[Analytical Perspectives]
[Special Analyses and Presentations]
[8. Credit and Insurance]
[From the U.S. Government Publishing Office, www.gpo.gov]
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8. CREDIT AND INSURANCE
Federal programs offer direct loans and/or loan guarantees for a wide
range of activities, primarily housing, education, business, and
exports. At the end of 1999, there were $234 billion in Federal direct
loans outstanding and $976 billion in guaranteed loans. The Federal
Government also insures bank, thrift, and credit union deposits up to
$100,000, guarantees private vested defined-benefit pensions, and
insures against disasters, specified international investment risks, and
various other risks.
In addition, the net loans outstanding of Government-sponsored
enterprises (GSEs)--privately owned companies and cooperatives that
operate under Federal charters--totaled $2.4 trillion, including asset-
backed securities guaranteed by the GSEs. GSEs are chartered to carry
out specified public purposes through financing activities in the
housing, education, and agriculture sectors. GSEs are not part of the
Federal Government, however, and their securities are not federally
guaranteed. By law, the GSEs' securities carry a disclaimer of any U.S.
obligation. Congress has authorized the Secretary of the Treasury, at
his discretion, to purchase up to $2.25 billion of obligations issued by
Fannie Mae and Freddie Mac, up to $4 billion by the Federal Home Loan
Bank System, and up to $1 billion by Sallie Mae. Farmer Mac may sell up
to $1.5 billion of its obligations to Treasury under specified, limited
conditions.
These diverse programs and GSEs are operating in the context of an
accelerating evolution of financial markets that is generating many new
risks, as well as new opportunities. Federal program managers will need
to reassess their roles and improve their effectiveness to adapt to
dynamic market conditions.
The introduction to this chapter summarizes key changes in financial
markets and their effects on Federal programs.
The first section is a crosscutting 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.
The second section reviews Federal credit programs and GSEs
in four sectors: housing, education, business and community
development, and exports. It notes the rationale and goals of
these programs and the related activities of the GSEs.
The final section assesses recent developments in Federal
deposit insurance, pension guarantees, and disaster insurance.
Evolving Financial Markets
The Financial Services Modernization Act, signed November 12, 1999,
replaces a legal structure created in the Great Depression with one that
is more appropriate to the rapidly changing and integrated financial
markets of today. The Act repeals restrictions on bank affiliation with
securities firms and removes the remaining statutory limitations on the
financial activities allowable in banking organizations for qualified
bank holding companies. It permits securities and insurance agency
activities to be conducted in bank and financial holding company
subsidiaries, municipal securities underwriting to be conducted in a
national bank or in bank subsidiaries, and merchant banking and
insurance underwriting to be conducted in financial holding company
subsidiaries.
The financial sector has already undergone substantial change. The
number of banking organizations has shrunk by a quarter in the last
decade and is roughly half the level 20 years ago. Consolidation has
raised the share of industry assets at the 100 largest banks to 70
percent in 1998 from about 50 percent in the mid-1980s. With easing
restrictions over the years, interstate banking and branching have
become nationwide, and 51 securities affiliates are operating in bank
holding companies. International lending by U.S. commercial banks
resumed growth in the early 1990s following large losses on developing
country loans in the 1980s, but has become increasingly concentrated in
large banks. Meanwhile, U.S. banking assets of foreign banks have grown
from 12 percent of all U.S. commercial banking assets in 1980 to a 23-25
percent share during the 1990s.
Financial innovation and integration have enabled funds to flow more
readily to their most productive uses across the country and around the
world. Capital market financing is available to smaller companies and
for a broader range of purposes than before. Specialized financial firms
and nonfinancial firms, particularly suppliers, are helping to funnel
funds from capital markets to small clients in cities and in rural
areas. Venture capital providers and sub-prime lenders are fueling the
growth of new businesses. Data on small business lending show that
institutions outside the local community have become an important source
of credit for many businesses.
The 1990s have been a time of robust growth in mortgage markets; the
net change in home mortgages rose from $180 billion in 1995 to $424
billion in the second quarter of 1999. Federal Reserve staff estimate
that about 40 percent of the growth in outstanding home mortgage debt
during the past five years financed the extraction of home equity.
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.
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Both intermediaries--banks and the many nonbank firms engaged in
financial services--and capital markets have been reaching out to new
clients that they did not serve a few years ago. Massive data bases and
increasingly sophisticated analytical methods are finding creditworthy
borrowers among people and businesses previously unlikely to receive
private credit. Faster and cheaper information and communications
systems also have revolutionized ``back office'' functions. These have
been consolidated to achieve economies of scale and located anywhere in
the world where capable workers are available. From these locations,
satellite communications can bring the ``back office'' to any desktop
computer. From a timely information base, credit servicing and workout
have become much more efficient.
While the increased globalization of financial institutions and
capital markets provides extensive benefits, it also makes domestic
market conditions more sensitive to events abroad. In 1997 and 1998, the
Asian crisis and further events in Russia and Brazil resulted in a
flight to liquidity and safety. Market conditions also worsened in 1998
when a heavily exposed hedge fund required a capital contribution from
major lenders to avoid bankruptcy and further market disruption. These
events drove down U.S. Treasury bond yields dramatically, and raised
rates on all but the highest quality corporate bonds. Some credit
markets were temporarily disrupted; related to this was an increase in
business borrowing from banks, rather than directly from capital
markets. Less-creditworthy borrowers faced higher rates or were
temporarily unable to find funds.
Conditions returned to near normal liquidity during 1999, but rate
spreads between most private loans and securities and Treasury debt
remained abnormally high. Problem loans at banks have increased about 70
percent compared with 1998, and banks have tightened underwriting
standards. As a result of these experiences, awareness of the potential
for discontinuities in financial markets has increased.
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 Federal programs 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--a particular program.
If the Government is caught unaware, the result may be greater
cost for taxpayers.
At the same time, managers of Federal programs can take
advantage of the growing private capability. 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. It
now backs a recovered industry, but one with an increasing concentration
of ``large complex banking organizations'' that have assumed the risks
inherent in providing a growing array of increasingly sophisticated
services, including many off-balance sheet activities, often on a
worldwide basis. Regulators face challenges ranging from the complexity
of assessing the risks of evolving financial services firms to the
continuing need to monitor for fraud. In pensions, the Government
guarantees defined benefit plans, but their role is diminishing as
defined contribution plans attract 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 are they
achieving their goals? And finally, could they be re-engineered to
achieve greater benefits in relation to costs?
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.
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\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.
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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
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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 better
health, these individuals 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 needed to eliminate
overcapacity. In other instances, Federal programs may be redesigned to
encourage the development of private credit market institutions or to
target Federal assistance more efficiently to groups still unable to
obtain credit and insurance in the private market.
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 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, program managers
need to identify borrowers who would not get private credit. They need
to reach out to underserved populations (e.g., low-income or minority
people) and neighborhoods (urban and
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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.
Implementation of the Federal Credit Reform Act of 1990 gave Federal
credit program managers the incentive to reconcile the tension between
helping certain groups or purposes and ``businesslike'' 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, a 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.
The narrow Federal role means output measures should include an
estimate of the percent of loans or guarantees originated going to
borrowers who would otherwise not have access to private credit, and the
percent of loans or guarantees originated going to specific target
groups (e.g., veterans) or for specific purposes. Because of the Federal
goal, output measures should include the percent of loans or guarantees
that are current. This should be compared with the percent that were
expected to be current at this point in the repayment cycle.
To assess the latter, program data should be analyzed to determine
whether repayment prospects are enhanced by particular characteristics
of loan structure (such as higher initial borrower equity), of loan
origination (such as verifying borrower financial status), of loan
servicing (such as prompt counseling), or of guarantee conditions (such
as lender risk-sharing). When such characteristics help to control the
cost of credit programs and to achieve desired outcomes, then these
characteristics should be measured as part of the program's output.
The linkage between such output characteristics and the outcomes of
Federal credit programs is not always fully recognized. For example, one
desired outcome is to reach underserved 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. The true cost of credit and insurance guarantees may also be
considered 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
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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, is there a reason why private terms
and conditions should be supplemented or subsidized? To
what extent?
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 down payments,
capitalization for State, local, or nonprofit revolving
funds, or other approaches be more efficient?
3. Credit assistance should be provided only when its
benefits exceed its cost. Analyze benefits and costs in
accordance with OMB Circular A-94.
Program Design
4. Credit programs should minimize substitution of public
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.
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8. 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 workouts. 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.
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.
The Federal Credit Policy Working Group
A Federal Credit Policy Working Group Task Force, led by OMB and the
Department of the Treasury's Financial Management Service, last year
made recommendations for revising OMB Circular A-129, ``Policies for
Federal Credit Programs and Non-Tax Receivables,'' which elucidates the
above principles. OMB Circular A-129 provides guidance to agencies on
budget and legislative policies to ensure effective credit programs, and
prescribes agencies' responsibilities in managing all non-tax
receivables so that debts owed to the Federal Government are collected
efficiently. The major credit agencies reviewed Government-wide policy
guidance on credit extension, receivables management, and delinquent
debt collection. The revision of A-129 will be issued by OMB in 2000.
Significant changes clarify credit budgeting guidance, reflect the
requirements of the Debt Collection Improvement Act of 1996, require
sale of seriously delinquent debt that is not referred to Treasury or to
Justice for collection, and revise write-off procedures for seriously
delinquent accounts.
To help implement this guidance, GSA created a Financial Asset
Services Multiple Award Schedule with 52 contracts from which agencies
can readily acquire help in portfolio management. Available services
include overall management for an asset sale, account servicing, post-
sale analyses, and review of credit reform analyses. Agencies using
private sector advisors have included Treasury, Education, Navy, Housing
and Urban Development, and the Small Business Administration.
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) supported $177 billion of loan and loan guarantee
commitments in 1999, helping nearly two million households. Roughly one
out of six single-family mortgages origi
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nated in the United States receives assistance from one of these
programs.
HUD's Federal Housing Administration (FHA) operates the
Mutual Mortgage Insurance Fund which insured $113 billion in
mortgages for 1.2 million households in 1999. Over 80 percent
of FHA's home purchase mortgages 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 1999, VA
provided $44 billion in guarantees to 396,399 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 moderate income rural residents
living in substandard housing. In 1999, $3 billion of
guarantees went to 39,752 households (2.8 percent of which
went to low income borrowers). The Budget includes a
legislative proposal to increase the premium charged on the
RHS single family guaranteed loans from one to 2 percent,
which would allow RHS to provide more loans at less cost to
the taxpayers.
In addition, RHS offers a single-family direct loan program and both
direct and guaranteed multi-family mortgages, along with supporting
rural housing assistance grants. FHA insures mortgages for multi-family
housing and other specialized properties. The VA provides financing to
the public (``vendee'' or direct loans) when it sells property acquired
from defaults. These direct loans are, in turn, pooled and sold as
securities.
Housing Finance Challenges and Opportunities
Private banks, thrifts, and mortgage bankers, which originate the
mortgages that FHA insures and VA and RHS guarantee, may deal with all
three programs, as well as with the Government National Mortgage
Association (Ginnie Mae, an agency of the Department of Housing and
Urban Development), 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 moving toward electronic loan
origination and automated underwriting. Behind such underwriting are
data warehouses that show default experience by type of loan, borrower
characteristics, home location, originator, and servicer, and models
relating these factors to default cost. These technological developments
offer challenges and opportunities to the Federal mortgage guarantors
and Ginnie Mae. Federal credit program managers are challenged to make
programs electronically accessible to their clients and loan
originators. They are motivated to assess and monitor their risks more
closely as private firms are reaching out to the better risks among
their potential clients. They also have an opportunity to provide better
service at a lower cost, to target their efforts to help borrowers
retain their homes, and to reach further to bring affordable housing and
home ownership opportunities to those who are not currently served.
The Housing Credit Consortium. In 1998, the FHA, VA, and RHS housing
credit programs and Ginnie Mae formed The Federal Housing Credit
Consortium to adapt to the rapid development of electronic underwriting
and other technological developments in the private mortgage market. The
Consortium's role is to keep abreast of changes in the housing credit
market, accelerate adoption of best practices, and establish common
standards where possible.
The Consortium members are currently working to create a prototype
data-sharing capability through which all members will have access to
integrated data on program and borrower characteristics, lender and loan
performance. It will provide timely, easily retrievable information,
giving managers the ability to monitor the changing risk and cost of
guarantees and the performance of guaranteed loan originators and
servicers. By analyzing information from the data warehouse and by
sharing information with each other and the private sector, the
Consortium will seek to improve loan origination, performance
measurement, risk sharing and pricing, and asset disposition.
The Consortium is working with Ginnie Mae to integrate and enhance
Ginnie's two databases for use by all Consortium members. Ginnie's
databases, the Issuer Portfolio Analysis Database System (IPADS) and the
Correspondence Portfolio Analysis Database System (CPADS), receive
monthly data from issuers of mortgage-backed securities, and monitor
current performance by loan, originator, servicer, mortgage pool,
security, and security issuer. Performance can be tracked and compared,
taking account of differences by region, economic conditions, size and
type of business, and age of portfolio. The vast majority of the FHA and
VA loans are placed in Ginnie Mae's Mortgage-Backed Securities program.
About 65 percent of RHS's single-family loans is also placed in Ginnie
Mae pools. Thus, although the current analytical system is designed to
fill Ginnie Mae's needs, the same data produced by the system is useful
to all three Federal programs. For example, CPADS enables FHA and VA to
monitor and assess how well the firms that originate and service the
loans they guarantee are performing. Ginnie Mae has shared CPADS with
FHA and VA for many years. RHS continued its partnership with Ginnie Mae
in 1999, and now has access to loan and lender performance data to
analyze RHS loan guarantees.
Ginnie Mae has committed to making enhancements to IPADS/CPADS that
will provide additional benefits to all three loan guarantee programs.
IPADS and CPADS were integrated last year and an initial round of
enhancements will be implemented this year. Further enhancements are
planned in the future to enable
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the agencies to monitor and respond effectively to technological,
institutional, and financial developments in the residential mortgage
market.
Loan Origination. Electronic underwriting provides convenient, faster
service at a lower cost to both lenders and borrowers. Both FHA and VA
now permit mortgage lenders to use approved automated underwriting
systems, including Freddie Mac's ``Loan Prospector'' and Fannie Mae's
``Desktop Underwriter,'' to originate these loans. FHA also has approved
the pmiAURAsm system and is developing its own ``universal''
mortgage scorecard to be used on all FHA approved automated underwriting
systems.
In 1999, RHS developed an Internet-based system that will, with future
planned enhancements, provide the capacity to accept electronic loan
originations from their participating lenders. Using electronic loan
origination will significantly improve loan processing efficiency and
timeliness for both RHS and the lenders. RHS is also exploring using
automated underwriting and credit scoring. These improvements will be
implemented as soon as possible, but complete adoption is several years
away.
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 portfolios behave, but also how the federally
guaranteed housing market as a whole performs. This information is
critical for developing effective performance standards.
FHA has created a loss mitigation program that scores lender
performance on loss mitigation annually and provides financial
incentives to lenders to hold down mortgage defaults and minimize FHA
claim and property disposition costs relative to other lenders in each
FHA insuring district. FHA processed over 20,000 new loss mitigation
claims (partial claims, special lender forbearance, and loan recashing)
in 1999. These options allowed families to stay in their homes, rather
than have the properties go to pre-foreclosure sale or foreclosure, and
provided significant savings to FHA.
VA plans aggressive intervention to reduce the likelihood of
foreclosure when loans are referred to VA after missing three payments,
in order to help veterans retain their homes and avoid the expense and
damage to their credit from foreclosure. VA was successful in 37 percent
of their 1998 interventions, and their goal is to increase that to 40
percent in 2001.
RHS reviews at least 10 percent of the loans serviced by state-based
lenders 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. Since
1998, RHS has commissioned external audits of its largest nationally
based loan servicers. The audits focus on both loan origination and loan
servicing requirements. These audits have helped to pinpoint program
weaknesses contributing to loan delinquencies. In addition, they serve
to alert and train servicers on RHS guidelines and reporting
requirements.
Managing Risk. 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. Federal loan
guarantee programs will need to assess the impact of private sector
customization on their loan portfolios, and 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 initial loan-to-value ratio. FHA has mitigated
some of the risk on its adjustable-rate mortgages by tightening the
underwriting standards to require borrowers to qualify at one percent
above the initial rate and to prohibit interest rate buy downs.
Asset Disposition. Common wisdom in the mortgage industry is to avoid
foreclosure because that process involves significant losses, including
costs for maintenance and marketing. Managers of Federal guarantee
programs have found that the best practice is to allow the more
experienced private sector to foreclose on, manage, and dispose of
properties.
