eximbank signed the Oil and Gas Framework 
          Agreement (OGFA) under which it may provide $2 billion or more 
          in financial assistance for purchases of U.S. equipment and 
          services to revitalize Russia's energy sector. Nine 
          transactions for $971 million have been authorized under this 
          agreement.
     In January 1996, Eximbank signed a Memorandum of 
          Understanding with the Russian state timber industry 
          governmental entity, helping to open the way for the export of 
          U.S. goods and services to modernize Russia's timber and 
          forest products industry.
     In November 1996, Eximbank initiated a Russian commercial 
          bank program to expand Eximbank financing for the private 
          sector. Eximbank currently accepts commercial bank guarantees 
          from Russia, Kazakhstan, Lithuania, Latvia, and Estonia, and 
          expects to accept commercial bank guarantees from other NIS 
          countries and most Central European countries as their banking 
          sectors develop.
  Through its Urban and Environmental Credit Program, USAID has provided 
loan guarantees to Poland, the Czech Republic, and Hungary. These 
guarantees, accompanied by technical assistance, will assist in 
developing financial markets for mortgages, municipal finance, and 
infrastructure finance.

  Using credit to promote sustainable development. Credit has become an 
increasingly important tool in U.S. bilateral assistance to promote 
sustainable development. USAID received funding through transfer 
authority in the FY 1998 budget for a new credit program, the 
Development Credit Authority (DCA). The DCA will provide loan guarantees 
in cases where credit is the most effective mechanism to achieve 
sustainable development, such as more effective financial markets or 
reductions in global climate change-causing emissions. Funding for this 
program has been doubled in the FY 1999 Budget. OPIC investment 
guarantees also support development by promoting U.S. direct investment 
in developing countries. This can transfer skills and technology, and 
create more efficient financial markets.
  International credit management initiative. The Administration 
proposes as part of the Director's management agenda to improve credit 
management at USAID, Eximbank, OPIC, DSAA, DOD/DELG, and USDA. This will 
include improvements to loan servicing, portfolio tracking, and credit 
budgeting policies and procedures. More accurate financial records, 
using consistent accounting standards, will improve repayment practices 
and collections.
  International lending cost estimates. Since 1992, the President's 
budget requests have used the same assumptions about default risk in 
international lending. These assumptions were obsolete given the changes 
in financial markets over the last six years. In addition, due to the 
scarcity of emerging market debt information in 1992, these assumptions 
were based on domestic corporate bond risk spreads, rather than 
international bond market data.
  The FY 1999 Budget makes new assumptions about default risk, as 
defined by the risk premia set for each country-risk category in the 
International Country Risk Assessment System (ICRAS). The new premia 
reflect

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the risk spreads observed on international debt market instruments from 
1992 to 1997 for a variety of risk categories. These new cost estimates 
will continue to be updated and refined over time, given agencies' 
default experience and additional observation of emerging market debt 
data.
  The ``subsidy cost'' of international credit programs is the 
government's contribution to an agency's long-term expense from 
extending a foreign credit, excluding administrative costs. Agency 
subsidy rates depend not only on the international lending risks 
measured by the ICRAS risk premia, but also on what fees or subsidies 
(such as below-market interest rates) the agencies offer with their 
credits. Most international credit agencies charge borrowers fees that 
substantially offset the cost due to credit risk. The FY 1999 Budget 
Credit Supplement shows lending terms and subsidy rates for each 
international credit agency.

                         III.  INSURANCE PROGRAMS

                            Deposit Insurance

  Federal deposit insurance was begun in the 1930s to provide coverage 
against depositor losses from failures of insured institutions. Deposit 
insurance also protects the Nation 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 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 $100,000 per account. The FDIC 
insures about $2.7 trillion at over 9,200 commercial banks and about 
1,800 savings institutions. The NCUA insures about 11,300 credit unions 
with $290 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 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 98 institutions with $7 billion in assets as 
``problem'' institutions, compared to over 1,000 institutions with 
almost $600 billion in assets just five years ago.
  No commercial banks or thifts failed during 1997--a record year for 
BIF and SAIF. Eight credit unions with $19 million in assets failed 
during 1997. Although depository institutions and their Federal 
insurance funds are currently in good financial condition, an economic 
downturn could put 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 continues to maintain deposit insurance premiums for 
banks in a range from zero for the healthiest banks to 27 cents per $100 
of deposits for the riskiest banks. Currently, 95 percent of commercial 
banks pay no deposit insurance premiums.
  The earnings of the thrift industry also have significantly improved 
in the last few years. The industry remains in strong financial 
condition despite enactment of the Deposit Insurance Funds Act of 1996 
(DIFA) which imposed a $4.5 billion special assessment to bring SAIF's 
reserves up to 1.25 percent of insured deposits. As a result, most 
thrifts paid no deposit insurance premiums in 1997.
  In addition, the DIFA merges the BIF and SAIF on January 1, 1999, 
provided that no savings associations exist at that time. This makes the 
merger conditional on legislation this year to combine the bank and 
thrift charters.
  The National Credit Union Share Insurance Fund (NCUSIF) also remains 
strong with assets of $3.7 billion. Each insured credit union is 
required to deposit and maintain in the fund 1 percent of its member 
share accounts. In 1997, the income generated from the 1 percent deposit 
eliminated the need to assess an additional insurance premium, and after 
the end of the fiscal year, the NCUA Board approved a dividend to reduce 
the Fund's equity ratio to the statutory ceiling of 1.30 percent. This 
was the third consecutive year that the Fund paid a dividend to 
federally insured credit unions. The Board also waived premiums for 
1998.

  Other Legislative and Regulatory Developments. 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.
  In May 1997, the Administration presented its recommendations for 
modernizing the financial services industry and developing a common 
depository institution charter to Congress. The Administration's 
proposal removes Depression-era barriers to competition, preserves the 
safety and soundness of our nation's depository institutions and 
protects consumer rights. The proposal promotes competition and 
efficiency within the indus

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try, which will foster the creation of new products and services and 
benefit consumers.
  In October 1997 the Supreme Court heard arguments on two related 
cases: the National Credit Union Administration v. First National Bank 
and the AT&T Family Federal Credit Union v. First National Bank. At 
issue is the question of how broadly a credit union may interpret its 
field of membership. The Supreme Court decision in these cases, which is 
expected during the current term, could have a significant impact on the 
growth rate and total size of credit unions.

                           Pension Guarantees

  The Pension Benefit Guaranty Corporation (PBGC) insures most defined-
benefit pension plans sponsored by private employers. PBGC pays 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 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. 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.
  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 to 4,400 compared to 3,600 in 1980.
  During the past five years, PBGC has been working to prevent and 
mitigate losses. Under the Early Warning Program, it has negotiated more 
than 50 major settlements providing more than $15 billion in new pension 
contributions from companies and improving pension security for 1.6 
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 more companies. In 1997, PBGC posted 
the second year with a positive financial position in its 23-year 
history.
  The Retirement Protection Act of 1994 (RPA) improved PBGC's early 
intervention capability, was an important factor in achieving a number 
of the settlements, and is beginning to strengthen PBGC's financial 
condition. The RPA requires companies to increase their contributions to 
underfunded plans over 10 to 15 years, and relates companies' premiums 
more fairly to PBGC's exposure by increasing the insurance premiums for 
those pension plans that are the most underfunded. RPA 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.
  PBGC fared well in 1997. There were no major plan terminations, and 
investment performance was strong. Premium revenues dropped somewhat, 
largely reflecting lower underfunding-related premiums as pension 
funding improved. Premiums were also reduced by an RPA provision that 
became effective July 1, 1997 which increased the interest rate used to 
calculate underfunding-related premiums.
  The multi-employer program guarantees pension benefits of certain 
unionized plans offered by several employers in an industry. The program 
continues to be financially strong. In May 1996, the Administration 
proposed to increase the maximum guarantee level on pension benefits 
paid to retirees for the first time since 1980. It would be increased 
from $5,580 to $12,870 per year for retirees with 30 years of service. 
Although it passed the Senate, this provision was not enacted and is 
being proposed again.
  This Budget proposes a new and simplified defined-benefit pension plan 
for small businesses, featuring accounts for individual participants. 
Unlike defined-contribution plans, the new plan guarantees a known level 
of annual income throughout workers' retirement years. The new plan is 
designed to be fully funded virtually constantly, but would also be 
protected by PBGC.

                           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. Coverage is limited to buildings and 
their contents. Policies for structures built before a community joined 
the flood insurance program are subsidized by law, while policies for 
structures built after a community joined the NFIP are actuarially 
rated.
  When the Federal flood insurance program was created in the early 
1970s, private insurance companies, with little information on flood 
risks by geographic area, had deemed the risk of floods uninsurable. In 
response, the NFIP provided insurance coverage, required building 
standards and other mitigation efforts to reduce losses, and undertook 
flood hazard mapping to quantify the geographic risk of flooding. The 
program has substantially met these goals.
  Flood insurance premium revenue grew by approximately 45 percent from 
1994 to 1997, exceeding the

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goal of 20 percent set three years ago. The NFIP's ``Cover America'' 
initiative, which is a major marketing and advertising campaign, should 
continue to increase awareness of flood insurance and educate people 
about the risks of floods. FEMA is using three strategies to increase 
the number of flood insurance policies in force: lender compliance, 
program simplification, and expanded marketing.
  The NFIP's Community Rating System (CRS) now allows policyholders in 
over 900 communities to receive discounts of at least 5 percent on their 
premiums by undertaking activities which will reduce flood losses, 
facilitate accurate insurance rating, and promote public awareness of 
flood insurance and flood risk.
  In 1997, the NFIP expanded mitigation insurance as authorized by the 
National Flood Insurance Reform Act of 1994. Mandatory Increased Cost of 
Construction (ICC) coverage, which took effect May 1, 1997, allows 
repetitively flooded or substantially damaged structures to be rebuilt 
in accordance with existing floodplain management requirements. This 
will reduce the amount and cost of future flood damage and allow those 
structures to be actuarially rated.
  In 1998 and 1999, FEMA will continue efforts to reduce future flood 
damage by educating Federal regulators about mandatory flood insurance 
requirements for federally backed home and business loans on property 
located in flood hazard areas; simplifying policy language; using 
mitigation insurance to allow flood victims to rebuild to code, thereby 
reducing future flood damage costs; 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 bad weather or other 
natural disasters. Private 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.
  The USDA crop insurance program is a cooperative effort between the 
Federal Government and the private insurance industry. Private insurance 
companies sell and adjust crop insurance policies. The Federal 
Government reimburses private companies for the administrative expenses 
associated with extending crop insurance and reinsures the private 
companies for excess insurance losses on all 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. Participation in the crop insurance program had been 
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. The 
1994 reform repealed agricultural disaster payment authorities and 
substituted a ``catastrophic'' insurance policy that indemnifies farmers 
at a rate roughly equal to the previous disaster payments. The 
catastrophic policy is free to farmers except for an administrative fee. 
Private companies 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. However, the 1996 Farm Bill eliminated 
the requirement that farmers participating in USDA's commodity programs 
carry crop insurance, and participation dropped in 1997 to an estimated 
61 percent of eligible acres.
  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 proposed 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.
  In order to ensure that sufficient funding is available to provide 
agent sales commissions, the budget proposes to shift funding for this 
activity from discretionary spending back to mandatory spending through 
the Federal Crop Insurance Corporation Fund. The Administration is 
developing a combination of program changes to reduce program cost that 
would take effect in 2000. These include placing a $100,000 limit on the 
indemnity producers can receive from the premium-free catastrophic 
insurance policy; reducing the reimbursement rate paid to the private 
insurance companies from the current 27 percent of premium to 25 
percent; slightly reducing the subsidy the Federal Government pays for 
insurance on changes from the expected market price; and lowering the 
loss ratio that premiums are based on to 1.060 from the current 1.075.

[[Page 184]]

------------------------------------------------------------------------
                       Improving Debt Collection

The timing and the amount of recoveries of defaulted loans are key elements 
in the cost of loan programs. Recoveries and rehabilitation of delinquent 
debt are important measures of overall program performance.                                                                                                                                                                           

At the end of 1997, total receivables of the Federal Government were $263 
billion or an increase of 4 percent from 1996. Of that amount, $52 billion 
were delinquent or an increase of 1 percent from 1996. Total delinquencies 
over 180 days delinquent increased by over $1 billion from $46 billion in 
1996 to $47 billion in 1997. The amount of non-performing accounts 
written-off increased from $5 billion in 1996 to $ 6 billion in 1997.

At each stage of 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. The chart below shows the historical growth in terms of 
collections through private collection agencies, salary offset, tax refund 
 offset, administrative offset and litigation. In the last ten years, the 
use of these tools has resulted in the collection of over $17 billion.

Total collections on outstanding receivables increased from $95 billion to 
$102 billion from 1996 to 1997. As Treasury and the agencies implement the 
Debt Collection Improvement Act of 1996, 
collections will increase through the use of such tools as administrative 
garnishment and loan asset sales. In addition, initiatives such as rescreening 
for prior delinquency will prevent unnecessary future defaults.