RHS already operates under the ``best practice'' for asset
disposition. The lender is paid the loss claim, including costs incurred
for up to six months after the default. After the loss claim is paid,
RHS has no involvement in the loan, and it becomes the sole
responsibility of the lender. In 2001, RHS will shorten the loss claim
period from six months to three months through regulatory changes to
encourage lenders to dispose of properties as efficiently as possible.
In 1999 Congress passed legislation giving new authority to FHA to pay
claims prior to foreclosure, thereby allowing FHA to pass along
defaulted notes to the private sector for servicing and/or disposition.
When fully implemented, this new authority will reduce foreclosures and,
for properties that do go into foreclosure, this new authority will
greatly reduce the time such properties remain on the market. In the
meantime FHA has turned over management and marketing of most of its
single family properties to contractors, who, within the first six
months of the contracts, are providing encouraging levels of returns on
claims and timely turnaround on these properties.
VA is continuing its efforts to reduce administrative costs through
restructuring, consolidations, and a study of its property management
function. The study, which will be completed at the end of fiscal year
2000, will determine whether it would be cost effective to contract
property management activities.
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RHS Direct Loans
RHS provides subsidized single-family direct loans to very-low- and
low-income borrowers unable to get credit elsewhere to purchase,
rehabilitate, or repair homes. The most recent and on-going servicing
improvement effort is the implementation of the Dedicated Loan
Origination Service System (DLOS), which centralizes the servicing of
the 502 Direct Loan program. DLOS, along with two regulations
implemented between 1996 and 1997, reduced RHS's direct loan subsidy
rate by 40 percent.
RHS also offers direct loans to private developers to construct and
rehabilitate multi-family rental housing for very-low- to low-income
residents, elderly households, or handicapped individuals. It provided
$114 million in direct loans in 1999, which will finance 2,100 units for
very-low-income tenants. RHS committed $75 million in loan guarantees
for multi-family housing in 1999. The loan level is proposed to increase
to $200 million for 2001, financing 3,200 new units for low- to
moderate- income tenants. The cost of this program is primarily due to
the subsidized interest component because expected default rates are
low. The Budget includes a legislative proposal to remove the
requirement to provide subsidized interest on these loans; this would
result in a negative subsidy. The Budget also provides $45 million, a 20
percent increase over 2000, for the farm labor housing program ($30
million in loans; $15 million in grants) as part of USDA's civil rights
initiative, which will provide an estimated 925 units for minority farm
workers and their families.
Fannie Mae and Freddie Mac
Fannie Mae and Freddie Mac, the largest Government-sponsored
enterprises (GSEs), are required by their charters to increase the
liquidity of mortgage funds. They carry out this function by purchasing
residential mortgages in the secondary market and funding these
purchases by issuing mortgage-backed securities (MBS) and debt. As of
September 1999, Fannie Mae and Freddie Mac had $2.0 trillion outstanding
in mortgages that they had purchased or guaranteed. Of this, $835
billion was retained in the GSEs' portfolios, and $1.2 trillion was
issued as MBSs (excluding MBSs held in portfolio).
As the dominant firms in the secondary mortgage market, the GSEs tend
to set the standards for the entire mortgage industry. Their business
activities also have a significant impact on the primary mortgage
market; together, the two firms purchased 43 percent of all single-
family mortgages originated in 1998.
The Federal Housing Enterprises Safety and Soundness Act of 1992
reformed Federal regulation of Fannie Mae and Freddie Mac. The Act
created the Office of Federal Housing Enterprise Oversight (OFHEO) to
conduct safety and soundness examinations and enforce minimum and risk-
based capital requirements on Fannie Mae and Freddie Mac. OFHEO has
solicited public comment on an extensive range of issues related to a
risk-based capital regulation in two Notices of Proposed Rulemaking
(NPRs). The comment period for the second risk-based capital NPR closes
on March 10, 2000. After OFHEO has reviewed the comments on both NPRs,
it will publish the final risk-based capital regulation or revise its
proposal. The risk-based capital regulation will become enforceable one
year after the final regulation is published.
In recent years, the GSEs' rapid growth in earnings has been
accompanied by even more rapid growth of their debt-financed holdings of
mortgage assets. From September 1997 to September 1999, outstanding
retained GSE holdings grew 76 percent in dollar volume. Increased
retained portfolios may imply increased interest rate exposure. In
recent years, both Fannie Mae and Freddie Mac have tried to limit the
interest rate risk on their portfolios. However, hedges do not eliminate
all risk of funding long-term, mostly fixed-rate assets with uncertain
payment streams. Implementation of an appropriate risk-based capital
regulation should help ensure that potential losses associated with
these risks are manageable.
The average credit quality of loans owned or guaranteed by the GSEs
has remained steady in recent years. The performance of existing loans
has benefitted from strong housing markets that have improved collateral
values, and the credit risk to the GSEs from new or outstanding loans is
limited by their extensive use of mortgage insurance and other credit
enhancements. Although both GSEs are increasingly active purchasers of
subprime loans (A-minus and Alt-A), outstanding volumes remain very
small relative to their overall size. Risks on such loans are mitigated
somewhat by higher fees and credit enhancements.
Under the 1992 Act and their Federal charters, Fannie Mae and Freddie
Mac have an affirmative obligation to promote access to mortgage credit
for low- and moderate-income families and in underserved areas.
Accordingly, the Secretary of Housing and Urban Development (HUD)
establishes affordable housing goals for the GSEs. The current goals,
which have been in effect since 1997, require each GSE to devote:
42 percent of its mortgage purchases to finance dwelling
units that are affordable by low- and moderate-income families
(Low- and Moderate-Income Housing Goal);
24 percent of its purchases to finance units in central
cities, rural areas, and other metropolitan areas with low and
moderate median income and high concentrations of minority
residents (Geographically Targeted Goal); 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 (Special
Affordable Housing Goal).
Fannie Mae and Freddie Mac have met or exceeded these goals in each
year. New affordable housing goals for the GSEs for the years 2000
through 2003 would be set by a proposed rule that HUD is publishing for
public comment. In this proposed rule, after a transition period, the
level of the Low- and Moderate-Income
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Housing Goal would be 50 percent; the level of the Geographically
Targeted Goal would be 31 percent; and the level of the Special
Affordable Housing Goal would be 20 percent.
If the trend toward bank consolidation continues, the resulting fewer,
larger banks may have somewhat more market power than they have today in
negotiating with the GSEs over guarantee fees and fees for automated
underwriting services. Fannie Mae and Freddie Mac may also see increased
competition from the Federal Home Loan Bank System. However, the GSEs'
advantages in financing a retained mortgage portfolio were not affected
by the financial modernization legislation enacted in 1999. Thus, the
GSEs likely will remain each other's main competition.
Another set of challenges is posed by the firms' own growth and
earnings targets, which create significant market expectations for
future performance, including continued record earnings. Once
implemented, OFHEO's risk-based capital requirements may also affect the
GSEs.
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 secure
advances with residential mortgages and other housing related assets.
The Financial Services Modernization Act of 1999 repealed the
requirement that federally chartered thrifts be members of the FHLBS.
Membership will be open to federally chartered and state-chartered
thrifts, commercial banks, credit unions, and insurance companies on a
voluntary basis. As of September 30, 1999, 7,226 financial institutions
were FHLBS members, an increase of 420 over September 1998. About 72
percent of members are commercial banks, 22 percent are thrifts, and the
remaining 6 percent are credit unions and insurance companies. However,
nearly 47 percent of outstanding FHLBS advances were held by federally
chartered thrifts as of September 30, 1999.
The FHLBS reported net income of $2.0 billion for the year ending
September 30, 1999, up from $1.6 billion in the previous 12 months.
System capital rose from $21 billion to $27 billion, but the ratio of
capital to assets fell from 5.4 percent to 5.1 percent. Average return
on equity was about 7.3 percent, after adjustment for payment of
interest to the Resolution Funding Corporation (REFCORP). Outstanding
advances to members reached $367 billion at September 30, 1999, a 48
percent increase over the $246 billion outstanding a year earlier.
The Financial Services Modernization Act requires the System to adopt
a risk-based capital structure, and it changed the FHLBanks' annual
payment toward the interest payments on bonds issued by the REFCORP from
$300 million annually to 20 percent of net earnings. The FHLBanks are
also required by law to pay the greater of 10 percent of net income or
$100 million to the Affordable Housing Program (AHP) and to provide
discounted advances for targeted housing and community investment
lending through a Community Investment Program (CIP). The need to
generate income to meet these obligations and provide a return to
members was behind the substantial increase in the System's investment
activity in recent years.
The FHLBS' exposure to credit risk on advances has traditionally been
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.
Unlike the System's advance activities, its investment activities,
including certain ``pilots,'' do create certain risks. To control the
System's risk exposure, the Federal Housing Finance Board (FHFB), the
System's regulator, has established regulations and policies that the
FHLBanks must follow to evaluate and manage their credit and interest
rate risk. FHLBanks must file periodic compliance reports, and the FHFB
conducts an annual on-site examination of each FHLBank. Each FHLBank's
board of directors must establish risk management policies that comport
with FHFB guidelines.
The FHLBanks hold $1.8 billion in assets in pilot projects,
approximately one-half of one percent of total System assets. The pilots
offer members an alternative way of granting credit, which will be
evaluated by the FHFB in 2000. In one pilot, the FHLBanks finance the
loans and assume the interest-rate and prepayment risks, while the
members originate and service the loans and assume most of the credit
risk. All assets held by a FHLBank under this pilot are required,
pursuant to the terms of the program, to be credit enhanced to at least
the level of an investment grade security.
The FHLBanks' investment activities pose an important public policy
issue regarding the degree to which their asset composition adequately
reflects the mission of the System. However, over the last year,
outstanding advances increased by six percentage points in relation to
the System's outstanding debt. As of September 30, 1999, about 56
percent of advances outstanding had a remaining maturity of greater than
one year; that is down slightly from last year's level of 61 percent,
but up from the 40 percent level two years ago. Although System
investments other than advances rose to $155 billion, as a percentage of
total assets, they fell to 29 percent on September 30, 1999. A year
earlier, investments stood at $136 billion, or 35 percent of total
assets. Non-advance investments are used to conduct extensive arbitrage;
like other GSEs, the System issues debt securities at close to U.S.
Treasury rates and invests the proceeds in higher yielding securities.
In fact, in 1999 the FHLBS issued $3.1 trillion in debt securities.
However, the majority of debt issued by the System is overnight or
short-term, and total debt outstanding was about $477 billion at the end
of 1999.
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An enormous, liquid, and efficient capital market exists for
conventional home mortgages today. As a result of increasing Government
Sponsored Enterprise (GSE) and Federal agency sponsorship of secondary
markets and the increasing presence of private securitizers, lenders
have access to substantial liquidity sources, in addition to FHLBS
advances, for financing home mortgages. However, the Financial Services
Modernization Act increases access to the FHLBS for community financial
institutions with $500 million or less in assets and permits advance
borrowing that provides funds for small businesses, farms, and agri-
businesses.
Education Credit Programs and GSEs
Student Loans
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 (Direct Loan) 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 2001, more than 6 million borrowers will receive 9.4 million loans
totaling nearly $42 billion. Of this amount, $33 billion is for new
loans, and the remainder is 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 Federal Family Education Loan program provides loans through a
complex administrative structure involving over 4,100 lenders, 36 State
and private guaranty agencies, 50 participants in the secondary market,
and over 4,000 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. In 2001, FFEL lenders will disburse more
than 6 million loans exceeding $26 billion in principal. Lenders bear
two percent of the default risk, and the Government and guaranty
agencies are responsible for the remainder. The Department also makes
administrative payments to guaranty agencies and pays interest subsidies
to lenders.
The William D. Ford 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 Direct
Loans, the Federal Government provides loan capital directly to nearly
1,300 schools, which then disburse loan funds to students--greatly
streamlining loan delivery for students, parents, and schools. In 2001,
the Direct Loan program will generate more than 3.2 million loans with a
total value in excess of $15 billion. 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 a number of reforms
to the guaranteed loan system that will ensure that financial returns to
program participants are both reasonable and equitably distributed,
improve the efficiency of loan default collection efforts, and return
unneeded funds to the Federal Treasury. Proposed changes are estimated
to save $3.8 billion over five years.
As part of the Ticket to Work and Work Incentive Improvement Act of
1999, the basis for interest subsidies to FFEL lenders was changed from
the 91-day Treasury bill--the instrument upon which student interest
rates are based--to 3-month commercial paper rates. This change, opposed
by the Administration and a number of higher education organizations,
was portrayed by both its congressional sponsors and advocates in the
lending community as not increasing lender returns. In fact, the change
increases lender yields in two ways. Under current economic forecasts,
Federal interest subsidies to lenders are actually 11 basis points
higher than they would have been under the previous formula. In
addition, the move to commercial paper also reduces lender costs by 20
basis points by eliminating the need for hedging--insurance against
future interest rate changes. In order to reestablish the cost-
neutrality of the change to commercial paper, the Administration is
therefore proposing to reduce lender subsidies by a total of 31 basis
points.
In addition, the Administration is proposing to eliminate interest
subsidy payments on FFEL loans funded through tax-exempt securities that
are currently subject to a 9.5 percent interest rate floor. Lenders with
access to tax-exempt financing have a lower cost of funds than their
private competitors; the proposed elimination of Federal interest
subsidies on loans subject to this unnecessary floor provision will
bring the return on tax-exempt-funded loans roughly in line with those
realized on loans funded with private capital.
The Administration is proposing to improve the management and
collection of defaulted loans through two new initiatives. First, the
amount guaranty agencies may retain on default collections will be
reduced from 24 percent to 18.5 percent--approximately the rate paid on
loans collected by the Department of Education through competitively
awarded contracts. This will provide the guaranty agencies greater
incentive to increase collections on defaulted loans in order to bolster
revenues. Second, the Administration proposes to further reduce guaranty
agency retention to 12 percent for collections stemming from the
consolidation of defaulted loans, the Department's cost for similar
loans, reflecting the lower cost associated with this type of
collection.
Beginning in 2001, all guaranty agencies will be able to participate
in voluntary agreements created by the
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Higher Education Amendments of 1998 (HEA) to create a more flexible
regulatory framework that recognizes the unique circumstances of
individual agencies. For example, agencies could use these agreements to
pilot streamlined or targeted default collection strategies that are not
allowed under current regulations. (A small number of agencies are
currently working with the Department of Education to establish pilot
agreements that would go into effect during 2000.) The broad
availability of these voluntary flexible agreements will reduce the need
for agencies to hold Federal reserve funds; accordingly, the
Administration is proposing to bring forward to 2001 recalls of $359
million in future reserves enacted in the HEA and the Balanced Budget
Act of 1997. The Administration is also proposing to recall $950 million
in surplus reserves during fiscal year 2001.
The Department of Education continues to improve program integrity and
reduce default costs. The Department is taking advantage of new
automated systems to review and analyze institutional eligibility
information, and 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 more than 1,700 schools. This enhanced scrutiny has
helped reduced the national student loan cohort default rate from 9.6
percent for 1996 to 8.8 percent for 1997, the sixth 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.
As one of Education's Performance Management Objectives, modernizing
student aid benefit delivery is a key priority. Accordingly, the
Department has converted the Office of Student Financial Assistance into
the Government's first Federal performance-based organization (PBO). The
PBO is designed to improve the management of all student aid programs,
using its expanded procurement and contracting flexibilities. This new
organization is focusing on re-engineering information systems and
expanding electronic data exchange to improve customer service, enhance
data quality, and lower costs. The PBO is working with students,
lenders, guaranty agencies, and others to develop a strategic
performance plan to address customer needs, enabling more students to
gain information on Federal aid on the Internet, apply for it
electronically, and have their eligibility determined quickly.
Sallie Mae
The Student Loan Marketing Association (Sallie Mae) was charted by
Congress in 1972 as a for-profit, shareholder-owned, Government-
sponsored enterprise (GSE). Sallie Mae was privatized in 1997 pursuant
to the authority granted by the Student Loan Marketing Association
Reorganization Act of 1996. The GSE is a wholly owned subsidiary of SLM
Holding Corporation and must wind-down and be liquidated by September
30, 2008. The Omnibus Consolidated and Emergency Supplemental
Appropriations for 1999 allows the SLM Holding Corporation to affiliate
with a financial institution upon the approval of the Secretary of the
Treasury. Any affiliation will require the holding company to dissolve
the GSE within two years of the affiliation date (unless such period is
extended by the Department of the Treasury).
Sallie Mae makes 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). Generally, under the
privatization legislation, the GSE cannot engage in any new business
activities or acquire any additional program assets other than
purchasing student loans. The GSE can continue to make warehousing
advances under contractual commitments existing on August 7, 1997.