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

[[Page 185]]



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



[[Page 186]]

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

Table 8-1.  FACE VALUE AND ESTIMATED COST OF FEDERAL AND FEDERALLY ASSISTED CREDIT PROGRAMS          
                           (in billions of dollars)                                            
----------------------------------------------------------------------------------------------------------------
                                                                         1998 Budget                   Current  
                                                                           Estim.                     Estimates 
                                                           Face Value      Present     Face Value      Present  
                         Program                              1996        Value of        1997        Value of  
                                                                        Future Costs                Future Costs
                                                                             \1\                         \1\    
----------------------------------------------------------------------------------------------------------------
Direct Loans: \2\                                                                                               
  Farm Service Agency (excl.CCC), Rural Development,                                                            
   Rural Housing........................................         47         10-16            47         10-16   
  Rural Electrification Admin. and Rural Telephone Bank.         35           3-6            34           3-6   
  Agency for International Development..................         13           1-2            13           1-2   
  Public Law 480........................................         12           0-1            11           0-1   
  Disaster Assistance...................................          9          8-12            10          7-11   
  Foreign Military Financing............................          8           0-1             8           0-1   
  Export-Import Bank....................................          8           2-4            10           3-4   
  Federal Direct Student Loan Program...................         12           6-9            21          8-12   
  Small Business........................................          2           0-1             1           0-1   
  Other Direct..........................................         19           1-2            26           2-4   
                                                         -------------------------------------------------------
    Total Direct Loans..................................        165         31-54           181         34-58   
                                                         -------------------------------------------------------
Guaranteed Loans: \2\                                                                                           
  FHA Mutual Mortgage Insurance Fund....................        364        (12)-0           361        (10)-0   
  VA Mortgage...........................................        155           3-5           170           5-7   
  FHA General/Special Risk Insurance Fund...............         91          7-10            88           6-9   
  Federal Family Education Loan Program.................        102          5-10            99          5-10   
  Small Business........................................         31           2-4            34           2-4   
  Export-Import Bank....................................         18           4-6            22           4-7   
  Farm Service Agency and Rural Housing.................         11           1-2            12           1-2   
  CCC Export Credits....................................          5           0-1             5           0-1   
  Other Guaranteed......................................         28           2-4            31           2-5   
                                                         -------------------------------------------------------
  Total Guaranteed Loans................................        805         12-42           822         15-45   
                                                         -------------------------------------------------------
  Total Federal Credit..................................        970         43-96         1,003        49-103   
                                                         -------------------------------------------------------
Government-Sponsored Enterprises: \3\                                                                           
  Fannie Mae............................................        812     ............        862     ............
  Freddie Mac...........................................        601     ............        627     ............
  Federal Home Loan Banks \4\...........................        153     ............        182     ............
  Sallie Mae \5\........................................  ............  ............  ............  ............
  Farm Credit System....................................         57     ............         59     ............
                                                         -------------------------------------------------------
  Total Government-Sponsored Enterprises................      1,623     ............      1,730     ............
                                                         =======================================================
      Total.............................................      2,593         43-96         2,733        49-103   
----------------------------------------------------------------------------------------------------------------
\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 1997 was $136      
  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 187]]


Table 8-2.  REESTIMATES OF CREDIT SUBSIDIES ON LOANS DISBURSED, 1992--1997 \1\                 
                              (In millions of dollars)                                            
----------------------------------------------------------------------------------------------------------------
                         Program                              1994       1995       1996       1997       1998  
----------------------------------------------------------------------------------------------------------------
Direct Loans:                                                                                                   
  Agriculture credit insurance fund......................      -72         28          2        -31    .........
  Agricultural conservation..............................       -1    .........  .........  .........  .........
  Rural electrification and telephone loans..............        *         61        -37         84    .........
  Rural telephone bank...................................        1    .........  .........       10    .........
  Rural water and waste disposal.........................  .........  .........  .........      -12    .........
  Rural housing insurance fund...........................        2        152         46        -73    .........
  Rural community facility...............................  .........  .........  .........       -2    .........
  Rural economic development loans.......................  .........  .........  .........        1    .........
  Rural development loan program.........................  .........        1    .........  .........  .........
  Rural community advancement program....................  .........  .........  .........       22    .........
  P.L. 480 Title I loan program..........................  .........  .........      -37         -1    .........
  Federal direct student loans...........................  .........  .........        3        -83        123  
  Bureau of Reclamation direct loans.....................  .........  .........  .........  .........        2  
  Veterans housing benefit program fund..................      -39         30         76        -72        465  
  Foreign military financing.............................  .........  .........  .........       13          4  
  SBA--disaster loans....................................  .........  .........  .........  .........     -354  
  Export-Import Bank direct loans........................      -28        -16         37    .........  .........
                                                                                                                
Loan Guarantees:                                                                                                
  Agriculture credit insurance fund......................        5         14         12        -51    .........
  Commodity Credit Corporation export guarantees.........        3        103       -426        343    .........
  Rural development insurance fund.......................       49    .........  .........       -3    .........
  Rural housing insurance fund...........................        2         10          7        -10    .........
  Rural business and industry............................  .........  .........  .........       -6    .........
  Rural community facility guarantees....................  .........  .........  .........       -2    .........
  Rural community advancement program....................  .........  .........  .........       -2    .........
  P.L. 480 Title I Food for Progress credits.............  .........       84        -38    .........  .........
  Federal family education (formerly GSL):                                                                      
    Technical reestimate.................................       97        421         60    .........  .........
    Volume reestimate....................................  .........  .........      535         99    .........
  FHA-Mutual mortgage....................................  .........  .........  .........     -340    .........
  FHA-General and special risk...........................     -175    .........     -110        -25    .........
  BIA-Indian guaranteed loans............................  .........  .........  .........       31    .........
  Veterans housing benefit fund guarantees:                                                                     
    Technical reestimate.................................     -447        167        334       -706         38  
  AID housing guaranty...................................       -2         -1         -7    .........  .........
  SBA-Business loans.....................................  .........  .........      257        -16       -176  
  Export-Import Bank guarantees..........................      -11        -59         13    .........  .........
                                                          ------------------------------------------------------
    Total................................................     -616        995        727       -832        102  
----------------------------------------------------------------------------------------------------------------
* $500 thousand or less.                                                                                        
\1\ Additional information on credit reform subsidy rates is contained in the Federal Credit Supplement to the  
  budget for 1999.                                                                                              
\2\ 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.                                              


[[Page 188]]


Table 8-3.  ESTIMATED 1999 SUBSIDY RATES, BUDGET AUTHORITY, AND LOAN LEVELS FOR DIRECT LOANS \1\        
                             (In millions of dollars)                                            
----------------------------------------------------------------------------------------------------------------
                                                                         1999 Weighted                          
                                                                            average         1999         1999   
                           Agency and Program                             subsidy as a    Subsidy     Estimated 
                                                                           percent of      budget    loan levels
                                                                         disbursements   authority              
----------------------------------------------------------------------------------------------------------------
Agriculture:                                                                                                    
  Agricultural credit insurance program................................          8.5            56          666 
  Rural community advancement program..................................        14.43           153        1,014 
  Rural electrification and telephone..................................         2.27            36        1,475 
  Rural telephone bank.................................................         2.65            10          175 
  Distance learning and medical link program...........................         0.12             *          150 
  Rural housing insurance fund.........................................        16.45           197        1,197 
  Rural development loan fund..........................................        50.35            18           35 
  Rural economic development loans.....................................        25.22             4           15 
  P.L. 480 direct loans................................................        86.79            89          102 
                                                                                                                
Commerce:                                                                                                       
  Fisheries finance loans..............................................            1             *           24 
                                                                                                                
Defense:                                                                                                        
  Family housing improvement fund......................................           60    ...........  ...........
                                                                                                                
Education:                                                                                                      
  Federal direct student loans.........................................         3.42           525       13,857 
                                                                                                                
Housing and Urban Development:                                                                                  
  FHA-mutual mortgage insurance program................................  .............  ...........          50 
  FHA-general and special risk program.................................  .............  ...........          50 
                                                                                                                
Interior:                                                                                                       
  Bureau of Reclamation loan program...................................        31.58            12           38 
                                                                                                                
State Department:                                                                                               
  Repatriation loans...................................................           80             1            1 
                                                                                                                
Transportation:                                                                                                 
  Minority business resource center program............................           11             2           14 
                                                                                                                
Treasury:                                                                                                       
  Community development financial institutions fund....................        40.65            20           49 
                                                                                                                
Veterans Affairs:                                                                                               
  Veterans housing benefit program fund................................        19.55            56          203 
  Miscellaneous veterans programs fund.................................         6.73             1           11 
                                                                                                                
International Assistance Programs:                                                                              
  Foreign military financing loan program..............................        11.97            20          167 
  Overseas Private Investment Corporation..............................            2             4          200 
                                                                                                                
Small Business Administration:                                                                                  
  Disaster loans.......................................................         5.93            53          901 
  Business loans.......................................................         9.54             6           60 
                                                                                                                
Other Independent Agencies:                                                                                     
  Export-Import Bank...................................................         3.22            45        1,396 
                                                                                                                
  Federal Emergency Management Agency:                                                                          
    Disaster assistance................................................         5.42             2           25 
                                                                        ----------------------------------------
    Total..............................................................         5.99         1,310       21,875 
----------------------------------------------------------------------------------------------------------------
* $500 thousand or less.                                                                                        
\1\ Additional information on credit reform subsidy rates is contained in the Federal Credit Supplement to the  
  budget for 1999.                                                                                              


[[Page 189]]


Table 8-4.  ESTIMATED 1999 SUBSIDY RATES, BUDGET AUTHORITY, AND LOAN LEVELS FOR LOAN GUARANTEES \1\      
                             (In millions of dollars)                                            
----------------------------------------------------------------------------------------------------------------
                                                                         1999 Weighted                          
                                                                            average         1999         1999   
                           Agency and Program                             subsidy as a    Subsidy     Estimated 
                                                                           percent of      budget    loan levels
                                                                         disbursements   authority              
----------------------------------------------------------------------------------------------------------------
Agriculture:                                                                                                    
  Agricultural credit insurance fund...................................         1.89            44        2,325 
  Commodity Credit Corporation export loans............................         5.48           253        4,615 
  Rural community advancement program..................................         0.55            10        1,285 
  Rural housing insurance fund.........................................         0.18             6        3,250 
                                                                                                                
Defense:                                                                                                        
  Export loan guarantees...............................................  .............  ...........         250 
  Family housing improvement fund......................................            7    ...........  ...........
                                                                                                                
Education:                                                                                                      
  Federal family education loan program................................         6.15         1,763       28,671 
                                                                                                                
Health and Human Services:                                                                                      
  Health resources and services........................................         5.32             4           80 
                                                                                                                
Housing and Urban Development:                                                                                  
  Indian housing guarantee fund........................................         8.13             6           69 
  Title VI Indian Federal guarantees...................................           11             5           44 
  Home loan guarantees.................................................           11            11          100 
  Community development loan guarantees (Sec. 108).....................          2.3            29        1,261 
  FHA-mutual mortgage..................................................        -2.62        -1,594      110,000 
  FHA-general and special risk.........................................        -0.27            81       18,100 
                                                                                                                
Interior:                                                                                                       
  Indian loan guarantees...............................................         7.54             5           60 
                                                                                                                
Transportation:                                                                                                 
  MARAD guaranteed loans (Title XI)....................................         5.01            16          520 
                                                                                                                
Veterans Affairs:                                                                                               
  Veterans housing benefit program fund................................         0.88           206       23,440 
                                                                                                                
International Assistance Programs:                                                                              
  Micro and small enterprise development...............................         3.29             2           61 
  Urban and environmental credit.......................................         8.82             6           68 
  Development credit authority.........................................         8.39            13          155 
  Overseas Private Investment Corporation..............................            2            46        2,600 
                                                                                                                
Small Business Administration:                                                                                  
  Business Loans.......................................................         1.51           176       15,235 
                                                                                                                
Other Independent Agencies:                                                                                     
  Export-Import Bank...................................................         5.86           903       15,401 
                                                                        ----------------------------------------
    Total..............................................................          N/A         1,991      227,590 
                                                                        ========================================
                                                                                                                
                                ADDENDUM                                                                        
                                                                                                                
Secondary guaranteed loans:                                                                                     
  GNMA secondary mortgage guarantees...................................        -0.42            -9      150,000 
----------------------------------------------------------------------------------------------------------------
N/A = Not applicable.                                                                                           
\1\ Additional information on credit reform subsidy rates is contained in the Federal Credit Supplement to the  
  budget for 1999.                                                                                              


[[Page 190]]


       Table 8-5.  SUMMARY OF FEDERAL DIRECT LOANS AND LOAN GUARANTEES                        
                          (In billions of dollars)                                            
----------------------------------------------------------------------------------------------------------------
                                                                      Actual                       Estimate     
                                                     -----------------------------------------------------------
                                                        1994      1995      1996      1997      1998      1999  
----------------------------------------------------------------------------------------------------------------
Direct Loans:                                                                                                   
    Obligations.....................................      22.7      30.9      23.4      33.6      28.1      26.3
    Disbursements...................................      19.3      22.0      23.6      32.2      32.0      29.8
    Subsidy budget authority \1\....................       2.8       2.6       1.8       2.4       4.5       1.3
                                                                                                                