Sallie Mae currently holds about one-third of all outstanding guaranteed
student loans.
Business and Rural Development Credit Programs and GSEs
Small Business Administration
Over the past six years, SBA has expanded small businesses' access to
credit, increasing its annual loan volume by 62 percent, from $7.4
billion in 1993 to $12.1 billion in 1999. This increase, across all of
SBA's business credit programs, has occurred while staffing has been
reduced by about 20 percent.
SBA's principal program, Section 7(a) General Business Loans, has
improved access to credit for the Nation's most under-served small
businesses over the last three years through several successful
initiatives. The Low Documentation (LowDoc) initiative reduced the
application form for 7(a) loans under $150,000 to a single page,
allowing both lenders and SBA to process loans in less than two days.
The SBAExpress program (the former FA$TRACK pilot, now permanent) allows
lenders to use their own forms and procedures in exchange for a reduced
Government guarantee. These initiatives and aggressive lending goals
have helped to increase loan approvals to minority- and women-owned
businesses from $1.8 billion in 1993 to $4.6 billion in 1999.
Increasing Access to Credit
SBA is proposing several new initiatives to further expand access to
credit by qualified borrowers who are unable to secure financing without
Government participation.
Targeting ``new markets.'' With the $16.5 million appropriated in FY
2000 (contingent upon authorization), SBA proposes to target ``new
markets''--regions where small business growth has been very limited.
The proposed initiatives will provide patient capital and technical
assistance to private-sector lenders and non-
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financial intermediaries in underserved inner cities and rural areas.
SBA will also expand the number of participating intermediaries in the
microloan program, which to date has experienced no defaults as a result
of strict agency oversight, rigorous reserve requirements, and a
companion technical assistance program to increase the borrower's
probability of success.
Financing smaller loans. Commercial lenders frequently avoid making
smaller loans due to high fixed costs per dollar lent, resulting in an
access barrier for many startup firms or established firms whose
financing needs do not meet the lenders' minimum thresholds. To close
this access gap, SBA's 2001 request proposes to standardize the
guarantee fee and to increase the guarantee percentage on loans up to
$150,000 in order to provide an incentive to lenders to make these
loans. These changes would result in higher subsidy costs due to reduced
fee revenue and higher claim payments in the event of default. However,
SBA is also proposing a fee simplification plan which will make the
combined impact of all changes subsidy rate neutral.
Integrating Private Sector Practices
Reliance on private sector partners. With its portfolio growing from
$20.7 billion in 1993 to more than $32.5 billion in 1999, SBA has relied
increasingly on private sector partners for loan servicing and
liquidation. The 7(a) program, which accounted for more than 70 percent
of SBA's business lending in 1999, has experienced the greatest shift to
private partnership. Under the Preferred Lender Program (PLP), SBA's
most experienced lenders have authority to approve, service, and
liquidate SBA-guaranteed loans in exchange for a reduced guarantee.
Loans approved through PLP lenders comprised 58 percent of all 7(a) loan
approval dollars in 1999. SBA also requires all non-PLP lenders to
service and liquidate their SBA-guaranteed loans. These policies have
shifted SBA's principal role from origination and servicing to one of
oversight and monitoring of private sector partners.
Need for better oversight tools. Over the past six years, SBA has
significantly increased its loan portfolio, reduced staffing, and
delegated its servicing and liquidating authorities to its private
sector partners. During this period, commercial small business lenders
have become increasingly more sophisticated in identifying credit risk,
and many 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. To
ensure that the agency meets its portfolio management responsibilities,
SBA will invest $8 million in 2000 to modernize the Agency's information
systems. An additional $13 million is requested for 2001. This funding
will allow SBA to improve internal accounting systems, recruit expertise
in lender oversight, develop the necessary in-house systems to support
lender monitoring, and create a centralized corporate database.
Reform initiatives. In 2000, SBA will continue to shift from loan
servicing to lender oversight. Initiatives already in progress include:
(1) selling all direct loans and defaulted guaranteed loans, and (2)
making strategic investments in better portfolio oversight tools. This
will allow SBA to focus on its goals of increasing access to credit,
while relying on private lenders to perform functions where they have
historically been more efficient. In conjunction with this shift in
agency focus, SBA is proposing to implement a multi-year workforce
transition strategy, beginning in 2000, to retrain workers in the skills
needed in the SBA of the 21st Century, move employees to those functions
where their skills will be most utilized, and provide retirement
incentives for those employees who do not wish to participate in the
transition effort.
Loan asset sales. One of the most significant events in completing the
transition from loan servicing to lender oversight is SBA's sale of its
current portfolio of defaulted guaranteed loans and direct loans in
1999, 2000, and 2001. In its first asset sale in 1999, SBA sold more
than 4,000 loans for $195 million--a $90 million premium over the $105
million that the agency estimated it would have collected if it held
these loans to maturity. The portfolio included performing and non-
performing 7(a) and Certified Development Companies (CDC) loans. Two
sales of approximately $1 billion each are currently scheduled for 2000;
these will include 7(a), CDC and disaster assistance business and home
loans. Drawing on experience of other Federal agencies, the SBA's
analysis of its portfolio value stemming from its Liquidation
Improvement Project, and the results of the initial asset sale, the
Administration estimates that SBA's business loan assets can be sold at
a gain to the Government. It is anticipated that the planned sales will
also yield future operational cost savings.
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. The community facility
programs are targeted to rural communities with fewer than 20,000
residents (fewer than 10,000 for the water and wastewater programs).
USDA also provides grants, direct loans, and loan guarantees to assist
rural businesses, including cooperatives, to increase employment and
diversify the rural economy. In 2001, USDA proposes to provide $1.3
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
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$1.2 billion in 1999. The default rate for these programs is currently
low.
The 1996 Farm Bill created 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 and localities. In 1997, Congress provided increased
flexibility through three funding ``streams,'' but blocked transfers
among streams. In 1998, Congress consolidated the three streams into one
RCAP account, but the 1998 through 2000 appropriation bills still did
not allow transfers between funding streams. The Budget proposes $763
million for a fully flexible RCAP.
Electric and Telecommunications Loans
USDA's rural electric and telecommunications program makes new loans
to maintain existing infrastructure and to modernize electric and
telephone service. Historically, the Federal risk associated with the
$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 $667
million was written off in 1997. As we move into the 21st century both
the telephone and electric industries are moving into a more competitive
environment.
In the electric industry, increased deregulation may erode loan
security and the ability of some 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's Rural Utilities Service (RUS) proposes to make $1.6
billion in direct and guaranteed loans in 2001 to rural electric
cooperatives, public bodies, nonprofit associations, and other utilities
in rural areas for generating, transmitting, and distributing
electricity. Included in this funding request is $400 million for
private sector guarantees. The demand for loans to rural electric co-
operatives is expected to continue to rise as borrowers replace many of
the 40-year-old electric plants.
The Distance Learning and Telemedicine program provides grants ($25
million in 2001) and loans ($300 million in 2001) to encourage and
improve telemedicine and distance learning services in rural areas
through the use of telecommunications, computer networks, and related
advanced technologies by students, teachers, medical professionals, and
rural residents. As part of the Digital Divide Initiative, RUS will
create a pilot program to fund $2 million in grants and $100 million in
Treasury rate loans in 2001 to be used in a grant/loan combination to
finance installation of broadband transmission capacity (i.e. the fiber
optic cable capacity needed to provide enhanced services such as the
Internet or high speed modems) to and through rural communities. The
other purpose for which RUS would provide a loan and grant combination
would be local dial-up Internet service to underserved areas. These
funds could be targeted to communities that currently lack Internet
access via a local call. Recipients of these loans and grants would be
current RUS telecommunication co-ops and businesses serving rural areas
and rural communities.
The Rural Telephone Bank (RTB) provides financing for rural
telecommunications systems. The 2001 Budget re-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 full 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 certain
Government-wide regulations, policies, and procedures. Funding for both
administrative expenses and subsidy budget authority would be provided
from the RTB's retained earnings beginning in 2001. The RTB would be
free to establish its interest rates or charge administrative fees and
institute an essentially private governance structure, which would allow
the RTB to demonstrate its ability to be financially self-sufficient.
This would be the necessary stepping stone to full privatization.
Loans to Farm Operators
Farm Service Agency (FSA) direct and guaranteed operating loans
provide credit to farmers and ranchers for annual production expenses
and purchases of livestock, machinery, and equipment. Direct and
guaranteed farm ownership loans assist producers in acquiring their
farming or ranching operations.
As a condition of eligibility 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. As FSA is the ``lender of last resort,''
high defaults and delinquencies are inherent in the direct loan program;
over $15 billion in direct farm loans have been written off since 1988,
compared to just over $40 billion in loans disbursed and guaranteed.
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 despite the Federal guarantee. As a
result of this incentive and the difference in borrower characteristics,
guaranteed farm loans have not experienced losses as high as those on
direct loans.
The Agriculture, Rural Development, Food and Drug Administration, and
Related Agencies Appropriations Act of 1999 changed portions of the
servicing requirements for delinquent borrowers. A borrower who has
received an FSA loan write-down or write-off may now be eligible for an
additional farm operating loan when
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the borrower is current under a debt reorganization plan or in certain
emergency circumstances. 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 the 1996 Farm Bill, acquired property remained in
inventory on average for five years before the FSA could dispose of it.
As part of USDA's Civil Rights Initiative, a reserve of loan funding
is established each year for targeted lending to socially disadvantaged
farmers and ranchers. In 1999, over $290 million in loans to socially
disadvantaged producers were made, and that number is expected to more
than double in 2000.
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 a business risk exceeding that of other GSEs because their
borrowers are generally dependent on a single economic sector;
agriculture. 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 provided Federal assistance to bail out
the FCS and created Farmer Mac.
The Nation's agricultural sector and its lenders continue to exhibit
stability in their incomes and balance sheets, thanks in part to record
Government emergency assistance payments in 1999. Commodity prices
remained low in 1999, and long term forecasts are for very gradual
recovery. Farm income levels, including Government payments, have
enabled most borrowers to maintain strong debt-to-asset ratios, and
lenders to keep loan delinquencies well below problem thresholds.
Farmland values gained modestly in 1999 as interest rates and
inflationary expectations remain low. However, such aggregate facts mask
the problems of a significant number of individual small farmers.
Further, regulators have voiced concern over the extent to which credit
card financing may be in use among farmers and ranchers, a statistic
they are unable to monitor.
Another sign of the generally stable condition of agricultural finance
is the greater share of credit provided by commercial banks. From 1986
to 1998, commercial banks' share of all farm debt increased from 24
percent to 41 percent, while the share for FCS declined from 29 percent
to 26 percent. USDA direct farm loan programs went from a market share
of 12 percent to 5 percent though, if adjusted for its guaranteed loans
issued through private banks, that percentage would more than double.
FCS is expected to maintain 1998 market share levels in 1999.
The Farm Credit System
The financial condition of the Farm Credit System banks and
associations during 1999 continues an 11-year trend of improving
financial health and performance. Nonperforming loans decreased to 1.5
percent of the portfolio, down from 1.6 percent in 1998. Loan volume has
gradually increased since 1992, although the $69.7 billion in September,
1999 is well below the high of over $80 billion in the early 1980s.
Increases in loan volume and declines in the cost of funds have widened
the FCS's net margin between interest received and interest paid from
less than one percent in 1987 to 2.75 percent in 1999.
Improved asset quality and income enabled FCS to post record capital
levels: by September 30, 1999, capital stood at $13.2 billion--an
increase of 6 percent for the year, 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 required of
FCS institutions to cover the remainder. The FCS has further reduced its
risk exposure by retiring all of its high-coupon long-term debt, using
marginal cost loan pricing, and adopting 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 FCS
districts with 36 banks plus 376 associations; by October 1999, there
were only 6 FCS districts, 7 banks, and 178 associations.
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 paid by FCS
institutions, supplement 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, 1999, the
Insurance Fund's net assets were $1.3 billion, and are estimated to
maintain the legally required level of at least two percent of
outstanding debt in 2000.
Improvement in the FCS' financial condition is also reflected in the
evaluations of FCS member institutions by 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 1999, in contrast, 180
institutions were given the top ratings, only 5 received the mid-range
rating of ``3,'' and none 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, but none were in effect on
September 30, 1999.
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FCS loans outstanding as of September 1999 were $66 billion, up 6
percent over 1998, and representing a 34 percent increase since 1990.
Loans to farmers and other eligible producers comprise 74 percent of the
System's portfolio. The volume of lending secured by farm land has been
generally stagnant since 1990, but farm operating loans have increased
over 40 percent since 1992. Loans to finance processing, marketing,
credit cooperatives, and rural utilities cooperatives accounted for 21
percent of FCS's portfolio at fiscal year-end 1999. The remaining 3
percent of the portfolio is made up of non-farm rural home loans (2
percent) and international loans (3 percent).
The System expects 1999 farm earnings to be a near-record $48 billion,
up from $44 billion in 1998. These strong reported earnings, and farm
income generally, have relied heavily on Government assistance payments
in recent years. Federal payments of $12 billion in 1998 and $22 billion
in 1999 to farmers and ranchers compensated for depressed commodity
prices and declining exports. The Farm Credit System, while continuing
to record strong earnings and capital growth, remains exposed to
numerous risks, including concentration risk, changes in Government
assistance payments, and the volatility of exports and crop prices.
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's authorities have
been legislatively expanded to permit it 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 (known as the ``Farmer Mac II'' program). 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 and interest rate risk. As a
direct purchaser of loans with no required subordination other than a
maximum 75 percent loan-to-value ratio for loans to qualify for
purchase, Farmer Mac is exposed to greater risk and must set appropriate
fees and level of capital reserves. Loan purchases and guarantees have
both increased since the passage of the 1996 Act. Both trends indicate
positive progress in the slowly developing agricultural secondary
markets.
The 1996 Act gave Farmer Mac three additional years to reach its
capital requirements, and two 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 1999 capital is estimated to be about $87 million--three times
greater than the 1996 statutory capital requirement and fully compliant
with the revised regulatory capital requirements.
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.
Overall, globalization of private capital markets has led private
lending to dominate officially supported direct and guaranteed credit.
Aggregate net resource flows to all developing countries grew from $152
billion in 1992 to $275 billion in 1998. In comparison, resource flows
from official direct or guaranteed credit were about the same in 1998
($24 billion) as in 1992 ($25 billion).
Federal international lending agencies coordinate for consistent
policy design and credit implementation to level the playing field for
U.S. exporters, deliver robust support for U.S. manufactured goods,
stabilize international financial markets, and promote sustainable
development.
Coordination: International credit programs are coordinated through
two groups to ensure consistency in policy design, and credit
implementation. The Trade Promotion Coordinating Committee (TPCC), works
within its membership and the Administration to developed a unified
National Export Strategy to make the delivery of trade promotion support
more effective and convenient for U.S. exporters.
The Interagency Country Risk Assessment System (ICRAS) standardizes
the way in which agencies budget for the risk of international lending.
The cost of lending by the agencies is governed by ratings and premia
established by the ICRAS. These premia use assumptions about default
risk in international lending based on international bond market data.
The premia for 2001 have been updated to reflect more recent data.
Because the eighteen months of additional bond market data captured many
bonds issued or traded during the height of the global financial crisis,
the risk premia increased on average by 25 percent. All else being
equal, the impact of the change in premia will constrain the level of
lending an agency may be able to implement. However, the practical
impact of the premia
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change will depend on a host of other factors such as maturity, risk
mix, and fees.
For the purpose of significantly improving the U.S. Government's
reporting and analysis of foreign credits, including loans, guarantees,
and insurance, the Treasury Department is coordinating the development,
with interagency support, of the Foreign Credit Reporting System (FCRS).
The system will provide government officials with desktop internet
access to cross-cutting foreign credit information for policymaking and
analytical purposes. While the system is currently under development, a
prototype is expected during 2000, followed by a fully operational
system in 2001.
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 strategically ``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.
Supporting more manufacturing exports. In 1999, Eximbank supported
exports totaling $13 billion with a budget of $676.5 million. Eximbank's
role is important in developing markets where the international
financial crisis has rolled back private finance, or in markets where
there is officially supported ECA competition. The 2001 Budget proposes
$963 million in credit resources for Eximbank, an increase of $207
million or 27 percent above its 2000 budget of $756 million--so that
Eximbank can:
Partially offset the higher risks and costs, of
international lending. The revised ICRAS premia recognize the
risk in the marketplace, and so significantly increases the
cost of lending for Eximbank, especially at the maturities and
in the markets in which Eximbank is most needed.