Loan Guarantees:                                                                                                
    Commitments.....................................     204.1     138.5     175.4     172.3     194.0     210.4
    Lender Disbursements............................     194.2     117.9     143.9     144.7     155.5     163.0
    Subsidy budget authority \1\....................       2.4       4.6       4.0       3.6       2.3       2.0
----------------------------------------------------------------------------------------------------------------
\1\ Excludes subsidy reestimates for loans made in prior years.                                                 
\2\ GNMA secondary guarantees of loans that are guaranteed by FHA, VA and RHS are excluded from the totals to   
  avoid double-counting.                                                                                        


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                                                -----------------------------
                                                        1997      1998      1999      1997      1998      1999  
                                                       actual   estimate  estimate   actual   estimate  estimate
----------------------------------------------------------------------------------------------------------------
                                                                                                                
----------------DIRECT LOAN WRITEOFFS---------------------------------------------------------------------------
                                                                                                                
Agriculture:                                                                                                    
  Agricultural credit insurance fund................       392       322       322      3.93      3.37      3.69
  Rural development insurance fund..................         2         2         2      0.04      0.04      0.04
  Rural housing insurance fund......................        97        96        92      0.33      0.36      0.33
  Rural electrification and telecommunications loans       409  ........  ........      1.45  ........  ........
                                                                                                                
Commerce:                                                                                                       
  Economic development revolving fund (EDA).........  ........         1         1  ........      1.81      1.96
                                                                                                                
Education:                                                                                                      
  Student financial assistance......................         5         8         8      3.54      5.36      4.81
  Federal direct student loan program...............        15  ........         2      0.07  ........  ........
                                                                                                                
Health and Human Services:                                                                                      
  Health Resources and Services.....................         2         2         2      0.25      0.25      0.25
                                                                                                                
Housing and Urban Development:                                                                                  
  Revolving fund....................................         5  ........  ........      1.84  ........  ........
  FHA-Mutal mortgage insurance......................  ........  ........         1  ........  ........      1.96
                                                                                                                
Interior:                                                                                                       
  Revolving fund....................................         2        14         4      3.77     31.11     11.76
                                                                                                                
State:                                                                                                          
  Repatriation loans................................         1         1         1        25        25        25
                                                                                                                
Veterans Affairs:                                                                                               
  Veterans housing benefit program \2\..............         9        11        16      0.04      0.04      0.07
                                                                                                                
Federal Emergency Management Administration:                                                                    
  Disaster assistance...............................        42  ........  ........      25.6  ........  ........
                                                                                                                
Small Business Administration                                                                                   
  Business and disaster loans.......................       232       117        85      2.14      1.11      0.91
                                                                                                                
Other Independent Agencies:                                                                                     
  Federal Communications Commission.................       793     6,202       119     11.65    152.83      9.48
  Tennesee Valley Authority.........................         1  ........  ........  ........      0.57       0.9
                                                                                                                
                                                     -----------------------------------------------------------
    Total, direct loan writeoffs....................     1,598     6,776       655  ........  ........  ........
                                                     -----------------------------------------------------------
      GUARANTEED LOAN TERMINATIONS FOR DEFAULT                                                                  
                                                                                                                
Agriculture:                                                                                                    
  Agricultural credit insurance fund................        78        13        12      1.11      0.17      0.15
  CCC guaranteed loans..............................        31       345       342      0.68      6.54      5.55
  Rural development insurance fund..................        42        30        13      11.2      8.98      4.88

[[Page 191]]

                                                                                                                
  Rural housing insurance fund......................        10        26        33      0.14      0.14      0.13
  Rural business and industry loans.................         6        17        16  ........  ........  ........
                                                                                                                
Commerce:                                                                                                       
  Federal ship financing fund.......................         1  ........  ........      1.17  ........  ........
                                                                                                                
Education:                                                                                                      
  Federal family education loans....................     3,322     3,522     3,567      3.36      3.29      2.88
                                                                                                                
Health and Human Services:                                                                                      
  Health professions graduate student loans.........        44        42        49      1.48      1.42      1.69
                                                                                                                
Housing and Urban Development:                                                                                  
  FHA-General and special risk guaranteed loans.....     1,092     1,496     3,280      1.24      1.63      3.33
  FHA-Mutual mortgage and cooperative housing loans.     4,488     4,108     3,895      1.24      1.08      0.92
                                                                                                                
Interior:                                                                                                       
  Indian loan guaranty..............................        40         6         5     39.21      5.94       4.9
                                                                                                                
Veterans Affairs:                                                                                               
  Veterans housing benefit program \3\..............     2,102     2,984     3,205      1.23      1.68      1.68
                                                                                                                
International Assistance Programs:                                                                              
  Foreign military financing........................         6         1         1       0.1      0.01      0.01
  Housing and other credit guaranty programs........  ........        27        15  ........      1.47      0.86
  Microenterprise and small enterprise development..  ........         1         1  ........      2.12      1.42
  Overseas Private Investment Corporation...........         7  ........  ........      0.35  ........  ........
                                                                                                                
Small Business Administration:                                                                                  
  Business loans....................................       545       513       493      2.14      1.11      0.91
                                                                                                                
Other Independent Agencies:                                                                                     
  Export-Import Bank................................        74         8        12      0.37      0.04      0.05
                                                                                                                
                                                     -----------------------------------------------------------
    Total, guaranteed loan terminations for default.    11,888    13,139    14,939  ........  ........  ........
                                                     -----------------------------------------------------------
    Total, direct loan writeoffs and guaranteed loan                                                            
     terminations...................................    13,486    19,915    15,594  ........  ........  ........
                                                     ===========================================================
                                                                                                                
  ADDENDUM: WRITEOFFS OF DEFAULTED GUARANTEED LOANS                                                             
           THAT RESULT IN LOANS RECEIVABLE                                                                      
                                                                                                                
Commerce:                                                                                                       
  Federal ship financing fund.......................         1  ........  ........      0.51  ........  ........
                                                                                                                
Education:                                                                                                      
  Federal family education loans....................       285       257       259      1.73      1.53      1.46
                                                                                                                
Health and Human Services:                                                                                      
  Health professions graduate student loans.........        10        10        10      2.12      2.08      2.01
                                                                                                                
Housing and Urban Development:                                                                                  
  FHA-General and special risk guaranteed loans.....       142       232       545      5.87      8.71     18.56
  FHA-Mutual mortgage and cooperative housing loans.       550        26         1    191.63     15.11      1.72
                                                                                                                
Veterans Affairs:                                                                                               
  Veterans housing benefit program \3\..............     1,120       548       565    145.83     71.72     74.73
                                                                                                                
International Assistance Programs:                                                                              
  Housing and other credit guaranty programs........  ........        70        84  ........     16.43        25
                                                                                                                
Small Business Administration:                                                                                  
  Business loans....................................       105       174       810       1.6      1.44      1.27
                                                                                                                
                                                     -----------------------------------------------------------
    Total, writeoffs of loans receivable............     2,213     1,317     2,274  ........  ........  ........
----------------------------------------------------------------------------------------------------------------
\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 were consolidated.                                                                               
\3\ In FY 1998, Veterans Housing Loan Guaranty Program and Guaranty and Indemnity Fund loan guarantees were     
  consolidated.                                                                                                 


[[Page 192]]


    Table 8-7.  APPROPRIATIONS ACTS LIMITATIONS ON CREDIT LOAN LEVELS \1\                     
                           (In millions of dollars)                                            
----------------------------------------------------------------------------------------------------------------
                                                                                                 Estimate       
                              Agency or Program                                  1997    -----------------------
                                                                                Actual       1998        1999   
----------------------------------------------------------------------------------------------------------------
                                                                                                                
Housing and Urban Development:                                                                                  
  FHA-General and special risk loans........................................         120         120         120
  FHA-Mutual mortgage insurance loans.......................................         200         200          50
                                                                                                                
Interior:                                                                                                       
  Bureau of Reclamation direct loans........................................          37          31          38
                                                                                                                
State Department:                                                                                               
  Repatriation loans........................................................           1           1           1
                                                                                                                
Transportation:                                                                                                 
  Minority business resource center loans...................................          15          15          14
  Orange County (CA) toll road demonstration................................          25  ..........  ..........
  Direct loan financing (Alameda)...........................................         140         140         120
                                                                                                                
Treasury:                                                                                                       
  Community development financial institutions fund.........................  ..........          32          49
                                                                                                                
Federal Emergency Management Agency:                                                                            
  Disaster assistance loans.................................................          25          31          25
                                                                                                                
International Assistance Programs:                                                                              
  Foreign military financing................................................         543         218         171
                                                                             -----------------------------------
    Total, limitations on direct loan obligations...........................       1,106       1,378       1,162
                                                                             ===================================
                 LIMITATIONS ON GUARANTEED LOAN COMMITMENTS                                                     
                                                                                                                
Health and Human Services:                                                                                      
  Health professions graduate student loan insurance........................         140          85  ..........
  Health center guaranteed loans............................................  ..........         160  ..........
                                                                                                                
Housing and Urban Development:                                                                                  
  Indian housing loan guarantee fund........................................          53          62          69
  Title VI Indian Federal guarantees........................................  ..........          45          44
  Community development loan guarantees (Sec. 108)..........................       1,389       1,261       1,261
  Home loan guarantee.......................................................  ..........  ..........         100
  FHA-General and special risk..............................................      17,400      17,400      18,100
  FHA-Mutual mortgage insurance.............................................     110,000     110,000     110,000
  FHA-Loan recovery fund....................................................          10          10  ..........
                                                                                                                
Interior:                                                                                                       
  Indian guaranteed loans...................................................          35          35          56
                                                                                                                
Transportation:                                                                                                 
  MARAD guaranteed loans (Title XI).........................................       1,000       1,000         520
                                                                                                                
International Assistance Programs:                                                                              
  Loan guarantees to Israel.................................................       2,000  ..........  ..........
                                                                             -----------------------------------
    Total, limitations on guaranteed loan commitments.......................     132,027     130,058     130,150
                                                                             ===================================
                                  ADDENDUM                                                                      
                                                                                                                
Secondary guaranteed loan commitment limitations:                                                               
  GNMA, mortgage-backed securities..........................................     110,000     130,000     150,000
----------------------------------------------------------------------------------------------------------------
\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 193]]


        Table 8-8.  DIRECT LOAN TRANSACTIONS OF THE FEDERAL GOVERNMENT                         
                           (in millions of dollars)                                            
----------------------------------------------------------------------------------------------------------------
                                                                         Estimate                               
      Agency or Program          1997    -----------------------------------------------------------------------
                               Actual        1998        1999        2000        2001        2002        2003   
----------------------------------------------------------------------------------------------------------------
  Department of Agriculture                                                                                     
                                                                                                                
     Farm Service Agency                                                                                        
                                                                                                                
Agricultural credit                                                                                             
 insurance fund liquidating                                                                                     
 account:                                                                                                       
   Obligations..............  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Loan disbursements.......           1           1           1           4           4           4           4
   Change in outstandings...      -1,074        -984        -981        -921        -760        -702        -552
   Outstandings.............       7,709       6,725       5,744       4,823       4,063       3,361       2,809
                                                                                                                
Agricultural credit                                                                                             
 insurance fund direct loan                                                                                     
 financing account:                                                                                             
   Obligations..............         799         646         666         666         666         666         666
   Loan disbursements.......         785         649         665         677         666         666         666
   Change in outstandings...         232         161         145         126          91          72          57
   Outstandings.............       2,258       2,419       2,564       2,690       2,781       2,853       2,910
                                                                                                                
Commodity credit corporation                                                                                    
 fund:                                                                                                          
   Obligations..............       5,333       6,408       7,451       7,525       6,849       6,288       5,970
   Loan disbursements.......       5,333       6,408       7,451       7,525       6,849       6,288       5,970
   Change in outstandings...          97         -93        -127         -53        -112         -60         -38
   Outstandings.............       1,769       1,676       1,549       1,496       1,384       1,324       1,286
                                                                                                                
   Rural Utilities Service                                                                                      
                                                                                                                
Rural communication                                                                                             
 development fund                                                                                               
 liquidating account:                                                                                           
   Obligations..............  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Loan disbursements.......  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Change in outstandings...  ..........          -1  ..........          -1          -1  ..........  ..........
   Outstandings.............           9           8           8           7           6           6           6
                                                                                                                
Distance learning and                                                                                           
 medical link direct loan                                                                                       
 financing account:                                                                                             
   Obligations..............  ..........         300         150         150         150         150         150
   Loan disbursements.......  ..........          90         195         180         150         150         150
   Change in outstandings...  ..........          83         173         143          99          85          70
   Outstandings.............  ..........          83         256         399         498         583         653
                                                                                                                
Rural development insurance                                                                                     
 fund liquidating account:                                                                                      
   Obligations..............  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Loan disbursements.......          17          10  ..........  ..........  ..........  ..........  ..........
   Change in outstandings...        -214        -199        -199        -189        -179        -170        -162
   Outstandings.............       4,135       3,936       3,737       3,548       3,369       3,199       3,037
                                                                                                                
Rural electrification and                                                                                       
 telecommunications direct                                                                                      
 loan financing account:                                                                                        
   Obligations..............       1,105       1,420       1,475       1,475       1,475       1,475       1,475
   Loan disbursements.......         916       1,903       1,499       1,346       1,287       1,213       1,412
   Change in outstandings...         804       1,829       1,409       1,234       1,150       1,056       1,233
   Outstandings.............       4,306       6,135       7,544       8,778       9,928      10,984      12,217
                                                                                                                
Rural telephone bank direct                                                                                     
 loan financing account:                                                                                        
   Obligations..............         100         175         175         175         175         175         175
   Loan disbursements.......          34         248         197         223         208         180         175
   Change in outstandings...          12         240         185         205         184         149         137
   Outstandings.............         203         443         628         833       1,017       1,166       1,303
                                                                                                                
Rural water and waste                                                                                           
 disposal direct loans                                                                                          
 financing account:                                                                                             
   Obligations..............         830         694         764         764         764         764         764
   Loan disbursements.......         670         726         680         649         757         635         642
   Change in outstandings...         645         701         646         605         704         569         564
   Outstandings.............       2,260       2,961       3,607       4,212       4,916       5,485       6,049
                                                                                                                
Rural electrification and                                                                                       
 telecommunications                                                                                             
 liquidating account:                                                                                           
   Obligations..............  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Loan disbursements.......          64          39          25          17          12           9           6
   Change in outstandings...      -2,213      -1,408      -1,668      -1,068        -969        -876        -790
   Outstandings.............      28,246      26,838      25,170      24,102      23,133      22,257      21,467
                                                                                                                
Rural telephone bank                                                                                            
 liquidating account:                                                                                           
   Obligations..............  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Loan disbursements.......          32          30          27          24          21          18          15
   Change in outstandings...         -64         -70         -93         -96        -100        -100        -100
   Outstandings.............       1,264       1,194       1,101       1,005         905         805         705
                                                                                                                

[[Page 194]]

                                                                                                                
    Rural Housing Service                                                                                       
                                                                                                                
Rural housing insurance fund                                                                                    
 liquidating account:                                                                                           
   Obligations..............  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Loan disbursements.......           2  ..........  ..........  ..........  ..........  ..........  ..........
   Change in outstandings...      -1,238      -1,209      -1,206      -1,215      -1,170      -1,124      -1,077
   Outstandings.............      20,947      19,738      18,532      17,317      16,147      15,023      13,946
                                                                                                                
Rural housing insurance fund                                                                                    
 direct loan financing                                                                                          
 account:                                                                                                       
   Obligations..............         928       1,230       1,197       1,197       1,197       1,197       1,197
   Loan disbursements.......         950       1,196       1,196       1,196       1,186       1,180       1,180
   Change in outstandings...         767       1,024         928         857         768         690         619
   Outstandings.............       8,567       9,591      10,519      11,376      12,144      12,834      13,453
                                                                                                                
Rural community facility                                                                                        
 direct loans financing                                                                                         
 account:                                                                                                       
   Obligations..............         137         206         200         200         200         200         200
   Loan disbursements.......         159         163         192         196         189         176         201
   Change in outstandings...         145         152         178         177         166         148         169
   Outstandings.............         493         645         823       1,000       1,166       1,314       1,483
                                                                                                                
 Rural Business--Cooperative                                                                                    
           Service                                                                                              
                                                                                                                
Rural economic development                                                                                      
 loans liquidating account:                                                                                     
   Obligations..............  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Loan disbursements.......  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Change in outstandings...          -1          -2          -2          -2  ..........  ..........  ..........
   Outstandings.............           6           4           2  ..........  ..........  ..........  ..........
                                                                                                                
Rural economic development                                                                                      
 direct loan financing                                                                                          
 account:                                                                                                       
   Obligations..............          12          25          15          15          15          15          15
   Loan disbursements.......          11          14          20          15          15          15          16
   Change in outstandings...           7           8          12           6           4           3           2
   Outstandings.............          42          50          62          68          72          75          77
                                                                                                                
Rural development loan fund                                                                                     
 direct loan financing                                                                                          
 account:                                                                                                       
   Obligations..............          37          35          35          35          35          35          35
   Loan disbursements.......          45          61          50          38          31          36          35
   Change in outstandings...          42          58          47          32          26          30          29
   Outstandings.............         173         231         278         310         336         366         395
                                                                                                                
Rural business and industry                                                                                     
 direct loans financing                                                                                         
 account:                                                                                                       
   Obligations..............          12          50          50          50          50          50          50
   Loan disbursements.......           3          17          35          44          48          50          50
   Change in outstandings...           3          17          35          43          46          47          46
   Outstandings.............           3          20          55          98         144         191         237
                                                                                                                
Rural development loan fund                                                                                     
 liquidating account:                                                                                           
   Obligations..............  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Loan disbursements.......           1           1  ..........  ..........  ..........  ..........  ..........
   Change in outstandings...          -2          -2          -3          -3          -3          -3          -3
   Outstandings.............          82          80          77          74          71          68          65
                                                                                                                
Foreign Agricultural Service                                                                                    
                                                                                                                
Expenses, Public Law 480,                                                                                       
 foreign assistance                                                                                             
 programs, Agriculture                                                                                          
 liquidating account:                                                                                           
   Obligations..............  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Loan disbursements.......  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Change in outstandings...        -321        -354        -406        -463        -330        -332        -333
   Outstandings.............       9,446       9,092       8,686       8,223       7,893       7,561       7,228
                                                                                                                
P.L. 480 Direct credit                                                                                          
 financing account:                                                                                             
   Obligations..............         183         227         102         102         102         102         102
   Loan disbursements.......         156         240         152         110         102         102         102
   Change in outstandings...         107         225         120          66          49          39          39
   Outstandings.............       1,371       1,596       1,716       1,782       1,831       1,870       1,909
                                                                                                                
P.L. 480 Title I Food for                                                                                       
 Progress Credits, financing                                                                                    
 account:                                                                                                       
   Obligations..............  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Loan disbursements.......  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Change in outstandings...  ..........  ..........  ..........  ..........         -49         -49         -49
   Outstandings.............         508         508         508         508         459         410         361
                                                                                                                

[[Page 195]]

                                                                                                                
Debt reduction--financing                                                                                       
 account:                                                                                                       
   Obligations..............  ..........          27         262          72  ..........  ..........  ..........
   Loan disbursements.......  ..........          27         262          72  ..........  ..........  ..........
   Change in outstandings...          -3          26         261          71          -1          -1          -1
   Outstandings.............          63          89         350         421         420         419         418
                                                                                                                
   Department of Commerce                                                                                       
                                                                                                                
    Economic Development                                                                                        
       Administration                                                                                           
                                                                                                                
Economic development                                                                                            
 revolving fund liquidating                                                                                     
 account:                                                                                                       
   Obligations..............  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Loan disbursements.......  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Change in outstandings...          -4          -5          -4          -4          -4          -4          -4
   Outstandings.............          58          53          49          45          41          37          33
                                                                                                                
    National Oceanic and                                                                                        
 Atmospheric Administration                                                                                     
                                                                                                                
Fisheries finance, financing                                                                                    
 account:                                                                                                       
   Obligations..............          25          34          24          24          24          24          24
   Loan disbursements.......  ..........          59          24          24          24          24          24
   Change in outstandings...  ..........          57          20          19          17          14          14
   Outstandings.............  ..........          57          77          96         113         127         141
                                                                                                                
   Department of Defense--                                                                                      
          Military                                                                                              
                                                                                                                
       Family Housing                                                                                           
                                                                                                                
Department of Defense,                                                                                          
 Family Housing Improvement,                                                                                    
 Direct Loan Financing                                                                                          
 Account:                                                                                                       
   Obligations..............  ..........          13  ..........         531         411         239         489
   Loan disbursements.......  ..........           7  ..........         175         345         319         334
   Change in outstandings...  ..........           7  ..........         175         345         319         334
   Outstandings.............  ..........           7           7         182         527         846       1,180
                                                                                                                
  Revolving and Management                                                                                      
            Funds                                                                                               
                                                                                                                
Working capital fund, Navy:                                                                                     
   Obligations..............  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Loan disbursements.......  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Change in outstandings...         -62         -69         -69         -73         -78        -136        -133
   Outstandings.............       1,164       1,095       1,026         953         875         739         606
                                                                                                                
Working capital fund, Air                                                                                       
 Force:                                                                                                         
   Obligations..............  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Loan disbursements.......  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Change in outstandings...         -13         -14         -17         -18         -29         -25         -27
   Outstandings.............         144         130         113          95          66          41          14
                                                                                                                
   Department of Education                                                                                      
                                                                                                                
   Office of Postsecondary                                                                                      
          Education                                                                                             
                                                                                                                
Student financial                                                                                               
 assistance:                                                                                                    
   Obligations..............  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Loan disbursements.......  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Change in outstandings...         -66          17          17          17          16          16          16
   Outstandings.............         141         158         175         192         208         224         240
                                                                                                                
College housing and academic                                                                                    
 facilities loans                                                                                               
 liquidating account:                                                                                           
   Obligations..............  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Loan disbursements.......          11  ..........  ..........  ..........  ..........  ..........  ..........
   Change in outstandings...         -33         -59         -35         -32         -31         -28         -28
   Outstandings.............         614         555         520         488         457         429         401
                                                                                                                
College housing and academic                                                                                    
 facilities loans financing                                                                                     
 account:                                                                                                       
   Obligations..............  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Loan disbursements.......           4           5           1           6           6  ..........  ..........
   Change in outstandings...           4           5           1           6           6  ..........  ..........
   Outstandings.............          18          23          24          30          36          36          36
                                                                                                                
Federal direct student loan                                                                                     
 program, financing account:                                                                                    
   Obligations..............      12,026       9,836       8,160      12,658      13,800      14,678      15,527
   Loan disbursements.......      10,271      13,333      13,670      14,477      15,274      16,093      16,951
   Change in outstandings...       9,652      12,316      11,889      11,733      11,387      10,898      10,309
   Outstandings.............      21,212      33,528      45,417      57,150      68,537      79,435      89,744
                                                                                                                

[[Page 196]]

                                                                                                                
    Department of Energy                                                                                        
                                                                                                                
       Power Marketing                                                                                          
       Administration                                                                                           
                                                                                                                
Bonneville Power                                                                                                
 Administration fund:                                                                                           
   Obligations..............  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Loan disbursements.......  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Change in outstandings...  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Outstandings.............           2           2           2           2           2           2           2
                                                                                                                
  Department of Health and                                                                                      
       Human Services                                                                                           
                                                                                                                
    Health Resources and                                                                                        
   Services Administration                                                                                      
                                                                                                                
Health Resources and                                                                                            
 Services:                                                                                                      
   Obligations..............  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Loan disbursements.......          21  ..........  ..........  ..........  ..........  ..........  ..........
   Change in outstandings...          -3         -24         -24         -24         -24         -24         -24
   Outstandings.............         797         773         749         725         701         677         653
                                                                                                                
Medical facilities guarantee                                                                                    
 and loan fund:                                                                                                 
   Obligations..............  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Loan disbursements.......  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Change in outstandings...         -10          -7          -7          -5          -5  ..........  ..........
   Outstandings.............          24          17          10           5  ..........  ..........  ..........
                                                                                                                
  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...         -65         -70         -71         -71         -71         -71         -74
   Outstandings.............       1,562       1,492       1,421       1,350       1,279       1,208       1,134
                                                                                                                
   Community Planning and                                                                                       
         Development                                                                                            
                                                                                                                
Revolving fund (liquidating                                                                                     
 programs):                                                                                                     
   Obligations..............  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Loan disbursements.......  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Change in outstandings...         -57         -40         -40         -35         -30         -30         -30
   Outstandings.............         271         231         191         156         126          96          66
                                                                                                                
Community development loan                                                                                      
 guarantees liquidating                                                                                         
 account:                                                                                                       
   Obligations..............  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Loan disbursements.......  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Change in outstandings...          -3          -4          -4          -4          -4          -4          -4
   Outstandings.............          36          32          28          24          20          16          12
                                                                                                                
      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.......          71          62          33          11  ..........  ..........  ..........
   Change in outstandings...          68          58          29           7          -4          -4          -4
   Outstandings.............         744         802         831         838         834         830         826
                                                                                                                
FHA-Mutual mortgage and                                                                                         
 cooperative housing                                                                                            
 insurance funds liquidating                                                                                    
 account:                                                                                                       
   Obligations..............  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Loan disbursements.......  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Change in outstandings...          -2          -2          -1  ..........  ..........  ..........  ..........
   Outstandings.............           5           3           2           2           2           2           2
                                                                                                                
FHA-General and special risk                                                                                    
 insurance funds liquidating                                                                                    
 account:                                                                                                       
   Obligations..............  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Loan disbursements.......  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Change in outstandings...         -19         -13         -10         -10          -8          -7          -7
   Outstandings.............          78          65          55          45          37          30          23
                                                                                                                

[[Page 197]]

                                                                                                                
FHA-General and special risk                                                                                    
 direct loan financing                                                                                          
 account:                                                                                                       
   Obligations..............           1          20          50          10          10          10          10
   Loan disbursements.......           1          20          50          10          10          10          10
   Change in outstandings...           1          20          45           4           2  ..........         -10
   Outstandings.............           1          21          66          70          72          72          62
                                                                                                                
Housing for the elderly or                                                                                      
 handicapped fund                                                                                               
 liquidating account:                                                                                           
   Obligations..............  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Loan disbursements.......           6         184  ..........  ..........  ..........  ..........  ..........
   Change in outstandings...         -78         114         -71         -70         -70         -69         -69
   Outstandings.............       8,228       8,342       8,271       8,201       8,131       8,062       7,993
                                                                                                                