Help meet the demand for financing aircraft and capital
equipment exports in developing markets. One of every four
U.S. commercial aircraft is sold to an Asian airline, but
commercial credit has decreased drastically because of Asia's
economic problems. Eximbank currently finances 10 percent of
all U.S. capital equipment exports to the developing world.
More funding will allow Eximbank to provide significantly more
long-term financing for exports of U.S. manufactured capital
goods and aircraft.
Finance exports to riskier markets. U.S. exporters
increasingly seek Eximbank financing to meet the demand in
riskier markets, but the higher cost of providing such
financing uses a greater proportion of Eximbank's budgetary
resources. Eximbank support is critical in these markets
because bank financing often is unavailable, and U.S.
exporters compete with government-financed foreign firms.
USDA's GSM-102 and 103 programs guarantee credit extended by private
U.S. exporters and U.S. financial institutions to facilitate exports to
buyers in countries where credit is necessary to maintain or increase
U.S. sales of agricultural products. The GSM programs are targeted to
countries where government guarantees are needed to counter competition
from countries that offer credit through ECAs or commodity marketing
boards.
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 Budget), or through a loan provided
by the Exchange Stabilization Fund (ESF).
The ESF may provide ``bridge loans'' to other countries in times of
short-term liquidity problems and financial crises. In the past,
``bridge loans'' from ESF provided dollars to a country over a short
period before the disbursement under an IMF loan. A package of up to $20
billion of ESF financial support was made available to Mexico during its
crisis in 1995. Such support was essential in helping to stabilize
Mexican and global financial markets. Mexico paid back its borrowings
under this package ahead of schedule in 1997, and the United States
earned almost $600 million in interest. There was zero subsidy cost for
the United States as defined under credit reform, as the medium-term
credit carried interest rates with an appropriate country risk premium
built in.
The United States was also willing to provide ESF support in response
to the financial crises affecting some countries such as South Korea in
1997 or Brazil in 1998. It did not prove necessary to develop an actual
ESF credit facility for Korea, but the United States agreed to use up to
$5 billion from the ESF as part of a multilateral guarantee of a Bank
for International Settlements credit facility for Brazil. Such support
helped to provide the international confidence needed by these countries
to begin the stabilization process.
Using credit to promote sustainable development. Credit has become an
increasingly important tool in U.S. bilateral assistance to promote
sustainable development. In 1999, OMB certified that USAID could
adequately manage its credit programs as required in the 1998 Foreign
Operations Appropriations Act. USAID's newest credit tool is the
Development Credit Authority (DCA) that provides non-sovereign loans and
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loan guarantees in cases where credit is more effective than grants to
achieve sustainable development, such as more effective financial
markets or reductions in global climate change-causing emissions. A
consolidation of all of USAID's credit programs is requested in the 2001
Budget to create a unified Office of Development Credit. This office
will encompass DCA activities as well as USAID's traditional
microenterprise and urban environmental credit programs.
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. OPIC has
implemented investment funds, on-lending facilities, and bond
insurance--building onto its traditional political risk insurance,
lending, and guarantee products.
III. INSURANCE PROGRAMS
Deposit Insurance
Federal deposit insurance was begun in the 1930s to protect depositors
against 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
savings associations (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 over $2.8 trillion of deposits at over 8,600 commercial banks
and almost 1,700 savings institutions. The NCUA insures 10,841 credit
unions with $323 billion in insured shares.
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 of 1989 and the
Federal Deposit Insurance Corporation Improvement Act of 1991. These
reforms, combined with more favorable economic conditions, helped to
restore the health of depository institutions and the deposit insurance
system. Only one thrift failed in 1999, becoming the first SAIF-member
to fail since 1996. Five commercial banks failed during 1999. Eighteen
credit unions with $67 million in assets failed during 1999. The FDIC
currently classifies only 80 institutions with $8 billion in assets as
``problem'' institutions, compared to nearly 318 institutions with $73
billion in assets just five years ago.
Banks have achieved record levels of earnings in recent years. As of
September 30, 1999, BIF had estimated reserves of $29 billion, 1.38
percent of insured deposits.
The earnings of the thrift industry also have improved significantly
in recent years. As of September 30, 1999, SAIF's reserves reached an
estimated $10.2 billion or 1.44 percent of insured deposits. This total
includes the $978 million SAIF Special Reserve that was established on
January 1, 1999, in accordance with the Deposit Insurance Funds Act
(DIFA) of 1996. The Special Reserve has now been eliminated by the
Financial Services Modernization Act of 1999.
The FDIC continues to maintain deposit insurance premiums in a range
from zero for the healthiest institutions to 27 cents per $100 of
deposits for the riskiest institutions. Due to the strong financial
condition of the industry and the insurance funds, 94 percent of
commercial banks and 91 percent of thrifts did not pay insurance
premiums in 1999.
The National Credit Union Share Insurance Fund (NCUSIF) also remains
strong with assets of $4.2 billion. Each insured credit union is
required to deposit and maintain in the fund an amount equal to 1
percent of its member share accounts. In 1999, 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 fifth consecutive year that the
Fund paid a dividend to federally insured credit unions. The Board also
waived premiums for 2000.
Although depository institutions and their Federal insurance funds
currently are in good financial condition, the U. S. economy has
experienced strong growth in recent years. This trend is unlikely to
continue indefinitely. An economic downturn, international events, or
other changes in the industry could put pressure on industry profits and
ultimately on the deposit insurance funds. For example, the spate of
mergers among large banks in the last several years has increased the
probability that a failure of one of America's 25 largest banks would
bankrupt the deposit insurance funds. Even in good economic times,
occurrences of substantial fraud--such as the failure of First National
Bank in Keystone, West Virginia, which is expected to cost the FDIC up
to $850 million to resolve--can significantly reduce the deposit funds'
balances. On the other hand, the President's signature of the Financial
Services Modernization Act may make future failures less likely by
allowing banks to diversify their activities, though this remains to be
seen.
Legislative, Judicial and Regulatory Developments
On November 12, 1999, the President signed the Financial Services
Modernization Act of 1999 (P.L. 106-102), thereby making the most
important legisla
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tive changes to the structure of the U.S. financial system since the
1930s. This historic Act will stimulate greater innovation and
competition in the financial services industry. Specifically, the Act
repeals provisions of the Glass-Steagall Act that, since the Great
Depression, have restricted affiliations between banks and securities
firms. It also amends the Bank Holding Company Act to remove
restrictions on affiliations between banks and insurance companies.
Furthermore, it grants banks significant new authority to conduct many
newly authorized activities through operating subsidiaries.
The Act also ensures that the needs of all communities are met and
consumer rights are protected. It preserves the significance of the
Community Reinvestment Act (CRA), by requiring that financial
institutions that take advantage of the new opportunities created by the
Act, have a satisfactory record of meeting the needs of all the
communities that they serve. Also under the Act, financial institutions
must clearly disclose their privacy policies to customers up front and
annually, allowing consumers to make informed choices about protecting
their financial privacy. For the first time, consumers will have a right
to know if their financial institution intends to share or sell their
personal financial data, within the corporate family or with an
unaffiliated third-party. Consumers will have the right to ``opt out''
of such information sharing with unaffiliated third parties.
In 1999 the National Credit Union Administration promulgated rules to
implement the historic Credit Union Membership Access Act, which was
signed into law in 1998. These rules will allow credit unions to accept
members from multiple employers with fewer than 3,000 employees;
implement prompt corrective action; and implement changes to the
National Credit Union Share Insurance Fund's equity ratio calculation
and dividend policies.
The Federal regulators of depository institutions (FDIC, the Federal
Reserve Board, the Comptroller of the Currency, the Office of Thrift
Supervision, and the NCUA) assisted banks, thrifts, and credit unions
throughout the Nation in making a smooth transition to the Year 2000.
During the Year 2000 transition, the Nation's payment systems functioned
well, and currency supplies were adequate to meet demand. Credit cards,
debit cards, checks and automated teller machines worked normally. The
successful transition marks the end of three years of preparation for
the century date change.
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 vested
guaranteed 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
that are currently healthy but become distressed, and from changes in
the funding of plans and their investment results.
The number of plans insured by PBGC has been declining as small
companies with defined benefit plans terminate them and shift to defined
contribution pension arrangements such as 401(k) accounts. The number of
plans with 1,000 or more participants has increased slightly since 1980.
However, the number of active workers in defined benefit plans declined
from 29 million in 1985 to fewer than 24 million in 1995. If the trend
continues, by 2003 fewer than half of the participants in defined
benefit plans will be active workers; the rest will be retirees.
In 1999, PBGC posted a positive financial position for the fourth
straight year after 21 years of being in a deficit position. This was
due to good economic conditions and favorable investment returns. But
risk remains. That risk has been reduced somewhat by steps taken by PBGC
and the Congress. Since 1990, PBGC has been working more actively to
prevent and mitigate losses. Under its Early Warning Program, PBGC has
negotiated 90 major settlements with companies, providing nearly $17.5
billion in extra contributions and other protections that improved
pension security for over 2 million people and reduced PBGC's future
exposure. 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.
PBGC's single-employer program fared well in 1999, with no major
terminations. Overall investment returns were positive. Strong
performance in its trust funds, which are invested in equities, offset
losses in its revolving funds, which are invested in U.S. Government
securities. Premium revenues dropped for the third year in a row, partly
reflecting a previously enacted increase in the statutory interest rate
for calculating underfunding.
PBGC's multiemployer program, which guarantees pension benefits of
certain unionized plans offered by several employers in an industry,
remained financially strong despite a large loss from one plan. The
Administration proposes to increase the maximum guarantee level on
pension benefits paid to retirees in multiemployer plans 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.
This Budget proposes a new and simplified defined benefit pension plan
for small businesses, featuring accounts for individual participants.
The new plan guarantees a known level of annual income throughout a
worker's retirement years. The new plan is designed to be fully funded
virtually constantly, but also would be protected by PBGC at a reduced
premium. The Budget also proposes to phase-in the PBGC's variable rate
premium for new plans, a lower flat-rate premium
[[Page 206]]
and no variable rate premium for the first five years of new plans of
small employers. In addition, the Budget proposes expanding the PBGC's
missing participant program to terminating multiemployer and terminating
defined contribution plans, and simplifying the guarantee rules for
business owners.
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.
The flood insurance policy base increased by nearly 70,000 policies in
1999. The NFIP's ``Cover America'' initiative, which is a major
marketing and advertising campaign, continues 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 now allows policyholders in nearly
900 communities to receive discounts of at least 5 percent on their
premiums by undertaking activities which will reduce flood losses,
facilitate more accurate insurance rating, and promote public awareness
of flood insurance and flood risk.
In 1997, the NFIP offered expanded insurance to cover increased costs
of compliance, as authorized by the National Flood Insurance Reform Act
of 1994. This separate 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.
FEMA will continue efforts to reduce future flood damage by educating
Federal financial regulators about mandatory flood insurance
requirements for federally related home and business loans on properties
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.
The 2001 Budget proposes two additional reforms of this program.
First, the Administration seeks authorization to use up to $50 million
from FEMA's Disaster Relief Fund to begin the process of purchasing and/
or elevating insured properties that have flooded repeatedly over the
last 10 years. This effort will ultimately result in lower claims
payments. Second, the Budget includes a proposal to charge a $12 license
fee for the use of FEMA's flood hazard maps to support a multi-year
program to update and modernize FEMA's inventory of floodplain maps.
These maps are essential in developing appropriate risk-based flood
insurance premium charges, will ensure that property owners have
appropriate levels of insurance, and will result in a more actuarially
sound program.
Crop Insurance
Subsidized Federal crop insurance administered by USDA assists farmers
in managing yield shortfalls due to bad weather or other natural
disasters. Private companies are unwilling to offer multi-peril crop
insurance without Government reinsurance 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 service crop insurance policies. The Federal
Government reimburses private companies for part of the administrative
expenses associated with providing 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.) In 1995, 82 percent of eligible acres
participated in the program--140 percent more than in 1994. However, the
1996 Farm Bill eliminated the requirement that farmers participating in
USDA's commodity programs
[[Page 207]]
carry crop insurance, and participation dropped in 1997 to an estimated
61 percent of eligible acres. That number increased to 67 percent in
1999 due to the crop insurance purchase requirement attached to disaster
benefits provided in 1999. That requirement is in place for just two
years and 61 percent is considered the average expected participation
level absent such requirements.
The 1996 Farm Bill significantly changed USDA's commodity programs and
associated price and income support for farmers. When the President
signed the Farm Bill, he 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.'' To begin to address the safety net problem, the 1998 Budget
proposed to expand the crop insurance program to include ``revenue
insurance'' coverage. Revenue insurance protects farmers against lost
revenue caused by low prices, low yields, or any combination of the two.
Revenue insurance programs are now available in 36 states and further
expansion is being studied.
In 1999, USDA unveiled a pilot ``whole farm'' revenue insurance plan
to cover diversified farming and ranching operations with a single
revenue insurance policy. The Adjusted Gross Revenue (AGR) policy
insures the five-year average revenue of a farming or ranching operation
on the basis of the producer's Schedule F for Farm Income on Federal tax
returns. In addition to being USDA's first insurance policy to cover
livestock, AGR marks a departure from the expensive, labor-intensive
approach to crop insurance which currently requires considerable
information collection, and farm visits for loss adjustment and
compliance verification.
Emergency funding in 1999 and 2000 added more crop insurance premium
subsidies for those years and raised program participation to record
levels. In the 1999 crop year, gross liability insured reached over $30
billion in crop production value compared to $26 billion in 1998. The
program is expected to sustain or increase these participation levels if
the Administration's proposal to strengthen the farm safety net is
enacted by Congress. The proposal, discussed in the main Budget volume,
includes increased subsidies for producers purchasing crop insurance in
order to provide incentives for greater coverage, as well as a pilot
livestock insurance program, multi-year loss policies, increased risk
management education, and outreach to producers.
[[Page 208]]
Table 8-1. ESTIMATED FUTURE COST OF OUTSTANDING FEDERAL CREDIT PROGRAMS
(in billions of dollars)
----------------------------------------------------------------------------------------------------------------
Estimated Estimated
Outstanding Future Costs of Outstanding Future Costs of
Program 1998 1998 1999 1999
Outstanding \1\ Outstanding \1\
----------------------------------------------------------------------------------------------------------------
Direct Loans \2\:
Federal Student Loan Programs................... 47 2 65 2
Farm Service Agency (excl.CCC), Rural 46 14 45 12
Development, Rural Housing.....................
Rural Electrification Admin. and Rural Telephone 34 4 29 3
Bank...........................................
Housing and Urban Development................... 14 2 14 3
Agency for International Development............ 12 6 11 6
Public Law 480.................................. 11 7 11 8
Export-Import Bank.............................. 11 3 12 6
Commodity Credit Corporation.................... 8 2 7 3
Federal Communications Commission............... 7 2 8 5
Disaster Assistance............................. 7 1 7 2
Other Direct Loan Programs...................... 20 3 22 2
-------------------------------------------------------------
Total Direct Loans............................ 217 45 234 50
-------------------------------------------------------------
Guaranteed Loans \2\:
FHA Mutual Mortgage Insurance Fund.............. 380 -2 411 -3
VA Mortgage..................................... 211 5 221 6
Federal Family Education Loan Program........... 118 12 127 12
FHA General/Special Risk Insurance Fund......... 89 7 93 7
Small Business.................................. 37 2 39 2
Export-Import Bank.............................. 22 1 25 1
International Assistance........................ 19 2 19 2
Farm Service Agency and Rural Housing........... 14 0 17 0
Commodity Credit Corporation.................... 4 2 7 1
Other Loan Guarantee Programs................... 20 0 16 0
-------------------------------------------------------------
Total Guaranteed Loans........................ 916 29 976 29
=============================================================
Total Federal Credit.......................... 1,133 74 1,210 80
----------------------------------------------------------------------------------------------------------------
Note: Detail may not add to total due to rounding.
\1\ Direct loan future costs are the financing account allowance for subsidy cost and the liquidating account
allowance for estimated uncollectible principal and interest. Loan guarantee future costs are estimated
liabilities for loan guarantees.
\2\ Excludes loans and guarantees by deposit insurance agencies and programs not included under credit reform,
such as CCC commodity price supports. Defaulted guaranteed loans which become loans receivable are accounted
for as direct loans.
[[Page 209]]
Table 8-2. FACE VALUE OF GOVERNMENT-SPONSORED ENTERPRISE LENDING
(in billions of dollars)
------------------------------------------------------------------------
Outstanding
-----------------------
1998 1999
------------------------------------------------------------------------
Government Sponsored Enterprises: \1\
Fannie Mae...................................... 989 1,141
Freddie Mac..................................... 702 843
Federal Home Loan Banks \2\..................... 246 367
Sallie Mae \3\.................................. 0 0
Farm Credit System.............................. 60 66
-----------------------
Total......................................... 1,997 2,417
------------------------------------------------------------------------
\1\ Net of purchases of federally guaranteed loans.