FHA-Mutual mortgage                                                                                             
 insurance direct loan                                                                                          
 financing account:                                                                                             
   Obligations..............           3          25          50          10          10          10          10
   Loan disbursements.......           1          27          50          10          10          10          10
   Change in outstandings...  ..........          26          47           3          -2         -13         -33
   Outstandings.............           2          28          75          78          76          63          30
                                                                                                                
Government National Mortgage                                                                                    
         Association                                                                                            
                                                                                                                
Guarantees of mortgage-                                                                                         
 backed securities                                                                                              
 liquidating account:                                                                                           
   Obligations..............  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Loan disbursements.......          98          19           8          44          18           5           5
   Change in outstandings...          11        -247           8           4           2           1           1
   Outstandings.............         332          85          93          97          99         100         101
                                                                                                                
Guarantees of mortgage-                                                                                         
 backed securities financing                                                                                    
 account:                                                                                                       
   Obligations..............  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Loan disbursements.......  ..........         339          71          65          61          62          54
   Change in outstandings...  ..........         255          13           1           2           3           1
   Outstandings.............  ..........         255         268         269         271         274         275
                                                                                                                
 Department of the Interior                                                                                     
                                                                                                                
    Bureau of Reclamation                                                                                       
                                                                                                                
Bureau of reclamation loan                                                                                      
 liquidating account:                                                                                           
   Obligations..............  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Loan disbursements.......  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Change in outstandings...  ..........          -3          -3          -3          -4          -4          -4
   Outstandings.............          77          74          71          68          64          60          56
                                                                                                                
Bureau of Reclamation direct                                                                                    
 loan financing account:                                                                                        
   Obligations..............          28          33          38          38          38          38          38
   Loan disbursements.......          26          38          38          44          46          48          51
   Change in outstandings...          26          38          38          44          46          48          51
   Outstandings.............          81         119         157         201         247         295         346
                                                                                                                
    National Park Service                                                                                       
                                                                                                                
Construction:                                                                                                   
   Obligations..............  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Loan disbursements.......  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Change in outstandings...  ..........          -1  ..........  ..........          -1  ..........          -1
   Outstandings.............           7           6           6           6           5           5           4
                                                                                                                
  Bureau of Indian Affairs                                                                                      
                                                                                                                
Revolving fund for loans                                                                                        
 liquidating account:                                                                                           
   Obligations..............  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Loan disbursements.......  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Change in outstandings...          -5         -16          -6          -4          -4          -4          -4
   Outstandings.............          53          37          31          27          23          19          15
                                                                                                                
Indian direct loan financing                                                                                    
 account:                                                                                                       
   Obligations..............  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Loan disbursements.......  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Change in outstandings...          -1          -1          -1          -2  ..........  ..........  ..........
   Outstandings.............          32          31          30          28          28          28          28
                                                                                                                

[[Page 198]]

                                                                                                                
       Insular Affairs                                                                                          
                                                                                                                
Assistance to territories:                                                                                      
   Obligations..............  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Loan disbursements.......  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Change in outstandings...          -1          -1          -1          -1          -1          -2          -2
   Outstandings.............          19          18          17          16          15          13          11
                                                                                                                
     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..............           7          15          14          14          14          14          14
   Loan disbursements.......           6          15          14          14          14          14          14
   Change in outstandings...          -1  ..........          -1  ..........          -2          -2          -2
   Outstandings.............           7           7           6           6           4           2  ..........
                                                                                                                
       Federal Highway                                                                                          
       Administration                                                                                           
                                                                                                                
Orange County (CA) toll road                                                                                    
 demonstration project                                                                                          
 direct loan financing                                                                                          
 account:                                                                                                       
   Obligations..............  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Loan disbursements.......  ..........           6          13          13          13          13          13
   Change in outstandings...  ..........           6          13          13          13          13          13
   Outstandings.............  ..........           6          19          32          45          58          71
                                                                                                                
High priority corridors loan                                                                                    
 financing account:                                                                                             
   Obligations..............  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Loan disbursements.......  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Change in outstandings...         -37  ..........  ..........  ..........  ..........  ..........  ..........
   Outstandings.............  ..........  ..........  ..........  ..........  ..........  ..........  ..........
                                                                                                                
Right-of-way revolving fund                                                                                     
 liquidating account:                                                                                           
   Obligations..............  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Loan disbursements.......          18          20          20          20           3  ..........  ..........
   Change in outstandings...           2  ..........          -2          -4         -21         -24         -24
   Outstandings.............         184         184         182         178         157         133         109
                                                                                                                
      Federal Railroad                                                                                          
       Administration                                                                                           
                                                                                                                
Amtrak corridor improvement                                                                                     
 loans liquidating account:                                                                                     
   Obligations..............  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Loan disbursements.......  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Change in outstandings...  ..........          -1  ..........          -1          -1          -1  ..........
   Outstandings.............           6           5           5           4           3           2           2
                                                                                                                
Amtrak corridor improvement                                                                                     
 direct loan financing                                                                                          
 account:                                                                                                       
   Obligations..............  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Loan disbursements.......  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Change in outstandings...          -3  ..........  ..........  ..........  ..........  ..........  ..........
   Outstandings.............  ..........  ..........  ..........  ..........  ..........  ..........  ..........
                                                                                                                
Direct loan financing                                                                                           
 account:                                                                                                       
   Obligations..............  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Loan disbursements.......         140         140         120  ..........  ..........  ..........  ..........
   Change in outstandings...         140         140         120  ..........  ..........  ..........  ..........
   Outstandings.............         140         280         400         400         400         400         400
                                                                                                                
Railroad rehabilitation and                                                                                     
 improvement liquidating                                                                                        
 account:                                                                                                       
   Obligations..............  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Loan disbursements.......  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Change in outstandings...         -14          -4          -4          -4          -5          -4          -4
   Outstandings.............          57          53          49          45          40          36          32
                                                                                                                

[[Page 199]]

                                                                                                                
Railroad rehabilitation and                                                                                     
 improvement direct loan                                                                                        
 financing account:                                                                                             
   Obligations..............  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Loan disbursements.......  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Change in outstandings...  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Outstandings.............           4           4           4           4           4           4           4
                                                                                                                
 Department of the Treasury                                                                                     
                                                                                                                
    Departmental Offices                                                                                        
                                                                                                                
Community development                                                                                           
 financial institutions fund                                                                                    
 direct loan financing                                                                                          
 account:                                                                                                       
   Obligations..............           7          32          49          49          49          49          49
   Loan disbursements.......           4           4           5           6          46          52          54
   Change in outstandings...           4           4           5           6          46          52          54
   Outstandings.............           4           8          13          19          65         117         171
                                                                                                                
   Department of Veterans                                                                                       
           Affairs                                                                                              
                                                                                                                
      Veterans Benefits                                                                                         
       Administration                                                                                           
                                                                                                                
Veterans Housing Benefit                                                                                        
 Program Fund Liquidating                                                                                       
 Account:                                                                                                       
   Obligations..............  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Loan disbursements.......          56          52          54          55          57          59          60
   Change in outstandings...         -29          12          13          13          14          14          15
   Outstandings.............         420         432         445         458         472         486         501
                                                                                                                
Veterans Housing Benefit                                                                                        
 Program Fund Direct Loan                                                                                       
 Financing Account:                                                                                             
   Obligations..............       1,280       1,891         109         152         124          88          49
   Loan disbursements.......       1,280       1,891         109         152         124          88          49
   Change in outstandings...         269         413        -712        -351        -173         -86         -42
   Outstandings.............         992       1,405         693         342         169          83          41
                                                                                                                
Miscellaneous veterans                                                                                          
 programs loan fund direct                                                                                      
 loan financing account:                                                                                        
   Obligations..............           5           7          11          13          17           7           3
   Loan disbursements.......           5           7          11          13          17           7           3
   Change in outstandings...           2           4           9          11          14           4  ..........
   Outstandings.............          15          19          28          39          53          57          57
                                                                                                                
Miscellaneous veterans                                                                                          
 programs loan fund                                                                                             
 liquidating account:                                                                                           
   Obligations..............  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Loan disbursements.......  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Change in outstandings...          -2  ..........          -1  ..........  ..........  ..........  ..........
   Outstandings.............           1           1  ..........  ..........  ..........  ..........  ..........
                                                                                                                
  Environmental Protection                                                                                      
           Agency                                                                                               
                                                                                                                
  Environmental Protection                                                                                      
           Agency                                                                                               
                                                                                                                
Abatement, control, and                                                                                         
 compliance direct loan                                                                                         
 liquidating account:                                                                                           
   Obligations..............  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Loan disbursements.......  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Change in outstandings...          -4          -9          -9          -8          -8          -8          -8
   Outstandings.............          85          76          67          59          51          43          35
                                                                                                                
Abatement, control, and                                                                                         
 compliance direct loan                                                                                         
 financing account:                                                                                             
   Obligations..............  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Loan disbursements.......           5           4           2  ..........  ..........  ..........  ..........
   Change in outstandings...  ..........          -1          -3          -5          -5          -5          -5
   Outstandings.............          65          64          61          56          51          46          41
                                                                                                                
Federal Emergency Management                                                                                    
           Agency                                                                                               
                                                                                                                
Federal Emergency Management                                                                                    
           Agency                                                                                               
                                                                                                                
Disaster assistance direct                                                                                      
 loan liquidating account:                                                                                      
   Obligations..............  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Loan disbursements.......  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Change in outstandings...         -22  ..........  ..........  ..........  ..........          -3          -4
   Outstandings.............          37          37          37          37          37          34          30
                                                                                                                
Disaster assistance direct                                                                                      
 loan financing account:                                                                                        
   Obligations..............  ..........          31          25          25          25          25          25
   Loan disbursements.......          48          45          50          25          25          25          25
   Change in outstandings...         -15          42          48          15           8          -2          -6
   Outstandings.............         127         169         217         232         240         238         232
                                                                                                                

[[Page 200]]

                                                                                                                
  International Assistance                                                                                      
          Programs                                                                                              
                                                                                                                
   International Security                                                                                       
         Assistance                                                                                             
                                                                                                                
Foreign military loan                                                                                           
 liquidating account:                                                                                           
   Obligations..............  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Loan disbursements.......          14           9           8           8           7           7           7
   Change in outstandings...        -867        -841        -626        -494        -432        -379        -296
   Outstandings.............       6,154       5,313       4,687       4,193       3,761       3,382       3,086
                                                                                                                
Foreign military financing                                                                                      
 direct loan financing                                                                                          
 account:                                                                                                       
   Obligations..............         298         200         167         167         167         167         167
   Loan disbursements.......         376         471         543         592         615         263         167
   Change in outstandings...         353         251         221         217         182        -240        -367
   Outstandings.............       1,451       1,702       1,923       2,140       2,322       2,082       1,715
                                                                                                                
Military debt reduction                                                                                         
 financing account:                                                                                             
   Obligations..............           3          18           4  ..........  ..........  ..........  ..........
   Loan disbursements.......           3          14           1  ..........  ..........  ..........  ..........
   Change in outstandings...           3          14           1  ..........  ..........  ..........  ..........
   Outstandings.............           3          17          18          18          18          18          18
                                                                                                                
   Multilateral Assistance                                                                                      
                                                                                                                
International organizations                                                                                     
 and programs:                                                                                                  
   Obligations..............  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Loan disbursements.......  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Change in outstandings...          -2          -2          -2          -2          -2          -2          -2
   Outstandings.............          32          30          28          26          24          22          20
                                                                                                                
  Agency for International                                                                                      
         Development                                                                                            
                                                                                                                
Economic assistance loans--                                                                                     
 liquidating account:                                                                                           
   Obligations..............  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Loan disbursements.......          10  ..........  ..........  ..........  ..........  ..........  ..........
   Change in outstandings...        -485        -671        -637        -648        -556        -545        -519
   Outstandings.............      12,164      11,493      10,856      10,208       9,652       9,107       8,588
                                                                                                                
Debt reduction, financing                                                                                       
 account:                                                                                                       
   Obligations..............  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Loan disbursements.......  ..........          69          89         199  ..........  ..........  ..........
   Change in outstandings...         -57          12          32         142         -57         -57         -15
   Outstandings.............         339         351         383         525         468         411         396
                                                                                                                
Microenterprise and small                                                                                       
 enterprise development                                                                                         
 credit direct loan                                                                                             
 financing account:                                                                                             
   Obligations..............  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Loan disbursements.......  ..........           1  ..........  ..........  ..........  ..........  ..........
   Change in outstandings...  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Outstandings.............           2           2           2           2           2           2           2
                                                                                                                
 Overseas Private Investment                                                                                    
         Corporation                                                                                            
                                                                                                                
Overseas Private Investment                                                                                     
 Corporation liquidating                                                                                        
 account:                                                                                                       
   Obligations..............  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Loan disbursements.......           3  ..........  ..........  ..........  ..........  ..........  ..........
   Change in outstandings...         -16         -13          -8          -7          -4          -3  ..........
   Outstandings.............          37          24          16           9           5           2           2
                                                                                                                
Overseas private investment                                                                                     
 corporation direct loan                                                                                        
 financing account:                                                                                             
   Obligations..............         133         133         133         133         133         133         133
   Loan disbursements.......          15          41          61          70          80          80          80
   Change in outstandings...          11          36          55          60          65          60          50
   Outstandings.............          83         119         174         234         299         359         409
                                                                                                                