\2\ The lending by the Federal Home Loan Banks measures their advances
to member thrift and other financial institutions. In addition, their
investment in private financial instruments at the end of 1999 was
$155 billion, including federally guaranteed securities, GSE
securities and money market instruments.
\3\ The face value of Federal Family Education Loans in the Student Loan
Marketing Association's portfolio is included in the totals for that
program under guaranteed loans in table 8-1.
[[Page 210]]
Table 8-3. REESTIMATES OF CREDIT SUBSIDIES ON LOANS DISBURSED BETWEEN 1992--1999\1\
(In millions of dollars)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Program 1994 1995 1996 1997 1998 1999 2000
--------------------------------------------------------------------------------------------------------------------------------------------------------
Direct Loans:
Agriculture credit insurance fund........................................ -72 28 2 -31 23 ......... 321
Agricultural conservation................................................ -1 ......... ......... ......... ......... ......... .........
Rural electrification and telephone loans................................ * 61 -37 84 ......... -39 .........
Rural telephone bank..................................................... 1 ......... ......... 10 ......... -9 -1
Rural housing insurance fund............................................. 2 152 46 -73 ......... 71 .........
Rural economic development loans......................................... ......... ......... ......... 1 ......... -1 *
Rural development loan program........................................... ......... 1 ......... ......... ......... -6 .........
Rural community advancement program \2\.................................. ......... ......... ......... 8 ......... 5 .........
P.L. 480 Title I loan program............................................ ......... ......... -37 -1 ......... ......... -253
Federal direct student loans:............................................ ......... ......... ......... ......... ......... ......... .........
Technical reestimate \3\............................................... ......... ......... 3 -83 172 -361 -2,442
Volume reestimate...................................................... ......... ......... ......... ......... ......... ......... .........
Bureau of Reclamation direct loans....................................... ......... ......... ......... ......... ......... ......... 3
BIA-Indian direct loans.................................................. ......... ......... ......... ......... ......... 1 4
DoT-High priority corridor loans......................................... ......... ......... ......... ......... -3 ......... .........
DoT-Alameda corridor loan................................................ ......... ......... ......... ......... ......... ......... -55
Community Development Financial Institutions fund........................ ......... ......... ......... ......... ......... ......... *
Veterans housing benefit program fund.................................... -39 30 76 -72 465 -111 -13
FEMA-Disaster assistance................................................. ......... ......... ......... ......... ......... ......... 47
Foreign military financing............................................... ......... ......... ......... 13 4 1 152
Debt restructuring....................................................... ......... ......... ......... ......... ......... ......... 5
SBA-Disaster loans....................................................... ......... ......... ......... ......... -193 246 .........
Export-Import Bank direct loans.......................................... -28 -16 37 ......... ......... ......... -177
Spectrum auction program................................................. ......... ......... ......... ......... 4,592 980 -1,501
Loan Guarantees:
Agriculture credit insurance fund........................................ 5 14 12 -51 96 ......... -130
Commodity Credit Corporation export guarantees........................... 3 103 -426 343 ......... ......... -253
Rural development insurance fund......................................... 49 ......... ......... -3 ......... ......... .........
Rural housing insurance fund............................................. 2 10 7 -10 ......... 109 .........
Rural community advancement program \2\.................................. ......... ......... ......... -10 ......... 41 .........
P.L. 480 Title I Food for Progress credits............................... ......... 84 -38 ......... ......... ......... .........
Fisheries finance, guaranteed loans...................................... ......... ......... ......... ......... -2 ......... .........
Federal family education: \4\
Technical reestimate \3\............................................... 97 421 60 ......... ......... 63 415
Volume reestimate...................................................... ......... ......... 535 99 ......... -216 362
FHA-Mutual mortgage...................................................... ......... ......... ......... -340 ......... 3,789 .........
FHA-General and special risk \5\......................................... -175 ......... -110 -25 743 79 .........
BIA-Indian guaranteed loans.............................................. ......... ......... ......... 31 ......... ......... -18
Maritime guaranteed loans (Title XI)..................................... ......... ......... ......... ......... ......... -71 27
Veterans housing benefit fund guarantees................................. -447 167 334 -706 38 492 242
AID housing guaranty..................................................... -2 -1 -7 ......... -14 ......... .........
Assistance to the New Independent States of the former Soviet Union...... ......... ......... ......... ......... ......... ......... -30
SBA-Business loans....................................................... ......... ......... 257 -16 -279 -545 -239
Export-Import Bank guarantees............................................ -11 -59 13 ......... ......... ......... -185
----------------------------------------------------------------------------
Total.................................................................. -616 995 727 -832 5,642 4,518 -3,720
--------------------------------------------------------------------------------------------------------------------------------------------------------
* $500 thousand or less.
\1\ Additional information on credit reform subsidy rates is contained in the Federal Credit Supplement to the budget for 2001.
\2\ Includes rural water and waste disposal, rural community facilities, and rural business and industry programs.
\3\ 2000 figure includes interest on reestimate.
\4\ Volume reestimates in mandatory loan guarantee 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.
\5\ 1999 figuludes interest on reestimate.
[[Page 211]]
Table 8-4. ESTIMATED 2001 SUBSIDY RATES, BUDGET AUTHORITY, AND LOAN LEVELS FOR DIRECT LOANS \1\
(in millions of dollars)
----------------------------------------------------------------------------------------------------------------
Weighted
average Subsidy Estimated
Agency and Program subsidy as a budget loan
percentage of authority levels
disbursements
----------------------------------------------------------------------------------------------------------------
Agriculture:
Agricultural credit insurance fund..................................... 10.26 114 1,080
Farm storage facility loans............................................ 2.85 4 150
Watershed and flood prevention operations.............................. 6.95 4 60
Rural community advancement program.................................... 12.91 172 1,332
Rural electrification and telecommunications loans..................... 0.24 4 1,645
Rural telephone bank................................................... 1.48 3 175
Distance learning and telemedicine program............................. -0.61 -2 400
Farm labor............................................................. 52.59 16 30
Rural housing insurance fund........................................... 19.15 284 1,485
Rural development loan fund............................................ 50.91 33 64
Rural economic development loans....................................... 26.07 4 15
P.L. 480............................................................... 71.51 114 160
Commerce:
Fisheries finance...................................................... 1.00 5 324
Defense--Military:
Family housing improvement fund........................................ 38.80 38 99
Education:
School renovation...................................................... 17.20 1,125 6,541
Federal direct student loan program.................................... -3.04 -517 16,972
Housing and Urban Development:
FHA-Mutual mortgage insurance.......................................... ............. .......... 250
FHA-General and special risk........................................... ............. .......... 50
Interior:
Bureau of Reclamation loans............................................ 52.99 9 27
State:
Repatriation loans..................................................... 80.00 1 1
Transportation:
Transportation infrastructure finance and innovation (TIFIA) program... 5.74 75 1,320
Treasury:
Community development financial institutions fund...................... 43.41 4 10
Veterans Affairs:
Veterans housing benefit program....................................... 1.82 12 649
Miscellaneous veterans housing program................................. 7.72 .......... 2
Miscellaneous veterans programs........................................ 35.02 .......... 3
Federal Emergency Management Agency:
Disaster assistance direct loans....................................... 6.71 2 25
International Assistance Programs:
Overseas Private Investment Corporation................................ 11.00 14 127
Small Business Administration:
Disaster loans......................................................... 17.46 142 871
Business loans......................................................... 8.95 5 60
Other Independent Agencies:
Export-Import Bank loans............................................... 7.50 72 960
--------------------------------------
Total................................................................ N/A 1,737 34,887
----------------------------------------------------------------------------------------------------------------
\1\ Additional information on credit subsidy rates is contained in the Federal Credit Supplement.
[[Page 212]]
Table 8-5. ESTIMATED 2001 SUBSIDY RATES, BUDGET AUTHORITY, AND LOAN LEVELS FOR LOAN GUARANTEES \1\
(in millions of dollars)
----------------------------------------------------------------------------------------------------------------
Weighted
average Subsidy Estimated
Agency and Program subsidy as a budget loan
percentage of authority levels
disbursements
----------------------------------------------------------------------------------------------------------------
Agriculture:
Agricultural credit insurance fund..................................... 2.06 71 3,478
Commodity Credit Corporation export loans.............................. 8.52 323 3,792
Rural community advancement program.................................... 0.52 8 1,535
Rural electrification and telecommunications loans..................... 0.01 .......... 400
Rural housing insurance fund........................................... 0.18 7 3,900
Defense--Military:
Family housing improvement fund........................................ 8.86 45 507
Education:
Federal family education loan.......................................... 11.22 2,760 29,853
Health and Human Services:
Health resources and services.......................................... 2.11 1 51
Housing and Urban Development:
Indian housing loan guarantee fund..................................... 8.13 6 72
Title VI Indian loan guarantees........................................ 11.07 5 43
Community development loan guarantees.................................. 2.30 28 1,217
America's private investment companies................................. 3.60 36 1,000
FHA-Mutual mortgage insurance.......................................... -2.57 -3,675 160,000
FHA-General and special risk........................................... -0.12 -21 21,000
Interior:
Indian guaranteed loans................................................ 6.73 5 82
Transportation:
Minority business resource center...................................... 11.00 2 14
Transportation infrastructure finance and innovation (TIFIA) program... 2.00 18 880
Maritime guaranteed loans (Title XI)................................... 4.97 2 40
Veterans Affairs:
Veterans housing benefit program....................................... 0.51 154 30,334
Miscellaneous veterans housing program................................. 48.25 6 13
International Assistance Programs:
Development credit authority........................................... 7.04 15 213
Overseas Private Investment Corporation................................ 1.00 10 1,000
Small Business Administration:
Business loans......................................................... 1.08 194 17,955
Other Independent Agencies:
Export-Import Bank loans............................................... 6.70 1,007 15,040
Presidio Trust......................................................... 0.46 1 200
--------------------------------------
Total................................................................ N/A 1,008 292,619
--------------------------------------
ADDENDUM: SECONDARY GUARANTEED LOAN COMMITMENT LIMITATIONS
GNMA:
Guarantees of mortgage-backed securities............................... -0.36 -356 200,000
----------------------------------------------------------------------------------------------------------------
\1\ Additional information on credit subsidy rates is contained in the Federal Credit Supplement.
[[Page 213]]
Table 8-6. SUMMARY OF FEDERAL DIRECT LOANS AND LOAN GUARANTEES
(In billions of dollars)
----------------------------------------------------------------------------------------------------------------
Actual Estimate
---------------------------------------------------------------------
1995 1996 1997 1998 1999 2000 2001
----------------------------------------------------------------------------------------------------------------
Direct Loans:
Obligations........................... 30.9 23.4 33.6 28.8 38.4 38.5 44.2
Disbursements......................... 22.0 23.6 32.2 28.7 37.7 37.3 35.8
Subsidy budget authority \1\.......... 2.6 1.8 2.4 6.5 2.6 -4.3 1.7
Loan Guarantees: \2\
Commitments........................... 138.5 175.4 172.3 218.4 252.4 255.1 289.0
Lender Disbursements.................. 117.9 143.9 144.7 199.5 224.7 234.0 257.9
Subsidy budget authority \1\.......... 4.6 4.0 3.6 2.6 4.3 3.2 0.8
----------------------------------------------------------------------------------------------------------------
\1\ Excludes subsidy reestimates made prior to 1998.
\2\ GNMA secondary guarantees of loans that are guaranteed by FHA, VA and RHS are excluded from the totals to
avoid double-counting.
[[Page 214]]
Table 8-7. DIRECT LOAN WRITE-OFFS AND GUARANTEED LOAN TERMINATIONS FOR DEFAULTS
--------------------------------------------------------------------------------------------------------------------------------------------------------
In millions of dollars As a percentage of outstanding
------------------------------------ loans \1\
Agency and Program -----------------------------------
1999 2000 2001 1999 2000 2001
actual estimate estimate actual estimate estimate
--------------------------------------------------------------------------------------------------------------------------------------------------------
DIRECT LOAN WRITEOFFS
Agriculture:
Agricultural credit insurance fund............................................ 278 284 344 3.00 3.06 3.87
Rural community advancement program........................................... .......... 6 10 .......... 0.12 0.17
Rural development insurance fund.............................................. 2 3 3 0.05 0.09 0.09
Rural housing insurance fund.................................................. 95 92 91 0.33 0.32 0.32
Rural development loans....................................................... 1 1 1 0.31 0.29 0.27
Commerce:
Economic development loans.................................................... 3 1 1 6.97 2.50 2.85
Education:
Student financial assistance.................................................. 15 9 10 23.43 14.75 17.54
Federal direct student loan program........................................... 41 86 118 0.08 0.16 0.18
Housing and Urban Development:
Revolving fund (liquidating programs)......................................... 6 .......... .......... 3.42 .......... ..........
FHA--Mutual mortgage insurance................................................ .......... .......... 2 .......... .......... 1.07
Interior:
BIA--Indian direct loans...................................................... 1 7 2 1.40 10.60 3.41
State:
Repatriation loans............................................................ 1 1 1 25.00 25.00 25.00
Veterans Affairs:
Veterans housing benefit program.............................................. 74 82 87 3.88 4.48 5.46
Federal Emergency Management Agency:
FEMA--disaster assistance..................................................... 1 .......... .......... 0.54 .......... ..........
International Assistance Programs:
Military debt reduction....................................................... .......... 11 8 .......... 110.00 133.33
Overseas Private Investment Corporation....................................... 1 1 1 1.28 1.27 1.23
Small Business Administration:
Disaster loans................................................................ 21 10 .......... 0.31 0.15 ..........
Business loans................................................................ 26 26 10 3.09 3.30 1.43
Other Independent Agencies:
Bank insurance fund........................................................... 38 .......... .......... 38.00 .......... ..........
Tennessee Valley Authority fund............................................... 1 1 1 2.12 1.96 1.69
-----------------------------------------------------------------------
Total, direct loan writeoffs................................................ 605 621 690 0.30 0.29 0.31
-----------------------------------------------------------------------
GUARANTEED LOAN TERMINATIONS FOR DEFAULT
Agriculture:
Agricultural credit insurance fund............................................ 61 94 104 0.80 1.17 1.19
CCC export guarantee programs................................................. 248 425 390 3.68 6.83 7.23
Rural community advancement program........................................... 33 33 33 1.10 0.93 0.71
Rural electrification and telecommunications.................................. 107 .......... .......... 25.17 .......... ..........
Rural development insurance fund.............................................. 1 18 11 0.76 17.06 17.05
Rural housing insurance fund.................................................. 40 62 79 0.40 0.56 0.58
Commerce:
NOAA--Federal ship financing.................................................. .......... 2 2 .......... 1.85 2.68
Defense--Military:
Defense export loan guarantee program......................................... .......... .......... 1 .......... .......... 10.52
Education:
Federal family education...................................................... 2,555 3,824 4,014 2.01 2.95 2.97
Health and Human Services:
Health education assistance loan program...................................... 22 37 42 0.76 1.30 1.53
Housing and Urban Development:
FHA--Mutual mortgage insurance................................................ 5,876 3,779 4,538 1.42 0.85 0.87
FHA--General and special risk................................................. 1,070 1,536 2,292 1.15 1.59 2.19
Interior:
BIA--Indian loan guarantee.................................................... 1 1 1 0.65 0.60 0.49
Transportation:
Federal ship financing fund................................................... 4 .......... .......... 1.24 .......... ..........
[[Page 215]]
Veterans Affairs:
Veterans housing benefit program.............................................. 2,381 3,030 3,370 1.07 1.37 1.55
International Assistance Programs:
Foreign military financing.................................................... 1 5 8 0.02 0.10 0.18
Microenterprise and other development......................................... 2 1 1 4.76 1.88 1.44
AID--Housing and other credit guaranty programs............................... 56 32 40 2.44 1.41 1.83
Overseas Private Investment Corporation....................................... 6 64 50 0.20 2.12 1.58
Small Business Administration:
Business loans................................................................ 699 684 684 1.77 1.66 1.52
Pollution control equipment................................................... 11 11 11 23.91 27.16 37.28
Other Independent Agencies:
Export-Import Bank............................................................ 1,000 284 425 3.94 1.00 1.38
-----------------------------------------------------------------------
Total, guaranteed loan terminations for default............................. 14,174 13,922 16,096 0.91 0.86 0.93
-----------------------------------------------------------------------
Total, direct loan writeoffs and guaranteed loan terminations............... 14,779 14,543 16,786 0.84 0.80 0.86
=======================================================================
ADDENDUM: WRITEOFFS OF DEFAULTED GUARANTEED LOANS THAT RESULT IN LOANS
RECEIVABLE
Education:
Federal family education...................................................... 587 459 473 2.68 2.03 1.98
Health and Human Services:
Health education assistance loan program...................................... 29 29 29 5.43 5.44 5.46
Housing and Urban Development:
FHA--Mutual mortgage insurance................................................ 17 85 1 2.66 25.07 1.96
FHA--General and special risk................................................. 172 229 652 7.22 9.80 31.27
Interior:
BIA--Indian loan guarantee.................................................... 2 .......... .......... 2.85 .......... ..........