       Small Business                                                                                           
       Administration                                                                                           
                                                                                                                
       Small Business                                                                                           
       Administration                                                                                           
                                                                                                                
Business direct loan                                                                                            
 financing account:                                                                                             
   Obligations..............          24          19          20          21          21          22          22
   Loan disbursements.......           8          13          30          30          30          30          30
   Change in outstandings...         -10         -14         -54         -62          27          27          27
   Outstandings.............         151         137          83          21          48          75         102
                                                                                                                

[[Page 201]]

                                                                                                                
Disaster direct loan                                                                                            
 financing account:                                                                                             
   Obligations..............         961         785       1,516         985         951       1,010       1,035
   Loan disbursements.......       1,168         744         533         878         902         936         936
   Change in outstandings...         664         136        -511      -7,168  ..........  ..........  ..........
   Outstandings.............       7,891       8,027       7,516         348         348         348         348
                                                                                                                
Disaster loan fund                                                                                              
 liquidating account:                                                                                           
   Obligations..............  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Loan disbursements.......  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Change in outstandings...        -220        -227        -597        -633  ..........  ..........  ..........
   Outstandings.............       1,457       1,230         633  ..........  ..........  ..........  ..........
                                                                                                                
Business loan fund                                                                                              
 liquidating account:                                                                                           
   Obligations..............  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Loan disbursements.......         117          90          69  ..........  ..........  ..........  ..........
   Change in outstandings...        -345        -565        -648        -112  ..........  ..........  ..........
   Outstandings.............       1,325         760         112  ..........  ..........  ..........  ..........
                                                                                                                
 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         -15  ..........  ..........
   Outstandings.............          51          39          27          15  ..........  ..........  ..........
                                                                                                                
Repayable advances to the                                                                                       
 District of Columbia direct                                                                                    
 loan financing account:                                                                                        
   Obligations..............         223  ..........  ..........  ..........  ..........  ..........  ..........
   Loan disbursements.......         223  ..........  ..........  ..........  ..........  ..........  ..........
   Change in outstandings...        -156        -223  ..........  ..........  ..........  ..........  ..........
   Outstandings.............         223  ..........  ..........  ..........  ..........  ..........  ..........
                                                                                                                
  Export-Import Bank of the                                                                                     
        United States                                                                                           
                                                                                                                
Export-Import Bank of the                                                                                       
 United States liquidating                                                                                      
 account:                                                                                                       
   Obligations..............  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Loan disbursements.......           2  ..........  ..........  ..........  ..........  ..........  ..........
   Change in outstandings...        -770      -1,038        -738      -1,236        -331        -294        -220
   Outstandings.............       6,388       5,350       4,612       3,376       3,045       2,751       2,531
                                                                                                                
Debt reduction financing                                                                                        
 account:                                                                                                       
   Obligations..............  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Loan disbursements.......  ..........         500         234         838  ..........  ..........  ..........
   Change in outstandings...  ..........         500         234         838  ..........  ..........  ..........
   Outstandings.............  ..........         500         734       1,572       1,572       1,572       1,572
                                                                                                                
Export-Import Bank direct                                                                                       
 loan financing account:                                                                                        
   Obligations..............       1,549       2,780       1,396       1,396       1,396       1,396       1,396
   Loan disbursements.......       1,331       1,042       1,113       1,062       1,128       1,197       1,269
   Change in outstandings...         750         673         609         335         245         207         187
   Outstandings.............       3,736       4,409       5,018       5,353       5,598       5,805       5,992
                                                                                                                
Farm Credit System Financial                                                                                    
   Assistance Corporation                                                                                       
                                                                                                                
Financial assistance                                                                                            
 corporation assistance                                                                                         
 fund, liquidating account:                                                                                     
   Obligations..............  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Loan disbursements.......         127         125         120         117         117         117         114
   Change in outstandings...         -35         -77         -88         -97        -103        -110        -139
   Outstandings.............       1,132       1,055         967         870         767         657         518
                                                                                                                
   Federal Communications                                                                                       
         Commission                                                                                             
                                                                                                                
Spectrum auction direct loan                                                                                    
 financing account:                                                                                             
   Obligations..............       7,481         713  ..........  ..........  ..........  ..........  ..........
   Loan disbursements.......       7,481         713  ..........  ..........  ..........  ..........  ..........
   Change in outstandings...       6,688      -5,489        -119        -119         -10  ..........  ..........
   Outstandings.............       6,803       1,314       1,195       1,076       1,066       1,066       1,066
                                                                                                                

[[Page 202]]

                                                                                                                
       Bank Insurance                                                                                           
                                                                                                                
Bank insurance fund:                                                                                            
   Obligations..............  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Loan disbursements.......  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Change in outstandings...  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Outstandings.............         100         100         100         100         100         100         100
                                                                                                                
      FSLIC Resolution                                                                                          
                                                                                                                
FSLIC resolution fund:                                                                                          
   Obligations..............  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Loan disbursements.......  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Change in outstandings...         -31         -95  ..........  ..........  ..........  ..........  ..........
   Outstandings.............          95  ..........  ..........  ..........  ..........  ..........  ..........
                                                                                                                
    National Credit Union                                                                                       
       Administration                                                                                           
                                                                                                                
Community development credit                                                                                    
 union revolving loan fund:                                                                                     
   Obligations..............  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Loan disbursements.......           2           2           2           2           2           1           1
   Change in outstandings...  ..........          -1          -2  ..........  ..........  ..........  ..........
   Outstandings.............           6           5           3           3           3           3           3
                                                                                                                
 Tennessee Valley Authority                                                                                     
                                                                                                                
Tennessee Valley Authority                                                                                      
 fund:                                                                                                          
   Obligations..............          49          50          38          38         153         172         172
   Loan disbursements.......          49          50          38          38          38          33          33
   Change in outstandings...        -109          36          27          23          16           8           8
   Outstandings.............          41          77         104         127         143         151         159
                             ===================================================================================
Total, Direct loan                                                                                              
 transactions:                                                                                                  
   Obligations..............      33,580      28,079      24,347      28,691      29,022      29,200      29,963
   Loan disbursements.......      32,181      31,985      29,832      31,315      30,538      30,216      30,919
   Change in outstandings...      12,715       5,535       7,810       1,921       9,971       8,965       8,829
   Outstandings.............     181,375     186,910     194,720     196,641     206,612     215,577     224,406
----------------------------------------------------------------------------------------------------------------


[[Page 203]]


     Table 8-9.  GUARANTEED LOAN TRANSACTIONS OF THE FEDERAL GOVERNMENT                       
                           (in millions of dollars)                                            
----------------------------------------------------------------------------------------------------------------
                                                                         Estimate                               
      Agency or Program          1997    -----------------------------------------------------------------------
                               Actual        1998        1999        2000        2001        2002        2003   
----------------------------------------------------------------------------------------------------------------
  Department of Agriculture                                                                                     
                                                                                                                
     Farm Service Agency                                                                                        
                                                                                                                
Agricultural credit                                                                                             
 insurance fund liquidating                                                                                     
 account:                                                                                                       
   Commitments..............  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   New guaranteed loans.....           1           1           1  ..........  ..........  ..........  ..........
   Change in outstandings...        -181        -162        -161        -130        -109         -98         -86
   Outstandings.............         992         830         669         539         430         332         246
                                                                                                                
Agricultural credit                                                                                             
 insurance fund guaranteed                                                                                      
 loan financing account:                                                                                        
   Commitments..............       1,575       2,331       2,325       2,325       2,325       2,325       2,325
   New guaranteed loans.....       1,549       2,254       2,279       2,279       2,279       2,279       2,279
   Change in outstandings...         334       1,046         862         862         862         862         862
   Outstandings.............       6,039       7,085       7,947       8,809       9,671      10,533      11,395
                                                                                                                
Commodity credit corporation                                                                                    
 export guarantee financing                                                                                     
 account:                                                                                                       
   Commitments..............       3,500       5,000       4,615       4,615       4,615       4,615       4,615
   New guaranteed loans.....       2,411       5,000       4,615       4,615       4,615       4,615       4,615
   Change in outstandings...        -775       1,439         349        -177          14           3          -1
   Outstandings.............       4,548       5,987       6,336       6,159       6,173       6,176       6,175
                                                                                                                
Commodity credit corporation                                                                                    
 guaranteed loans                                                                                               
 liquidating account:                                                                                           
   Commitments..............  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   New guaranteed loans.....  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Change in outstandings...         -75         -16  ..........  ..........  ..........  ..........  ..........
   Outstandings.............          16  ..........  ..........  ..........  ..........  ..........  ..........
                                                                                                                
      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           4           4           4           4           4           4
                                                                                                                
Rural development insurance                                                                                     
 fund liquidating account:                                                                                      
   Commitments..............  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   New guaranteed loans.....           3  ..........  ..........  ..........  ..........  ..........  ..........
   Change in outstandings...        -125         -82         -54         -44         -36         -31         -24
   Outstandings.............         375         293         239         195         159         128         104
                                                                                                                
Rural water and waste water                                                                                     
 disposal guaranteed loans                                                                                      
 financing account:                                                                                             
   Commitments..............           3          75          75          75          75          75          75
   New guaranteed loans.....  ..........          24          26          78          53          75          75
   Change in outstandings...          -1          23          25          76          48          68          66
   Outstandings.............           7          30          55         131         179         247         313
                                                                                                                
Rural electrification and                                                                                       
 telecommunications                                                                                             
 liquidating account:                                                                                           
   Commitments..............  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   New guaranteed loans.....  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Change in outstandings...         -25         -20         -20         -20         -20         -20         -20
   Outstandings.............         642         622         602         582         562         542         522
                                                                                                                
    Rural Housing Service                                                                                       
                                                                                                                
Rural housing insurance fund                                                                                    
 liquidating account:                                                                                           
   Commitments..............  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   New guaranteed loans.....  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Change in outstandings...          -2          -2          -1          -2          -1          -2          -1
   Outstandings.............          30          28          27          25          24          22          21
                                                                                                                
Rural housing insurance fund                                                                                    
 guaranteed loan financing                                                                                      
 account:                                                                                                       
   Commitments..............       2,028       3,020       3,250       3,150       3,150       3,150       3,150
   New guaranteed loans.....       1,690       2,888       3,026       3,127       3,139       3,138       3,139
   Change in outstandings...       1,536       2,638       2,711       2,698       2,583       2,438       2,280
   Outstandings.............       5,039       7,677      10,388      13,086      15,669      18,107      20,387
                                                                                                                

[[Page 204]]

                                                                                                                
Rural community facility                                                                                        
 guaranteed loans financing                                                                                     
 account:                                                                                                       
   Commitments..............          83         153         210         210         210         210         210
   New guaranteed loans.....          32          67         107         124         173         196         210
   Change in outstandings...          27          61          97         109         152         167         171
   Outstandings.............         121         182         279         388         540         707         878
                                                                                                                
 Rural Business--Cooperative                                                                                    
           Service                                                                                              
                                                                                                                
Rural business and industry                                                                                     
 guaranteed loans financing                                                                                     
 account:                                                                                                       
   Commitments..............         816       1,075       1,000       1,000       1,000       1,000       1,000
   New guaranteed loans.....         666         711         813         771         763         766         750
   Change in outstandings...         578         550         593         489         434         392         334
   Outstandings.............       1,306       1,856       2,449       2,938       3,372       3,764       4,098
                                                                                                                
   Department of Commerce                                                                                       
                                                                                                                
    Economic Development                                                                                        
       Administration                                                                                           
                                                                                                                
Economic development                                                                                            
 revolving fund liquidating                                                                                     
 account:                                                                                                       
   Commitments..............  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   New guaranteed loans.....  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Change in outstandings...          -1          -1          -1          -1          -1          -1          -1
   Outstandings.............          14          13          12          11          10           9           8
                                                                                                                
    National Oceanic and                                                                                        
 Atmospheric Administration                                                                                     
                                                                                                                
Fishing vessel obligations                                                                                      
 guarantees financing                                                                                           
 account:                                                                                                       
   Commitments..............  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   New guaranteed loans.....          23          20  ..........  ..........  ..........  ..........  ..........
   Change in outstandings...          15          11          -9          -9          -9          -9          -9
   Outstandings.............          94         105          96          87          78          69          60
                                                                                                                
Federal ship financing fund,                                                                                    
 fishing vessels liquidating                                                                                    
 account:                                                                                                       
   Commitments..............  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   New guaranteed loans.....  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Change in outstandings...         -22         -13         -12         -10          -9          -8          -8
   Outstandings.............          85          72          60          50          41          33          25
                                                                                                                
   Department of Defense--                                                                                      
          Military                                                                                              
                                                                                                                
         Procurement                                                                                            
                                                                                                                
Defense export loan                                                                                             
 guarantee financing                                                                                            
 account:                                                                                                       
   Commitments..............          20         250         250         250         250         250         250
   New guaranteed loans.....  ..........          20          75         150         250         250         250
   Change in outstandings...  ..........          20          71         146         246         218         190
   Outstandings.............  ..........          20          91         237         483         701         891
                                                                                                                