Veterans Affairs:
Veterans housing benefit program.............................................. 113 83 79 14.65 10.29 8.98
Small Business Administration:
Business loans................................................................ 320 173 71 15.01 8.48 3.67
-----------------------------------------------------------------------
Total, writeoffs of loans receivable........................................ 1,240 1,058 1,305 3.69 3.10 3.72
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ Average of loans outstanding for the year.
[[Page 216]]
Table 8-8. APPROPRIATIONS ACTS LIMITATIONS ON CREDIT LOAN LEVELS \1\
(In millions of dollars)
----------------------------------------------------------------------------------------------------------------
Estimate
Agency and Program 1999 -----------------------
Actual 2000 2001
----------------------------------------------------------------------------------------------------------------
DIRECT LOAN OBLIGATIONS
Agriculture:
Agricultural credit insurance fund........................................ 872 1,797 1,080
Distance learning and telemedicine........................................ 55 200 400
Rural electrification and telecommunications.............................. 1,911 2,610 1,645
Rural telephone bank...................................................... 158 175 175
Rural water and waste disposal direct loans............................... 707 679 1,032
Rural housing insurance fund.............................................. 1,167 1,360 1,515
Rural community facility direct loans..................................... 162 167 250
Rural economic development................................................ 15 15 15
Rural development loan fund............................................... 33 38 64
Rural business and industry direct loans.................................. 50 50 50
P.L. 480 direct credit.................................................... 282 907 160
Commerce:
Fisheries finance......................................................... 229 28 324
Education:
Historically black college and university capital financing............... 375 364 339
Housing and Urban Development:
FHA-General and special risk.............................................. 50 50 50
FHA-Mutual mortgage insurance............................................. 100 100 250
Interior:
Bureau of Reclamation..................................................... 38 43 27
Assistance to American Samoa.............................................. .......... 19 ..........
State:
Repatriation loans........................................................ 1 1 1
Transportation:
Minority business resource center......................................... 14 14 ..........
Transportation infrastructure finance and innovation (TIFIA) program...... 893 1080 1,320
Treasury:
Community development financial institutions fund......................... 32 53 53
Federal Emergency Management Agency:
Disaster assistance....................................................... 30 25 25
General Services Administration:
Columbia Hospital for Women............................................... .......... 14 ..........
International Assistance Programs:
Military debt reduction................................................... 1 11 ..........
-----------------------------------
Total, limitations on direct loan obligations........................... 7,175 9,800 8,775
-----------------------------------
LOAN GUARANTEE COMMITMENTS
Agriculture:
Agricultural credit insurance fund........................................ 2,551 4,042 3,478
Rural electrification and telecommunications guaranteed loans............. 150 500 400
Rural water and waste water disposal guaranteed loans..................... 75 75 75
Rural housing insurance fund.............................................. 3,075 3,300 3,900
Rural community facility guaranteed loans................................. 210 210 210
Rural business and industry guaranteed loans.............................. 1,000 850 1,250
Commerce:
Emergency oil and gas guaranteed loans.................................... .......... 500 ..........
Emergency steel guaranteed loans.......................................... .......... 1,000 ..........
Defense--Military:
Defense export loan guarantee............................................. 14,980 14,980 14,980
Health and Human Services:
Health centers............................................................ .......... 100 51
[[Page 217]]
Housing and Urban Development:
Indian housing loan guarantee fund........................................ 81 72 72
Title VI Indian federal guarantees........................................ 55 55 43
Community development loan guarantees..................................... 1,261 1,261 1,217
America's private investment companies.................................... .......... 541 1,000
FHA-General and special risk.............................................. 18,100 18,100 21,000
FHA-Loan guarantee recovery fund.......................................... 8 7 ..........
FHA-Mutual mortgage insurance............................................. 140,000 140,000 160,000
Interior:
Indian.................................................................... 60 60 82
Transportation:
Minority business resource center......................................... .......... .......... 14
Transportation infrastructure finance and innovation program loan 600 720 880
guarantees...............................................................
Maritime guaranteed loan (Title XI)....................................... 1,767 1,505 40
International Assistance Programs:
Overseas private investment corporation................................... 2,333 2,333 1,000
Small Business Administration:
Business loan guarantees.................................................. 13,500 16,500 18,213
Other Independent Agencies:
Presidio Trust............................................................ .......... 200 200
-----------------------------------
Total, limitations on loan guarantee commitments........................ 199,806 206,911 228,105
===================================
ADDENDUM: SECONDARY GUARANTEED LOAN COMMITMENT LIMITATIONS
Housing and Urban Development:
Guarantees of mortgage-backed securities.................................. 200,000 200,000 200,000
-----------------------------------
Total, limitations on secondary guaranteed loan commitments............. 200,000 200,000 200,000
----------------------------------------------------------------------------------------------------------------
\1\ Data represents loan level limitations enacted or proposed to be enacted in appropriation acts. For
information on actual and estimated loan levels supportable by new subsidy budget authority requested, see
Tables 8-4 and 8-5.
[[Page 218]]
Table 8-9. DIRECT LOAN TRANSACTIONS OF THE FEDERAL GOVERNMENT
(in millions of dollars)
----------------------------------------------------------------------------------------------------------------
Estimate
Agency and Account 1999 -------------------------
Actual 2000 2001
----------------------------------------------------------------------------------------------------------------
Department of Agriculture
Farm Service Agency
Agricultural credit insurance fund liquidating account:
Obligations........................................................... ........... ........... ...........
Loan disbursements.................................................... 1 2 2
Change in outstandings................................................ -882 -967 -985
Outstandings.......................................................... 5,817 4,850 3,865
Farm storage facility direct loan financing account:
Obligations........................................................... ........... 350 150
Loan disbursements.................................................... ........... 350 150
Change in outstandings................................................ ........... 350 66
Outstandings.......................................................... ........... 350 416
Agricultural credit insurance fund direct loan financing account:
Obligations........................................................... 999 1,723 1,080
Loan disbursements.................................................... 1,278 1,637 1,026
Change in outstandings................................................ 728 949 267
Outstandings.......................................................... 3,443 4,392 4,659
Commodity Credit Corporation fund:
Obligations........................................................... 8,358 9,399 9,257
Loan disbursements.................................................... 8,358 9,399 9,257
Change in outstandings................................................ 213 -79 -312
Outstandings.......................................................... 2,846 2,767 2,455
Natural Resources Conservation Service
Watershed and flood prevention operations direct loan financing account:
Obligations........................................................... ........... ........... 60
Loan disbursements.................................................... ........... ........... 7
Change in outstandings................................................ ........... ........... 7
Outstandings.......................................................... ........... ........... 7
Rural Utilities Service
Rural communication development fund liquidating account:
Obligations........................................................... ........... ........... ...........
Loan disbursements.................................................... ........... ........... ...........
Change in outstandings................................................ -1 -1 ...........
Outstandings.......................................................... 7 6 6
Distance learning and telemedicine direct loan financing account:
Obligations........................................................... 55 200 400
Loan disbursements.................................................... 1 101 232
Change in outstandings................................................ 1 93 206
Outstandings.......................................................... 1 94 300
Rural development insurance fund liquidating account:
Obligations........................................................... ........... ........... ...........
Loan disbursements.................................................... 2 ........... ...........
Change in outstandings................................................ -338 -281 -258
Outstandings.......................................................... 3,470 3,189 2,931
Rural electrification and telecommunications direct loan financing
account:
Obligations........................................................... 1,763 2,610 1,645
Loan disbursements.................................................... 1,093 1,689 1,582
Change in outstandings................................................ 760 1,547 1,412
Outstandings.......................................................... 5,949 7,496 8,908
Rural telephone bank direct loan financing account:
Obligations........................................................... 114 175 175
Loan disbursements.................................................... 58 117 145
Change in outstandings................................................ 49 107 134
Outstandings.......................................................... 246 353 487
Rural water and waste disposal direct loans financing account:
Obligations........................................................... 721 679 1,032
Loan disbursements.................................................... 619 835 862
Change in outstandings................................................ 535 786 803
Outstandings.......................................................... 3,345 4,131 4,934
[[Page 219]]
Rural electrification and telecommunications liquidating account:
Obligations........................................................... ........... ........... ...........
Loan disbursements.................................................... 19 8 19
Change in outstandings................................................ -1,209 -1,030 -1,189
Outstandings.......................................................... 25,867 24,837 23,648
Rural telephone bank liquidating account:
Obligations........................................................... ........... ........... ...........
Loan disbursements.................................................... 17 15 13
Change in outstandings................................................ -186 -110 -106
Outstandings.......................................................... 986 876 770
Rural Housing Service
Rural housing insurance fund liquidating account:
Obligations........................................................... ........... ........... ...........
Loan disbursements.................................................... ........... ........... ...........
Change in outstandings................................................ -1,331 -1,127 -1,052
Outstandings.......................................................... 18,373 17,246 16,194
Rural housing insurance fund direct loan financing account:
Obligations........................................................... 1,169 1,371 1,515
Loan disbursements.................................................... 1,137 1,332 1,448
Change in outstandings................................................ 769 993 1,046
Outstandings.......................................................... 10,180 11,173 12,219
Rural community facility direct loans financing account:
Obligations........................................................... 163 185 250
Loan disbursements.................................................... 168 226 178
Change in outstandings................................................ 141 204 153
Outstandings.......................................................... 747 951 1,104
Rural Business--Cooperative Service
Rural economic development loans liquidating account:
Obligations........................................................... ........... ........... ...........
Loan disbursements.................................................... ........... ........... ...........
Change in outstandings................................................ -1 -1 -1
Outstandings.......................................................... 2 1 ...........
Rural economic development direct loan financing account:
Obligations........................................................... 15 15 15
Loan disbursements.................................................... 23 16 15
Change in outstandings................................................ 16 6 5
Outstandings.......................................................... 66 72 77
Rural development loan fund direct loan financing account:
Obligations........................................................... 33 38 64
Loan disbursements.................................................... 44 42 41
Change in outstandings................................................ 40 36 33
Outstandings.......................................................... 249 285 318
Rural business and industry direct loans financing account:
Obligations........................................................... 26 50 50
Loan disbursements.................................................... 20 31 51
Change in outstandings................................................ 19 23 37
Outstandings.......................................................... 38 61 98
Rural development loan fund liquidating account:
Obligations........................................................... ........... ........... ...........
Loan disbursements.................................................... ........... 1 1
Change in outstandings................................................ -5 -4 -4
Outstandings.......................................................... 72 68 64
Foreign Agricultural Service
Expenses, P.L. 480, foreign assistance programs, Agriculture liquidating
account:
Obligations........................................................... ........... ........... ...........
Loan disbursements.................................................... ........... ........... ...........
Change in outstandings................................................ -336 -275 -539
Outstandings.......................................................... 8,810 8,535 7,996
[[Page 220]]
P.L. 480 direct credit financing account:
Obligations........................................................... 282 907 160
Loan disbursements.................................................... 401 777 195
Change in outstandings................................................ 398 772 187
Outstandings.......................................................... 1,927 2,699 2,886
P.L. 480 Title I food for progress credits, financing account:
Obligations........................................................... ........... ........... ...........
Loan disbursements.................................................... ........... ........... ...........
Change in outstandings................................................ ........... ........... ...........
Outstandings.......................................................... 508 508 508
Debt reduction--financing account:
Obligations........................................................... ........... ........... ...........
Loan disbursements.................................................... ........... ........... ...........
Change in outstandings................................................ ........... -2 -2
Outstandings.......................................................... 63 61 59
Department of Commerce
Economic Development Administration
Economic development revolving fund liquidating account:
Obligations........................................................... ........... ........... ...........
Loan disbursements.................................................... ........... ........... ...........
Change in outstandings................................................ -11 -6 -4
Outstandings.......................................................... 43 37 33
National Oceanic and Atmospheric Administration
Fisheries finance, direct loan financing account:
Obligations........................................................... 229 28 324
Loan disbursements.................................................... 98 159 160
Change in outstandings................................................ 96 155 153
Outstandings.......................................................... 122 277 430
Department of Defense--Military
Family Housing
Family housing improvement, direct loan financing account:
Obligations........................................................... ........... 74 99
Loan disbursements.................................................... ........... 11 ...........
Change in outstandings................................................ ........... 11 ...........
Outstandings.......................................................... ........... 11 11
Department of Education
Office of Elementary and Secondary Education
School renovation, direct loan financing account:
Obligations........................................................... ........... ........... 6,541
Loan disbursements.................................................... ........... ........... 327
Change in outstandings................................................ ........... ........... 281
Outstandings.......................................................... ........... ........... 281
Office of Postsecondary Education
College housing and academic facilities loans liquidating account:
Obligations........................................................... ........... ........... ...........
Loan disbursements.................................................... ........... ........... ...........
Change in outstandings................................................ -47 -43 -43
Outstandings.......................................................... 519 476 433
College housing and academic facilities loans financing account:
Obligations........................................................... ........... ........... ...........
Loan disbursements.................................................... 4 1 4
Change in outstandings................................................ 4 1 4
Outstandings.......................................................... 25 26 30
Historically black college and university capital financing, direct loan
financing account:
Obligations........................................................... 11 25 25
Loan disbursements.................................................... 6 25 25
Change in outstandings................................................ 6 25 25
Outstandings.......................................................... 11 36 61
[[Page 221]]
Office of Student Financial Assistance
Student financial assistance:
Obligations........................................................... ........... ........... ...........
Loan disbursements.................................................... ........... ........... ...........
Change in outstandings................................................ -73 -6 -2
Outstandings.......................................................... 64 58 56
Federal direct student loan program, financing account:
Obligations........................................................... 19,243 16,135 16,971
Loan disbursements.................................................... 18,070 14,636 15,429
Change in outstandings................................................ 12,465 12,646 12,535
Outstandings.......................................................... 45,830 58,476 71,011
Department of Energy
Power Marketing Administration
Bonneville Power Administration fund:
Obligations........................................................... ........... ........... ...........
Loan disbursements.................................................... ........... ........... ...........
Change in outstandings................................................ ........... ........... ...........
Outstandings.......................................................... 2 2 2
Department of Health and Human Services
Health Resources and Services Administration
Medical facilities guarantee and loan fund:
Obligations........................................................... ........... ........... ...........
Loan disbursements.................................................... ........... ........... ...........
Change in outstandings................................................ -2 -7 -8
Outstandings.......................................................... 15 8 ...........
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................................................ -71 -71 -71
Outstandings.......................................................... 1,421 1,350 1,279
Community Planning and Development
Revolving fund (liquidating programs):
Obligations........................................................... ........... ........... ...........
Loan disbursements.................................................... ........... ........... ...........
Change in outstandings................................................ -45 -35 -30
Outstandings.......................................................... 175 140 110
Community development loan guarantees liquidating account:
Obligations........................................................... ........... ........... ...........
Loan disbursements.................................................... ........... ........... ...........
Change in outstandings................................................ -17 -4 -4
Outstandings.......................................................... 13 9 5
Housing Programs
Nonprofit sponsor assistance liquidating account:
Obligations........................................................... ........... ........... ...........
Loan disbursements.................................................... ........... ........... ...........
Change in outstandings................................................ ........... ........... ...........
Outstandings.......................................................... 1 1 1
Flexible subsidy fund:
Obligations........................................................... ........... ........... ...........
Loan disbursements.................................................... 17 14 20
Change in outstandings................................................ 17 10 16
Outstandings.......................................................... 786 796 812
FHA-Mutual mortgage and cooperative housing insurance funds liquidating
account:
Obligations........................................................... ........... ........... ...........
Loan disbursements.................................................... ........... ........... ...........
Change in outstandings................................................ -1 -4 ...........
Outstandings.......................................................... 4 ........... ...........
[[Page 222]]
FHA-General and special risk insurance funds liquidating account:
Obligations........................................................... ........... ........... ...........
Loan disbursements.................................................... ........... ........... ...........
Change in outstandings................................................ -4 -4 -4
Outstandings.......................................................... 68 64 60
FHA-General and special risk direct loan financing account:
Obligations........................................................... ........... 17 17
Loan disbursements.................................................... 1 17 17
Change in outstandings................................................ 1 16 16
Outstandings.......................................................... 1 17 33
Housing for the elderly or handicapped fund liquidating account:
Obligations........................................................... ........... ........... ...........
Loan disbursements.................................................... 3 ........... ...........
Change in outstandings................................................ -98 -87 -86
Outstandings.......................................................... 8,045 7,958 7,872
FHA-Mutual mortgage insurance direct loan financing account:
Obligations........................................................... 1 100 250
Loan disbursements.................................................... 1 90 227
Change in outstandings................................................ -2 84 197
Outstandings.......................................................... 3 87 284
Government National Mortgage Association
Guarantees of mortgage-backed securities liquidating account:
Obligations........................................................... ........... ........... ...........
Loan disbursements.................................................... 101 112 101
Change in outstandings................................................ 2 -18 -17
Outstandings.......................................................... 360 342 325
Department of the Interior
Bureau of Reclamation
Bureau of reclamation loan liquidating account:
Obligations........................................................... ........... ........... ...........
Loan disbursements.................................................... ........... ........... ...........
Change in outstandings................................................ -3 -3 -4
Outstandings.......................................................... 66 63 59
Water and related resources:
Obligations........................................................... ........... ........... ...........
Loan disbursements.................................................... ........... ........... ...........
Change in outstandings................................................ ........... ........... -1
Outstandings.......................................................... 3 3 2
Bureau of Reclamation direct loan financing account:
Obligations........................................................... 25 43 27
Loan disbursements.................................................... 26 30 27
Change in outstandings................................................ 26 29 24
Outstandings.......................................................... 146 175 199
National Park Service
Construction and major maintenance:
Obligations........................................................... ........... ........... ...........
Loan disbursements.................................................... ........... ........... ...........
Change in outstandings................................................ ........... -1 ...........
Outstandings.......................................................... 6 5 5
Bureau of Indian Affairs
Revolving fund for loans liquidating account:
Obligations........................................................... ........... ........... ...........
Loan disbursements.................................................... ........... ........... ...........
Change in outstandings................................................ -4 -3 -3
Outstandings.......................................................... 43 40 37
Indian direct loan financing account:
Obligations........................................................... ........... ........... ...........
Loan disbursements.................................................... ........... ........... ...........
Change in outstandings................................................ -1 -7 -2
Outstandings.......................................................... 28 21 19
[[Page 223]]
Insular Affairs
Assistance to territories:
Obligations........................................................... ........... ........... ...........
Loan disbursements.................................................... ........... ........... ...........
Change in outstandings................................................ -1 -1 -1
Outstandings.......................................................... 16 15 14
Assistance to American Samoa direct loan financing account:
Obligations........................................................... ........... 19 ...........
Loan disbursements.................................................... ........... 14 5
Change in outstandings................................................ ........... 13 4
Outstandings.......................................................... ........... 13 17
Department of State
Administration of Foreign Affairs
Repatriation loans financing account:
Obligations........................................................... 1 1 1
Loan disbursements.................................................... 1 1 1
Change in outstandings................................................ ........... ........... ...........
Outstandings.......................................................... 4 4 4
Department of Transportation
Office of the Secretary
Minority business resource center direct loan financing account:
Obligations........................................................... 6 14 ...........
Loan disbursements.................................................... 3 7 7
Change in outstandings................................................ 1 -2 -3
Outstandings.......................................................... 8 6 3
Federal Highway Administration
Transportation infrastructure finance and innovation (TIFIA) program
direct loan financing account:
Obligations........................................................... 873 990 1,210
Loan disbursements.................................................... ........... 992 858
Change in outstandings................................................ ........... 992 858
Outstandings.......................................................... ........... 992 1,850
Transportation infrastructure finance and innovation (TIFIA) program line
of credit financing account:
Obligations........................................................... 20 90 110
Loan disbursements.................................................... ........... ........... ...........
Change in outstandings................................................ ........... ........... ...........
Outstandings.......................................................... ........... ........... ...........
Right-of-way revolving fund liquidating account:
Obligations........................................................... ........... ........... ...........
Loan disbursements.................................................... 36 3 3
Change in outstandings................................................ 12 -21 -21
Outstandings.......................................................... 194 173 152
Federal Railroad Administration
Amtrak corridor improvement loans liquidating account:
Obligations........................................................... ........... ........... ...........
Loan disbursements.................................................... ........... ........... ...........
Change in outstandings................................................ -1 -1 -1
Outstandings.......................................................... 5 4 3
Alameda corridor direct loan financing account:
Obligations........................................................... ........... ........... ...........
Loan disbursements.................................................... 120 ........... ...........
Change in outstandings................................................ 120 ........... -400
Outstandings.......................................................... 400 400 ...........
Railroad rehabilitation and improvement liquidating account:
Obligations........................................................... ........... ........... ...........
Loan disbursements.................................................... ........... ........... ...........
Change in outstandings................................................ -3 -5 -4
Outstandings.......................................................... 53 48 44
[[Page 224]]
Railroad rehabilitation and improvement direct loan financing account:
Obligations........................................................... ........... ........... ...........
Loan disbursements.................................................... ........... ........... ...........
Change in outstandings................................................ ........... ........... ...........
Outstandings.......................................................... 4 4 4
Department of the Treasury
Departmental Offices
Community development financial institutions fund direct loan financing
account:
Obligations........................................................... 8 10 10
Loan disbursements.................................................... 5 5 7
Change in outstandings................................................ 5 5 6
Outstandings.......................................................... 10 15 21
Department of Veterans Affairs
Veterans Benefits Administration
Veterans housing benefit program fund liquidating account:
Obligations........................................................... ........... ........... ...........
Loan disbursements.................................................... 10 9 9
Change in outstandings................................................ -10 -28 -25
Outstandings.......................................................... 317 289 264
Veterans housing benefit program fund direct loan financing account:
Obligations........................................................... 1,648 1,992 649
Loan disbursements.................................................... 1,648 1,992 649
Change in outstandings................................................ 484 -129 -290
Outstandings.......................................................... 1,588 1,459 1,169
Miscellaneous veterans housing loans direct loan financing account:
Obligations........................................................... 2 2 2
Loan disbursements.................................................... 2 2 1
Change in outstandings................................................ 1 2 1
Outstandings.......................................................... 17 19 20
Miscellaneous veterans programs loan fund direct loan financing account:
Obligations........................................................... 2 3 3
Loan disbursements.................................................... ........... ........... ...........
Change in outstandings................................................ ........... ........... ...........
Outstandings.......................................................... 1 1 1
Environmental Protection Agency
Abatement, control, and compliance direct loan financing account:
Obligations........................................................... ........... ........... ...........
Loan disbursements.................................................... ........... ........... ...........
Change in outstandings................................................ -5 -5 -5
Outstandings.......................................................... 51 46 41
Federal Emergency Management Agency
Disaster assistance direct loan liquidating account:
Obligations........................................................... ........... ........... ...........
Loan disbursements.................................................... ........... ........... ...........
Change in outstandings................................................ ........... ........... ...........
Outstandings.......................................................... 37 37 37
Disaster assistance direct loan financing account:
Obligations........................................................... 3 25 25
Loan disbursements.................................................... 3 25 25
Change in outstandings................................................ 1 19 9
Outstandings.......................................................... 148 167 176
General Services Administration
Real Property Activities
Columbia hospital for women direct loan financing account:
Obligations........................................................... ........... 14 ...........
Loan disbursements.................................................... ........... 14 ...........
Change in outstandings................................................ ........... 14 ...........
Outstandings.......................................................... ........... 14 14
[[Page 225]]
International Assistance Programs
International Security Assistance
Foreign military loan liquidating account:
Obligations........................................................... ........... ........... ...........
Loan disbursements.................................................... 7 7 7
Change in outstandings................................................ -582 -535 -444
Outstandings.......................................................... 4,805 4,270 3,826
Foreign military financing direct loan financing account:
Obligations........................................................... ........... ........... ...........
Loan disbursements.................................................... 345 466 594
Change in outstandings................................................ 83 153 221
Outstandings.......................................................... 1,665 1,818 2,039
Military debt reduction financing account:
Obligations........................................................... 1 11 ...........
Loan disbursements.................................................... 1 11 ...........
Change in outstandings................................................ 1 ........... -8
Outstandings.......................................................... 10 10 2
Agency for International Development
Economic assistance loans--liquidating account:
Obligations........................................................... ........... ........... ...........
Loan disbursements.................................................... ........... ........... ...........
Change in outstandings................................................ -775 -596 -530
Outstandings.......................................................... 10,660 10,064 9,534
Debt reduction, financing account:
Obligations........................................................... ........... ........... ...........
Loan disbursements.................................................... ........... 72 3
Change in outstandings................................................ -65 15 -54
Outstandings.......................................................... 217 232 178
Microenterprise and small enterprise development credit direct loan
financing account:
Obligations........................................................... 2 ........... ...........
Loan disbursements.................................................... 1 1 1
Change in outstandings................................................ ........... ........... ...........
Outstandings.......................................................... 3 3 3
Overseas Private Investment Corporation
Overseas Private Investment Corporation liquidating account:
Obligations........................................................... ........... ........... ...........
Loan disbursements.................................................... ........... ........... ...........
Change in outstandings................................................ -10 -5 -6
Outstandings.......................................................... 14 9 3
Overseas Private Investment Corporation direct loan financing account:
Obligations........................................................... 136 136 127
Loan disbursements.................................................... 7 20 23
Change in outstandings................................................ 1 6 10
Outstandings.......................................................... 64 70 80
Small Business Administration
Business direct loan financing account:
Obligations........................................................... 15 30 60
Loan disbursements.................................................... 15 30 60
Change in outstandings................................................ -6 16 45
Outstandings.......................................................... 93 109 154
Disaster direct loan financing account:
Obligations........................................................... 814 221 951
Loan disbursements.................................................... 755 650 1,192
Change in outstandings................................................ 53 169 -1,375
Outstandings.......................................................... 5,658 5,827 4,452
Disaster loan fund liquidating account:
Obligations........................................................... ........... ........... ...........
Loan disbursements.................................................... ........... ........... ...........
Change in outstandings................................................ -187 -580 -487
Outstandings.......................................................... 1,067 487 ...........
[[Page 226]]
Business loan fund liquidating account:
Obligations........................................................... ........... ........... ...........
Loan disbursements.................................................... 34 32 22
Change in outstandings................................................ -242 -127 -107
Outstandings.......................................................... 748 621 514
Other Independent Agencies
Export-Import Bank of the United States
Export-Import Bank liquidating account:
Obligations........................................................... ........... ........... ...........
Loan disbursements.................................................... ........... ........... ...........
Change in outstandings................................................ -552 -349 -353
Outstandings.......................................................... 5,169 4,820 4,467
Debt reduction financing account:
Obligations........................................................... ........... ........... ...........
Loan disbursements.................................................... 44 118 ...........
Change in outstandings................................................ 44 118 ...........
Outstandings.......................................................... 108 226 226
Export-Import Bank direct loan financing account:
Obligations........................................................... 903 836 960
Loan disbursements.................................................... 2,375 1,117 790
Change in outstandings................................................ 2,027 424 -27
Outstandings.......................................................... 7,054 7,478 7,451
Farm Credit System Financial Assistance Corporation
Financial Assistance Corporation assistance fund, liquidating account:
Obligations........................................................... ........... ........... ...........
Loan disbursements.................................................... ........... ........... ...........
Change in outstandings................................................ -33 -17 -15
Outstandings.......................................................... 900 883 868
Federal Communications Commission
Spectrum auction direct loan financing account:
Obligations........................................................... 733 2 2
Loan disbursements.................................................... 733 2 2
Change in outstandings................................................ 1,498 -8 -36
Outstandings.......................................................... 8,287 8,279 8,243
Bank Insurance
Bank insurance fund:
Obligations........................................................... ........... ........... ...........
Loan disbursements.................................................... ........... ........... ...........
Change in outstandings................................................ -44 -100 ...........
Outstandings.......................................................... 100 ........... ...........
FSLIC Resolution
FSLIC resolution fund:
Obligations........................................................... ........... ........... ...........
Loan disbursements.................................................... ........... ........... ...........
Change in outstandings................................................ -34 -11 ...........
Outstandings.......................................................... 75 64 64
National Credit Union Administration
Community development credit union revolving loan fund:
Obligations........................................................... 2 6 4
Loan disbursements.................................................... 2 6 4
Change in outstandings................................................ ........... 3 1
Outstandings.......................................................... 7 10 11
Tennessee Valley Authority
Tennessee Valley Authority fund:
Obligations........................................................... 16 22 22
Loan disbursements.................................................... 16 22 22
Change in outstandings................................................ 4 8 8
Outstandings.......................................................... 47 55 63
--------------------------------------
[[Page 227]]
Subtotal, direct loan transactions:
Obligations........................................................... 38,392 38,548 44,243
Loan disbursements.................................................... 37,729 37,291 35,846
Change in outstandings................................................ 13,403 14,104 9,851
Outstandings.......................................................... 200,416 214,520 224,371
--------------------------------------
ADDENDUM: DEFAULTED GUARANTEED LOANS THAT RESULT IN A LOAN RECEIVABLE
Department of Agriculture
Farm Service Agency
Commodity Credit Corporation export guarantee financing account:
Claim payments........................................................ 248 425 390
Change in outstandings................................................ 240 418 381
Outstandings.......................................................... 336 754 1,135
Commodity Credit Corporation guaranteed loans liquidating account:
Claim payments........................................................ ........... ........... ...........
Change in outstandings................................................ -82 -114 -158
Outstandings.......................................................... 4,210 4,096 3,938
Department of Commerce
National Oceanic and Atmospheric Administration
Federal ship financing fund, fishing vessels liquidating account:
Claim payments........................................................ ........... ........... ...........
Change in outstandings................................................ ........... ........... ...........
Outstandings.......................................................... 24 24 24
Department of Education
Office of Student Financial Assistance
Federal family education loan liquidating account:
Claim payments........................................................ 314 190 109
Change in outstandings................................................ -2,122 -795 -724
Outstandings.......................................................... 13,187 12,392 11,668
Federal family education loan program, financing account:
Claim payments........................................................ 2,045 3,352 3,604
Change in outstandings................................................ 255 2,111 1,998
Outstandings.......................................................... 8,701 10,812 12,810
Department of Health and Human Services
Health Resources and Services Administration
Health education assistance loans financing account:
Claim payments........................................................ 9 22 28
Change in outstandings................................................ 6 19 24
Outstandings.......................................................... 38 57 81
Health education assistance loans liquidating account:
Claim payments........................................................ 20 23 18
Change in outstandings................................................ 2 -21 -26
Outstandings.......................................................... 496 475 449
Department of Housing and Urban Development
Housing Programs
FHA-Mutual mortgage and cooperative housing insurance funds liquidating
account:
Claim payments........................................................ 11 5 3
Change in outstandings................................................ -24 -266 2
Outstandings.......................................................... 270 4 6
FHA-General and special risk insurance funds liquidating account:
Claim payments........................................................ 172 136 170
Change in outstandings................................................ -99 -393 -776
Outstandings.......................................................... 1,890 1,497 721
FHA-General and special risk guaranteed loan financing account:
Claim payments........................................................ 243 407 510
Change in outstandings................................................ 110 302 365
Outstandings.......................................................... 491 793 1,158
[[Page 228]]
FHA-Mutual mortgage insurance guaranteed loan financing account:
Claim payments........................................................ 35 14 26
Change in outstandings................................................ 21 -334 22
Outstandings.......................................................... 369 35 57
Department of the Interior
Bureau of Indian Affairs
Indian loan guaranty and insurance fund liquidating account:
Claim payments........................................................ ........... ........... ...........
Change in outstandings................................................ -3 -2 -2
Outstandings.......................................................... 29 27 25
Indian guaranteed loan financing account:
Claim payments........................................................ 3 1 1
Change in outstandings................................................ -3 ........... ...........
Outstandings.......................................................... 41 41 41
Department of Transportation
Maritime Administration
Federal ship financing fund liquidating account:
Claim payments........................................................ 4 ........... ...........