       Family Housing                                                                                           
                                                                                                                
Department of Defense,                                                                                          
 Family Housing Improvement,                                                                                    
 Guaranteed Loan Financing                                                                                      
 Account:                                                                                                       
   Commitments..............  ..........         186  ..........         200       1,175         682       1,396
   New guaranteed loans.....  ..........  ..........         101          66         986         914         955
   Change in outstandings...  ..........  ..........         101          56         966         884         915
   Outstandings.............  ..........  ..........         101         157       1,123       2,007       2,922
                                                                                                                
   Department of Education                                                                                      
                                                                                                                
   Office of Postsecondary                                                                                      
          Education                                                                                             
                                                                                                                
Federal family education                                                                                        
 loan liquidating account:                                                                                      
   Commitments..............  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   New guaranteed loans.....  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Change in outstandings...      -6,743      -5,888      -5,548      -4,073      -2,726      -1,654        -924
   Outstandings.............      23,583      17,695      12,147       8,074       5,348       3,694       2,770
                                                                                                                
Federal family education                                                                                        
 loan program, financing                                                                                        
 account:                                                                                                       
   Commitments..............      24,832      26,820      28,671      30,380      32,031      33,755      35,560
   New guaranteed loans.....      19,542      25,051      25,686      27,293      28,829      30,387      32,019
   Change in outstandings...      16,715      22,276      22,112      22,412      22,055      21,157      19,834
   Outstandings.............      75,387      97,663     119,775     142,187     164,242     185,399     205,233
                                                                                                                
Historically Black College                                                                                      
 and University Capital                                                                                         
 financing--Financing                                                                                           
 account:                                                                                                       
   Commitments..............  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   New guaranteed loans.....  ..........           1           4           8          12          15          16
   Change in outstandings...  ..........           1           4           8          12          15          16
   Outstandings.............  ..........           1           5          13          25          40          56
                                                                                                                

[[Page 205]]

                                                                                                                
  Department of Health and                                                                                      
       Human Services                                                                                           
                                                                                                                
    Health Resources and                                                                                        
   Services Administration                                                                                      
                                                                                                                
Health education assistance                                                                                     
 loans:                                                                                                         
   Commitments..............         140          85  ..........  ..........  ..........  ..........  ..........
   New guaranteed loans.....         140          85  ..........  ..........  ..........  ..........  ..........
   Change in outstandings...         128          74         -16         -21         -26         -31         -33
   Outstandings.............       1,494       1,568       1,552       1,531       1,505       1,474       1,441
                                                                                                                
Health education assistance                                                                                     
 loans program:                                                                                                 
   Commitments..............  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   New guaranteed loans.....  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Change in outstandings...         -84         -88         -99        -104        -108        -114        -119
   Outstandings.............       1,475       1,387       1,288       1,184       1,076         962         843
                                                                                                                
Health center guaranteed                                                                                        
 loan financing account:                                                                                        
   Commitments..............  ..........         160  ..........  ..........  ..........  ..........  ..........
   New guaranteed loans.....  ..........          67          74          13           6  ..........  ..........
   Change in outstandings...  ..........          67          71           9           1          -5          -6
   Outstandings.............  ..........          67         138         147         148         143         137
                                                                                                                
Medical facilities guarantee                                                                                    
 and loan fund:                                                                                                 
   Commitments..............  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   New guaranteed loans.....  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Change in outstandings...         -46         -44         -40         -30         -28  ..........  ..........
   Outstandings.............         142          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...        -275        -280        -280        -280        -280        -280        -280
   Outstandings.............       3,586       3,306       3,026       2,746       2,466       2,186       1,906
                                                                                                                
Indian housing loan                                                                                             
 guarantee fund financing                                                                                       
 account:                                                                                                       
   Commitments..............          47          62          69          34          34          34          34
   New guaranteed loans.....          11          20          34          40          40          40          40
   Change in outstandings...          11          20          34          40          40          40          40
   Outstandings.............          17          37          71         111         151         191         231
                                                                                                                
Title VI Indian Federal                                                                                         
 guarantees financing                                                                                           
 account:                                                                                                       
   Commitments..............  ..........          45          44  ..........  ..........  ..........  ..........
   New guaranteed loans.....  ..........          11          11          22          33          12  ..........
   Change in outstandings...  ..........          11          11          22          33          12  ..........
   Outstandings.............  ..........          11          22          44          77          89          89
                                                                                                                
   Community Planning and                                                                                       
         Development                                                                                            
                                                                                                                
Revolving fund (liquidating                                                                                     
 programs):                                                                                                     
   Commitments..............  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   New guaranteed loans.....  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Change in outstandings...          -1          -1          -1  ..........  ..........  ..........  ..........
   Outstandings.............           2           1  ..........  ..........  ..........  ..........  ..........
                                                                                                                
Community development loan                                                                                      
 guarantees financing                                                                                           
 account:                                                                                                       
   Commitments..............         278       1,261       1,261       1,217       1,217       1,217       1,261
   New guaranteed loans.....         189       1,000       1,000       1,000       1,200       1,250       1,250
   Change in outstandings...         142         865         800         800         950         950         950
   Outstandings.............         775       1,640       2,440       3,240       4,190       5,140       6,090
                                                                                                                
Community development loan                                                                                      
 guarantees liquidating                                                                                         
 account:                                                                                                       
   Commitments..............  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   New guaranteed loans.....  ..........          10          10           7           5  ..........  ..........
   Change in outstandings...         -45         -23         -20         -18         -20         -20         -20
   Outstandings.............         198         175         155         137         117          97          77
                                                                                                                
Home loan guarantee                                                                                             
 financing account:                                                                                             
   Commitments..............  ..........  ..........         100         100  ..........  ..........  ..........
   New guaranteed loans.....  ..........  ..........          27          82          72          19  ..........
   Change in outstandings...  ..........  ..........          27          72          62           4         -15
   Outstandings.............  ..........  ..........          27          99         161         165         150
                                                                                                                

[[Page 206]]

                                                                                                                
      Housing Programs                                                                                          
                                                                                                                
FHA-Mutual mortgage and                                                                                         
 cooperative housing                                                                                            
 insurance funds liquidating                                                                                    
 account:                                                                                                       
   Commitments..............  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   New guaranteed loans.....  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Change in outstandings...     -14,404      -6,362      -5,655      -5,607      -4,924      -4,486      -4,171
   Outstandings.............      87,755      81,393      75,738      70,131      65,207      60,721      56,550
                                                                                                                
FHA-General and special risk                                                                                    
 insurance funds liquidating                                                                                    
 account:                                                                                                       
   Commitments..............  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   New guaranteed loans.....  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Change in outstandings...      -6,018      -2,715      -4,088      -3,439      -2,769      -2,928      -2,638
   Outstandings.............      42,405      39,690      35,602      32,163      29,394      26,466      23,828
                                                                                                                
FHA-General and special risk                                                                                    
 guaranteed loan financing                                                                                      
 account:                                                                                                       
   Commitments..............      13,318      16,648      17,100      18,100      18,100      18,100      18,100
   New guaranteed loans.....      12,677      14,323      14,416      14,073      13,805      12,331      13,480
   Change in outstandings...       5,344       9,999      10,495       8,768       8,207       6,576       7,578
   Outstandings.............      45,663      55,662      66,157      74,925      83,132      89,708      97,286
                                                                                                                
FHA-Loan guarantee recovery                                                                                     
 fund--financing account:                                                                                       
   Commitments..............  ..........          10  ..........  ..........  ..........  ..........  ..........
   New guaranteed loans.....  ..........           3           3           3           1  ..........  ..........
   Change in outstandings...  ..........           3           3           3           1  ..........  ..........
   Outstandings.............  ..........           3           6           9          10          10          10
                                                                                                                
FHA-Mutual mortgage                                                                                             
 insurance guaranteed loan                                                                                      
 financing account:                                                                                             
   Commitments..............      75,432      82,260      98,031      97,753      97,513      97,237      96,958
   New guaranteed loans.....      61,175      58,613      67,222      68,315      69,369      70,473      71,590
   Change in outstandings...      37,459      46,068      47,746      43,227      39,485      38,358      54,163
   Outstandings.............     272,750     318,818     366,564     409,791     449,276     487,634     541,797
                                                                                                                
Government National Mortgage                                                                                    
         Association                                                                                            
                                                                                                                
Guarantees of mortgage-                                                                                         
 backed securities                                                                                              
 liquidating account:                                                                                           
   Commitments..............  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   New guaranteed loans.....      97,569  ..........  ..........  ..........  ..........  ..........  ..........
   Change in outstandings...      32,609    -439,725     -82,607      -7,373        -322         -14  ..........
   Outstandings.............     530,042      90,317       7,710         337          15           1           1
                                                                                                                
Guarantees of mortgage-                                                                                         
 backed securities financing                                                                                    
 account:                                                                                                       
   Commitments..............     110,000     130,000     150,000     150,000     150,000     150,000     150,000
   New guaranteed loans.....  ..........     107,472     108,658     110,772     111,853     112,522     114,285
   Change in outstandings...  ..........     468,737     108,369      31,308      62,387      27,840      31,525
   Outstandings.............  ..........     468,737     577,106     608,414     670,801     698,641     730,166
                                                                                                                
 Department of the Interior                                                                                     
                                                                                                                
  Bureau of Indian Affairs                                                                                      
                                                                                                                
Indian loan guaranty and                                                                                        
 insurance fund liquidating                                                                                     
 account:                                                                                                       
   Commitments..............  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   New guaranteed loans.....  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Change in outstandings...         -31         -20         -13          -8          -6          -4          -2
   Outstandings.............          57          37          24          16          10           6           4
                                                                                                                
Indian guaranteed loan                                                                                          
 financing account:                                                                                             
   Commitments..............          35          35          56          35          35          35          35
   New guaranteed loans.....           6          16          20          25          35          35          35
   Change in outstandings...         -44          -1           2           2          10  ..........          -5
   Outstandings.............         102         101         103         105         115         115         110
                                                                                                                
Department of Transportation                                                                                    
                                                                                                                
   Maritime Administration                                                                                      
                                                                                                                
Federal ship financing fund                                                                                     
 liquidating account:                                                                                           
   Commitments..............  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   New guaranteed loans.....  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Change in outstandings...        -154        -154        -124        -104         -84         -84         -84
   Outstandings.............         677         523         399         295         211         127          43
                                                                                                                

[[Page 207]]

                                                                                                                
Maritime guaranteed loan                                                                                        
 (Title XI) financing                                                                                           
 account:                                                                                                       
   Commitments..............         330         477         520         320         320         320         320
   New guaranteed loans.....         319         477         477         477         477         477         477
   Change in outstandings...         242         299         271         242         213         185         185
   Outstandings.............       2,006       2,305       2,576       2,818       3,031       3,216       3,401
                                                                                                                
   Department of Veterans                                                                                       
           Affairs                                                                                              
                                                                                                                
      Veterans Benefits                                                                                         
       Administration                                                                                           
                                                                                                                
Veterans Housing Benefit                                                                                        
 Program Fund Liquidating                                                                                       
 Account:                                                                                                       
   Commitments..............  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   New guaranteed loans.....  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Change in outstandings...        -835        -838        -741        -657        -584        -528        -478
   Outstandings.............      23,896      23,058      22,317      21,660      21,076      20,548      20,070
                                                                                                                
Veterans Housing Benefit                                                                                        
 Program Fund Guaranteed                                                                                        
 Loan Financing Account:                                                                                        
   Commitments..............      24,287      24,844      23,440      22,895      23,399      22,786      23,287
   New guaranteed loans.....      24,287      24,844      23,440      22,895      23,399      22,786      23,287
   Change in outstandings...      16,543      14,928      12,627      11,308      11,215      10,035      10,000
   Outstandings.............     146,574     161,502     174,129     185,437     196,652     206,687     216,687
                                                                                                                
  International Assistance                                                                                      
          Programs                                                                                              
                                                                                                                
   International Security                                                                                       
         Assistance                                                                                             
                                                                                                                
Foreign military loan                                                                                           
 liquidating account:                                                                                           
   Commitments..............  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   New guaranteed loans.....  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Change in outstandings...        -438        -388        -380        -373        -357        -350        -349
   Outstandings.............       5,691       5,303       4,923       4,550       4,193       3,843       3,494
                                                                                                                
  Agency for International                                                                                      
         Development                                                                                            
                                                                                                                
Loan guarantees to Israel                                                                                       
 financing account:                                                                                             
   Commitments..............       2,000  ..........  ..........  ..........  ..........  ..........  ..........
   New guaranteed loans.....       1,250       1,412  ..........  ..........  ..........  ..........  ..........
   Change in outstandings...       1,250       1,412  ..........  ..........  ..........  ..........  ..........
   Outstandings.............       7,814       9,226       9,226       9,226       9,226       9,226       9,226
                                                                                                                
Development credit authority                                                                                    
 guaranteed loan financing                                                                                      
 account:                                                                                                       
   Commitments..............  ..........          36         214         155         155         155         155
   New guaranteed loans.....  ..........  ..........          94         130         155         155         155
   Change in outstandings...  ..........  ..........          94         130         154         154         153
   Outstandings.............  ..........  ..........          94         224         378         532         685
                                                                                                                
Housing and other credit                                                                                        
 guaranty programs                                                                                              
 liquidating account:                                                                                           
   Commitments..............  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   New guaranteed loans.....          41          29  ..........  ..........  ..........  ..........  ..........
   Change in outstandings...         -66         -98        -116        -121        -108        -105        -105
   Outstandings.............       1,884       1,786       1,670       1,549       1,441       1,336       1,231
                                                                                                                
Private sector revolving                                                                                        
 fund liquidating account:                                                                                      
   Commitments..............  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   New guaranteed loans.....  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Change in outstandings...          -8          -8  ..........  ..........  ..........  ..........  ..........
   Outstandings.............           8  ..........  ..........  ..........  ..........  ..........  ..........
                                                                                                                
Microenterprise and small                                                                                       
 enterprise development                                                                                         
 guaranteed loan financing                                                                                      
 account:                                                                                                       
   Commitments..............          96          69          46          47          48          49          50
   New guaranteed loans.....           6          33          36          46          46          47          48
   Change in outstandings...           6          31          15          40          29          32           1
   Outstandings.............          32          63          78         118         147         179         180
                                                                                                                
Urban and environmental                                                                                         
 credit guaranteed loan                                                                                         
 financing account:                                                                                             
   Commitments..............          43          31          68          71          91         102         114
   New guaranteed loans.....         104         150          65          35          54          65          81
   Change in outstandings...         104         150          65          35          54          65          81
   Outstandings.............         343         493         558         593         647         712         793
                                                                                                                
Assistance for the New                                                                                          
 Independent States of the                                                                                      
 Former Soviet Union:                                                                                           
 Ukraine export credit                                                                                          
 insurance financing                                                                                            
 account:                                                                                                       
   Commitments..............  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   New guaranteed loans.....          61  ..........  ..........  ..........  ..........  ..........  ..........
   Change in outstandings...          61         -81         -61  ..........  ..........  ..........  ..........
   Outstandings.............         142          61  ..........  ..........  ..........  ..........  ..........
                                                                                                                

[[Page 208]]

                                                                                                                
 Overseas Private Investment                                                                                    
         Corporation                                                                                            
                                                                                                                
Overseas Private Investment                                                                                     
 Corporation liquidating                                                                                        
 account:                                                                                                       
   Commitments..............  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   New guaranteed loans.....          20  ..........  ..........  ..........  ..........  ..........  ..........
   Change in outstandings...         -75         -75         -56         -10  ..........  ..........  ..........
   Outstandings.............         141          66          10  ..........  ..........  ..........  ..........
                                                                                                                
Overseas private investment                                                                                     
 corporation guaranteed loan                                                                                    
 financing account:                                                                                             
   Commitments..............       2,143       1,800       2,000       2,000       2,000       2,000       2,000
   New guaranteed loans.....         857       1,100       1,300       1,500       1,800       2,000       2,000
   Change in outstandings...         646         700         800         800       1,000       1,000         800
   Outstandings.............       1,981       2,681       3,481       4,281       5,281       6,281       7,081
                                                                                                                
       Small Business                                                                                           
       Administration                                                                                           
                                                                                                                
       Small Business                                                                                           
       Administration                                                                                           
                                                                                                                
Pollution control equipment                                                                                     
 fund liquidating account:                                                                                      
   Commitments..............  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   New guaranteed loans.....  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Change in outstandings...         -10         -11         -11         -11         -11         -10         -10
   Outstandings.............          76          65          54          43          32          22          12
                                                                                                                
Business guaranteed loan                                                                                        
 financing account:                                                                                             
   Commitments..............      10,641      11,887      11,660      11,660      11,660      11,660      11,660
   New guaranteed loans.....       6,955       7,143       7,336       7,534       7,738       7,947       7,947
   Change in outstandings...       3,822       3,926       4,032       4,142       4,253       4,368       4,368
   Outstandings.............      28,452      32,378      36,410      40,552      44,805      49,173      53,541
                                                                                                                
Business loan fund                                                                                              
 liquidating account:                                                                                           
   Commitments..............  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   New guaranteed loans.....           1           1           1           1           1           1           1
   Change in outstandings...      -1,042        -850        -698        -579         -33         -23         -23
   Outstandings.............       5,341       4,491       3,793       3,214       3,181       3,158       3,135
                                                                                                                
 Other Independent Agencies                                                                                     
                                                                                                                
  Export-Import Bank of the                                                                                     
        United States                                                                                           
                                                                                                                
Export-Import Bank of the                                                                                       
 United States liquidating                                                                                      
 account:                                                                                                       
   Commitments..............  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   New guaranteed loans.....          13  ..........  ..........  ..........  ..........  ..........  ..........
   Change in outstandings...        -833        -616        -445        -375        -315        -246        -177
   Outstandings.............       2,368       1,752       1,307         932         617         371         194
                                                                                                                
Export-Import Bank                                                                                              
 guaranteed loan financing                                                                                      
 account:                                                                                                       
   Commitments..............      10,610      15,413      15,413      15,413      15,413      15,413      15,413
   New guaranteed loans.....      10,670      10,102      10,693      11,036      11,302      11,600      11,600
   Change in outstandings...       5,159         329          23        -240        -711        -918        -918
   Outstandings.............      19,743      20,072      20,095      19,855      19,144      18,226      17,308
                                                                                                                
    National Credit Union                                                                                       
       Administration                                                                                           
                                                                                                                
Credit union share insurance                                                                                    
 fund:                                                                                                          
   Commitments..............           1  ..........  ..........  ..........  ..........  ..........  ..........
   New guaranteed loans.....  ..........  ..........  ..........  ..........  ..........  ..........  ..........
   Change in outstandings...  ..........          -1  ..........  ..........  ..........  ..........  ..........
   Outstandings.............           1  ..........  ..........  ..........  ..........  ..........  ..........
                             -----------------------------------------------------------------------------------
Subtotal, Guaranteed loans                                                                                      
 (gross)                                                                                                        
   Commitments..............     282,258     324,033     360,418     362,005     364,816     365,170     367,968
   New guaranteed loans.....     242,268     262,948     271,650     276,517     282,490     284,395     290,584
   Change in outstandings...      90,372     117,120     111,153     103,988     141,869     103,854     124,005
   Outstandings.............   1,351,933   1,469,053   1,580,206   1,684,194   1,826,063   1,929,917   2,053,922
                                                                                                                
Less, secondary guaranteed                                                                                      
 loans: \1\                                                                                                     
                                                                                                                
GNMA guarantees of RHS/VA/                                                                                      
 FHA pools:                                                                                                     
   Commitments..............    -110,000    -130,000    -150,000    -150,000    -150,000    -150,000    -150,000
   New guaranteed loans.....     -97,569    -107,472    -108,658    -110,772    -111,853    -112,522    -114,285
   Change in outstandings...     -32,609     -29,012     -25,762     -23,935     -62,065     -27,826  ..........
   Outstandings.............    -530,042    -559,054    -584,816    -608,751    -670,816    -698,642    -730,167
                             ===================================================================================

[[Page 209]]

                                                                                                                
Total, primary guaranteed                                                                                       
 loans: \2\                                                                                                     
   Commitments..............     172,258     194,033     210,418     212,005     214,816     215,170     217,968
   New guaranteed loans.....     144,699     155,476     162,992     165,745     170,637     171,873     176,299
   Change in outstandings...      57,763      88,108      85,391      80,053      79,804      76,028      92,480
   Outstandings.............     821,891     909,999     995,390   1,075,443   1,155,247   1,231,275   1,323,755
----------------------------------------------------------------------------------------------------------------
\1\ Loans guaranteed by FHA, VA, or RHS 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 210]]

Table 8-10.  LENDING AND BORROWING BY GOVERNMENT-SPONSORED ENTERPRISES (GSEs) \1\               
                             (In millions of dollars)                                            
----------------------------------------------------------------------------------------------------------------
                                                                                                Estimate        
               Enterprise                                                      1997    -------------------------
                                                                              actual        1998         1999   
----------------------------------------------------------------------------------------------------------------
Student Loan Marketing Association......  New transactions................      10,019        8,224        8,106
                                          Net change......................      -3,132       -5,402       -4,442
                                          Outstandings....................      34,259       28,857       24,415
Federal National Mortgage Association:                                                                          
  Portfolio Programs....................  New transactions................      60,290       79,623       87,093
                                          Net change......................      28,674       44,319       42,238
                                          Outstandings....................     321,711      366,030      408,268
  Mortgage-backed securities............  New transactions................     133,703      207,272      156,883
                                          Net change......................      22,189      110,611       59,420
                                          Outstandings....................     566,942      677,553      736,973
Federal Home Loan Mortgage Corporation:                                                                         
  Portfolio Programs....................  New transactions................      36,040       39,644       43,608
                                          Net change......................      27,738       33,683       40,902
                                          Outstandings....................     157,165      190,848      231,750
  Mortgage-backed securities............  New transactions................     103,600      106,708      109,909
                                          Net change......................      -1,295       -1,291       -1,287
                                          Outstandings....................     470,015      468,724      467,437
Farm Credit System:                                                                                             
  Banks for cooperatives................  New transactions................      14,941       15,523       16,026
                                          Net change......................        -196           39           74
                                          Outstandings....................       2,026        2,065        2,139
  Farm Credit Banks.....................  New transactions................      43,441       38,985       40,492
                                          Net change......................       1,809        1,396        1,510
                                          Outstandings....................      41,025       42,421       43,931
  Agricultural Credit Banks.............  New transactions................      40,668       48,000       49,000
                                          Net change......................          47          749          898
                                          Outstandings....................      14,961       15,710       16,608
  Federal Agricultural Mortgage           New transactions................         302          528          924
   Corporation.                                                                                                 
                                          Net change......................         216          394          711
                                          Outstandings....................         814        1,208        1,919
Federal home loan banks \2\.............  New transactions................         980        1,039        1,107
                                          Net change......................      28,698       11,000       11,000
                                          Outstandings....................     182,000      193,000      204,000
    Subtotal, lending (gross)...........  New transactions................     443,984      545,546      513,148
                                          Net change......................     104,748      195,498      151,024
                                          Outstandings....................   1,790,918    1,986,416    2,137,440
Less guaranteed loans purchased by:                                                                             
  Student Loan Marketing Association \3\  Net change......................      -3,132       -5,402       -4,442
                                          Outstandings....................      34,259       28,857       24,415
  Federal National Mortgage Association.  Net change......................       1,168  ...........  ...........
                                          Outstandings....................      26,614       26,614       26,614
  Other.................................  Net change......................      -1,219  ...........  ...........
                                          Outstandings....................      15,659       15,659       15,659
                                         -----------------------------------------------------------------------
    Total GSE lending (net).............  New transactions................     443,984      545,546      513,148
                                          Net change......................     107,931      200,900      155,466
                                          Outstandings....................   1,714,386    1,915,286    2,070,752
                BORROWING                                                                                       
                                                                                                                
Student Loan Marketing Association......  Net change......................      -5,022       -7,588       -6,060
                                          Outstandings....................      40,230       32,642       26,582
Federal National Mortgage Association...  Net change......................      61,039      153,824      105,088
                                          Outstandings....................     924,945    1,078,769    1,183,857
Federal Home Loan Mortgage Corporation..  Net change......................      11,802       29,506       51,203
                                          Outstandings....................     630,066      659,572      710,775
Farm Credit System:                                                                                             
  Banks for cooperatives................  Net change......................        -269           13           77
                                          Outstandings....................       2,067        2,080        2,157
  Farm credit banks.....................  Net change......................       1,647        1,354        1,300
                                          Outstandings....................      43,588       44,942       46,242
  Agricultural credit banks.............  Net change......................         523          494          890
                                          Outstandings....................      16,469       16,963       17,853
  Federal Agricultural Mortgage           Net change......................         967          409          662
   Corporation.                                                                                                 
                                          Outstandings....................       1,699        2,108        2,770
Federal home loan banks.................  Net change......................      41,012       15,165       15,247
                                          Outstandings....................     284,545      299,710      314,957
The Financing Corporation \3\...........  Net change......................           2            1            1
                                          Outstandings....................       8,144        8,145        8,146
Resolution Funding Corporation \3\......  Net change......................          -2           -3           -2
                                          Outstandings....................      30,072       30,069       30,067
    Subtotal, borrowing (gross).........  Net change......................     111,699      193,175      168,406
                                          Outstandings....................   1,981,825    2,175,000    2,343,406
Less borrowing from other GSEs..........  Net change......................         354  ...........  ...........
                                          Outstandings....................      51,159       51,159       51,159
Less purchase of Federal debt             Net change......................         800          451          627
 securities:.                                                                                                   
                                          Outstandings....................       9,008        9,459       10,086
Less borrowing to purchase guaranteed                                                                           
 loans by:                                                                                                      
  Student Loan Marketing Association \4\  Net change......................      -3,132       -5,402       -4,442

[[Page 211]]

                                                                                                                
                                          Outstandings....................      34,259       28,857       24,415
  Federal National Mortgage Association.  Net change......................       1,168  ...........  ...........
                                          Outstandings....................      26,614       26,614       26,614
  Other.................................  Net change......................      -1,219  ...........  ...........
                                          Outstandings....................      15,659       15,659       15,659
                                         -----------------------------------------------------------------------
    Total GSE borrowing (net)...........  Net change......................     113,728      198,126      172,221
                                          Outstandings....................   1,845,126    2,043,252    2,215,473
----------------------------------------------------------------------------------------------------------------
\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 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 1997 was $136      
  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 1998 or 1999.                                          
\4\ All SLMA loans acquired are guaranteed by the Federal Government and therefore also counted as guaranteed   
  loans.