Change in outstandings................................................ -26 -5 -5
Outstandings.......................................................... 20 15 10
Department of Veterans Affairs
Veterans Benefits Administration
Veterans housing benefit program fund liquidating account:
Claim payments........................................................ 103 87 75
Change in outstandings................................................ -46 -19 -14
Outstandings.......................................................... 574 555 541
Veterans housing benefit program fund guaranteed loan financing account:
Claim payments........................................................ 114 121 136
Change in outstandings................................................ 94 89 91
Outstandings.......................................................... 197 286 377
International Assistance Programs
International Security Assistance
Foreign military loan liquidating account:
Claim payments........................................................ 24 14 21
Change in outstandings................................................ 13 11 21
Outstandings.......................................................... 14 25 46
Agency for International Development
Housing and other credit guaranty programs liquidating account:
Claim payments........................................................ 56 32 40
Change in outstandings................................................ 15 8 14
Outstandings.......................................................... 500 508 522
Microenterprise and small enterprise development guaranteed loan
financing account:
Claim payments........................................................ 2 1 1
Change in outstandings................................................ 2 1 1
Outstandings.......................................................... 3 4 5
Overseas Private Investment Corporation
Overseas Private Investment Corporation guaranteed loan financing
account:
Claim payments........................................................ 5 50 50
Change in outstandings................................................ 2 45 33
Outstandings.......................................................... 17 62 95
Small Business Administration
Pollution control equipment fund liquidating account:
Claim payments........................................................ 3 ........... ...........
Change in outstandings................................................ 2 -1 -1
Outstandings.......................................................... 47 46 45
[[Page 229]]
Business guaranteed loan financing account:
Claim payments........................................................ 630 643 656
Change in outstandings................................................ -81 -15 241
Outstandings.......................................................... 753 738 979
Business loan fund liquidating account:
Claim payments........................................................ 69 41 28
Change in outstandings................................................ -88 -168 -278
Outstandings.......................................................... 1,378 1,210 932
--------------------------------------
Subtotal, defaulted guaranteed loans that result in a loan receivable:
Claim payments........................................................ 4,110 5,564 5,866
Change in outstandings................................................ -1,812 871 1,209
Outstandings.......................................................... 33,585 34,456 35,665
======================================
Total:
Obligations........................................................... 38,392 38,548 44,243
Loan disbursements.................................................... 41,839 42,855 41,712
Change in outstandings................................................ 11,591 14,975 11,060
Outstandings.......................................................... 234,001 248,976 260,036
----------------------------------------------------------------------------------------------------------------
[[Page 230]]
Table 8-10. GUARANTEED LOAN TRANSACTIONS OF THE FEDERAL GOVERNMENT
(in millions of dollars)
----------------------------------------------------------------------------------------------------------------
Estimate
Agency and Account 1999 ---------------------------
Actual 2000 2001
----------------------------------------------------------------------------------------------------------------
Department of Agriculture
Farm Service Agency
Agricultural credit insurance fund liquidating account:
Commitments........................................................ ............ ............ ............
New guaranteed loans............................................... ............ ............ ............
Change in outstandings............................................. -182 -205 -112
Outstandings....................................................... 594 389 277
Agricultural credit insurance fund guaranteed loan financing account:
Commitments........................................................ 2,551 4,042 3,478
New guaranteed loans............................................... 2,349 3,083 3,130
Change in outstandings............................................. 731 959 724
Outstandings....................................................... 7,023 7,982 8,706
Commodity Credit Corporation export guarantee financing account:
Commitments........................................................ 3,045 3,787 3,792
New guaranteed loans............................................... 244 3,501 3,501
Change in outstandings............................................. -87 -1,050 -590
Outstandings....................................................... 6,739 5,689 5,099
Commodity Credit Corporation guaranteed loans liquidating account:
Commitments........................................................ ............ ............ ............
New guaranteed loans............................................... ............ ............ ............
Change in outstandings............................................. -214 ............ ............
Outstandings....................................................... ............ ............ ............
Natural Resources Conservation Service
Agricultural resource conservation demonstration guaranteed loan
financing account:
Commitments........................................................ ............ ............ ............
New guaranteed loans............................................... ............ ............ ............
Change in outstandings............................................. ............ ............ ............
Outstandings....................................................... 24 24 24
Rural Utilities Service
Rural communication development fund liquidating account:
Commitments........................................................ ............ ............ ............
New guaranteed loans............................................... ............ ............ ............
Change in outstandings............................................. -1 ............ ............
Outstandings....................................................... 4 4 4
Rural development insurance fund liquidating account:
Commitments........................................................ ............ ............ ............
New guaranteed loans............................................... ............ ............ ............
Change in outstandings............................................. -96 -51 -31
Outstandings....................................................... 131 80 49
Rural electrification and telecommunications guaranteed loans
financing account:
Commitments........................................................ 150 500 400
New guaranteed loans............................................... 16 133 176
Change in outstandings............................................. 16 131 173
Outstandings....................................................... 16 147 320
Rural water and waste water disposal guaranteed loans financing
account:
Commitments........................................................ 6 75 75
New guaranteed loans............................................... 20 69 44
Change in outstandings............................................. 19 67 41
Outstandings....................................................... 20 87 128
Rural electrification and telecommunications liquidating account:
Commitments........................................................ ............ ............ ............
New guaranteed loans............................................... ............ ............ ............
Change in outstandings............................................. -152 -20 -20
Outstandings....................................................... 409 389 369
Rural Housing Service
Rural housing insurance fund liquidating account:
Commitments........................................................ ............ ............ ............
New guaranteed loans............................................... ............ ............ ............
Change in outstandings............................................. -4 -2 -3
Outstandings....................................................... 23 21 18
[[Page 231]]
Rural housing insurance fund guaranteed loan financing account:
Commitments........................................................ 3,052 3,300 3,900
New guaranteed loans............................................... 3,085 2,966 3,497
Change in outstandings............................................. 2,566 2,287 2,661
Outstandings....................................................... 9,772 12,059 14,720
Rural community facility guaranteed loans financing account:
Commitments........................................................ 107 210 210
New guaranteed loans............................................... 59 131 165
Change in outstandings............................................. 39 119 147
Outstandings....................................................... 194 313 460
Rural Business--Cooperative Service
Rural business and industry guaranteed loans financing account:
Commitments........................................................ 1,281 869 1,250
New guaranteed loans............................................... 1,027 1,134 1,059
Change in outstandings............................................. 887 956 838
Outstandings....................................................... 2,763 3,719 4,557
Department of Commerce
Departmental Management
Emergency oil and gas guaranteed loan financing account:
Commitments........................................................ ............ 500 ............
New guaranteed loans............................................... ............ 500 ............
Change in outstandings............................................. ............ 500 -50
Outstandings....................................................... ............ 500 450
Emergency steel guaranteed loan financing account:
Commitments........................................................ ............ 1,000 ............
New guaranteed loans............................................... ............ 1,000 ............
Change in outstandings............................................. ............ 1,000 -100
Outstandings....................................................... ............ 1,000 900
Economic Development Administration
Economic development revolving fund liquidating account:
Commitments........................................................ ............ ............ ............
New guaranteed loans............................................... ............ ............ ............
Change in outstandings............................................. -10 -2 ............
Outstandings....................................................... 3 1 1
National Oceanic and Atmospheric Administration
Fisheries finance, guaranteed loan financing account:
Commitments........................................................ ............ ............ ............
New guaranteed loans............................................... ............ ............ ............
Change in outstandings............................................. -9 -24 -24
Outstandings....................................................... 71 47 23
Federal ship financing fund, fishing vessels liquidating account:
Commitments........................................................ ............ ............ ............
New guaranteed loans............................................... ............ ............ ............
Change in outstandings............................................. -14 -10 -9
Outstandings....................................................... 54 44 35
Department of Defense--Military
Operation and Maintenance
Defense export loan guarantee financing account:
Commitments........................................................ ............ ............ ............
New guaranteed loans............................................... 5 ............ ............
Change in outstandings............................................. 1 -4 -5
Outstandings....................................................... 16 12 7
Procurement
Arms initiative guaranteed loan financing account:
Commitments........................................................ ............ 8 ............
New guaranteed loans............................................... ............ 8 ............
Change in outstandings............................................. ............ 7 -2
Outstandings....................................................... 10 17 15
[[Page 232]]
Family Housing
Family housing improvement guaranteed loan financing account:
Commitments........................................................ ............ 563 507
New guaranteed loans............................................... ............ 29 ............
Change in outstandings............................................. ............ 29 ............
Outstandings....................................................... ............ 29 29
Department of Education
Office of Student Financial Assistance
Federal family education loan liquidating account:
Commitments........................................................ ............ ............ ............
New guaranteed loans............................................... ............ ............ ............
Change in outstandings............................................. -4,387 -4,084 -2,781
Outstandings....................................................... 13,910 9,826 7,045
Federal family education loan program financing account:
Commitments........................................................ 27,497 28,326 29,853
New guaranteed loans............................................... 21,914 25,261 26,472
Change in outstandings............................................. 13,260 9,524 7,958
Outstandings....................................................... 112,768 122,292 130,250
Department of Health and Human Services
Health Resources and Services Administration
Health education assistance loans financing account:
Commitments........................................................ ............ ............ ............
New guaranteed loans............................................... ............ ............ ............
Change in outstandings............................................. -11 -23 -30
Outstandings....................................................... 1,551 1,528 1,498
Health education assistance loans liquidating account:
Commitments........................................................ ............ ............ ............
New guaranteed loans............................................... ............ ............ ............
Change in outstandings............................................. -69 -83 -87
Outstandings....................................................... 1,343 1,260 1,173
Health center guaranteed loan financing account:
Commitments........................................................ ............ 100 51
New guaranteed loans............................................... ............ 100 51
Change in outstandings............................................. ............ 100 51
Outstandings....................................................... 9 109 160
Medical facilities guarantee and loan fund:
Commitments........................................................ ............ ............ ............
New guaranteed loans............................................... ............ ............ ............
Change in outstandings............................................. -37 -30 -15
Outstandings....................................................... 45 15 ............
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............................................. -281 -281 -281
Outstandings....................................................... 3,026 2,745 2,464
Indian housing loan guarantee fund financing account:
Commitments........................................................ 12 72 72
New guaranteed loans............................................... 17 40 40
Change in outstandings............................................. 9 37 37
Outstandings....................................................... 47 84 121
Title VI Indian federal guarantees financing account:
Commitments........................................................ ............ 55 43
New guaranteed loans............................................... ............ 55 43
Change in outstandings............................................. ............ 52 40
Outstandings....................................................... ............ 52 92
[[Page 233]]
Community Planning and Development
Revolving fund (liquidating programs):
Commitments........................................................ ............ ............ ............
New guaranteed loans............................................... ............ ............ ............
Change in outstandings............................................. -1 -1 ............
Outstandings....................................................... 1 ............ ............
Community development loan guarantees financing account:
Commitments........................................................ 432 1,261 1,217
New guaranteed loans............................................... 468 650 825
Change in outstandings............................................. 320 450 575
Outstandings....................................................... 1,509 1,959 2,534
Community development loan guarantees liquidating account:
Commitments........................................................ ............ ............ ............
New guaranteed loans............................................... ............ ............ ............
Change in outstandings............................................. -31 -25 -25
Outstandings....................................................... 134 109 84
America's private investment companies financing account:
Commitments........................................................ ............ 541 1,000
New guaranteed loans............................................... ............ 395 771
Change in outstandings............................................. ............ 395 771
Outstandings....................................................... ............ 395 1,166
Housing Programs
FHA-Mutual mortgage and cooperative housing insurance funds
liquidating account:
Commitments........................................................ ............ ............ ............
New guaranteed loans............................................... ............ ............ ............
Change in outstandings............................................. -15,164 -8,482 -6,897
Outstandings....................................................... 55,866 47,384 40,487
FHA-General and special risk insurance funds liquidating account:
Commitments........................................................ ............ ............ ............
New guaranteed loans............................................... ............ ............ ............
Change in outstandings............................................. -3,685 -2,852 -2,151
Outstandings....................................................... 32,905 30,053 27,902
FHA-General and special risk guaranteed loan financing account:
Commitments........................................................ 16,924 15,905 16,677
New guaranteed loans............................................... 16,074 15,330 16,551
Change in outstandings............................................. 6,995 9,974 11,146
Outstandings....................................................... 59,692 69,666 80,812
FHA-Loan guarantee recovery fund--financing account:
Commitments........................................................ 1 7 ............
New guaranteed loans............................................... 1 4 4
Change in outstandings............................................. 1 4 4
Outstandings....................................................... 2 6 10
FHA-Mutual mortgage insurance guaranteed loan financing account:
Commitments........................................................ 123,546 122,658 158,993
New guaranteed loans............................................... 113,174 122,341 149,883
Change in outstandings............................................. 46,299 74,358 85,830
Outstandings....................................................... 355,608 429,966 515,796
Government National Mortgage Association
Guarantees of mortgage-backed securities liquidating account:
Commitments........................................................ ............ ............ ............
New guaranteed loans............................................... ............ ............ ............
Change in outstandings............................................. -95,853 ............ -2
Outstandings....................................................... 156 156 154
Guarantees of mortgage-backed securities financing account:
Commitments........................................................ 163,508 114,311 96,262
New guaranteed loans............................................... 163,508 114,311 96,262
Change in outstandings............................................. 123,697 30,255 7,437
Outstandings....................................................... 569,312 599,567 607,004
[[Page 234]]
Department of the Interior
Bureau of Indian Affairs
Indian loan guaranty and insurance fund liquidating account:
Commitments........................................................ ............ ............ ............
New guaranteed loans............................................... ............ ............ ............
Change in outstandings............................................. -8 -7 -6
Outstandings....................................................... 32 25 19
Indian guaranteed loan financing account:
Commitments........................................................ 32 60 82
New guaranteed loans............................................... 32 60 82
Change in outstandings............................................. 7 33 53
Outstandings....................................................... 120 153 206
Department of Transportation
Office of the Secretary
Minority business resource center guaranteed loan financing account:
Commitments........................................................ ............ ............ 14
New guaranteed loans............................................... ............ ............ 7
Change in outstandings............................................. ............ ............ 5
Outstandings....................................................... ............ ............ 5
Federal Highway Administration
Transportation infrastructure finance and innovation (TIFIA) program
loan guarantee financing account:
Commitments........................................................ 600 720 880
New guaranteed loans............................................... ............ 1,320 880
Change in outstandings............................................. ............ 1,320 880
Outstandings....................................................... ............ 1,320 2,200
Maritime Administration
Federal ship financing fund liquidating account:
Commitments........................................................ ............ ............ ............
New guaranteed loans............................................... ............ ............ ............
Change in outstandings............................................. -76 -52 -57
Outstandings....................................................... 321 269 212
Maritime guaranteed loan (Title XI) financing account:
Commitments........................................................ 1,767 1,505 40
New guaranteed loans............................................... 1,767 1,505 40
Change in outstandings............................................. 954 1,334 -192
Outstandings....................................................... 3,411 4,745 4,553
Department of Veterans Affairs
Veterans Benefits Administration
Veterans housing benefit program fund liquidating account:
Commitments........................................................ ............ ............ ............
New guaranteed loans............................................... 38 ............ ............
Change in outstandings............................................. -5,770 -4,425 -3,372
Outstandings....................................................... 17,638 13,213 9,841
Veterans housing benefit program fund guaranteed loan financing
account:
Commitments........................................................ 44,061 34,104 30,334
New guaranteed loans............................................... 44,061 34,104 30,334
Change in outstandings............................................. 16,263 2,647 -3,085
Outstandings....................................................... 203,651 206,298 203,213
Miscellaneous veterans housing loans guaranteed loan financing
account:
Commitments........................................................ ............ 20 13
New guaranteed loans............................................... ............ 20 13
Change in outstandings............................................. ............ 20 11
Outstandings....................................................... ............ 20 31
[[Page 235]]
International Assistance Programs
International Security Assistance
Foreign military loan liquidating account:
Commitments........................................................ ............ ............ ............
New guaranteed loans............................................... ............ ............ ............
Change in outstandings............................................. -380 -371 -357
Outstandings....................................................... 4,924 4,553 4,196
Agency for International Development
Loan guarantees to Israel financing account:
Commitments........................................................ ............ ............ ............
New guaranteed loans............................................... ............ ............ ............
Change in outstandings............................................. ............ ............ ............
Outstandings....................................................... 9,226 9,226 9,226
Development credit authority guaranteed loan financing account:
Commitments........................................................ 93 69 213
New guaranteed loans............................................... ............ 75 114
Change in outstandings............................................. ............ 75 114
Outstandings....................................................... ............ 75 189
Housing and other credit guaranty programs liquidating account:
Commitments........................................................ ............ ............ ............
New guaranteed loans............................................... ............ ............ ............
Change in outstandings............................................. -74 -76 -84
Outstandings....................................................... 1,760 1,684 1,600
Private sector revolving fund liquidating account:
Commitments........................................................ ............ ............ ............
New guaranteed loans............................................... ............ ............ ............
Change in outstandings............................................. ............ ............ ............
Outstandings....................................................... 1 1 1
Microenterprise and small enterprise development guaranteed loan
financing account:
Commitments........................................................ 50 56 ............
New guaranteed loans............................................... 39 44 30
Change in outstandings............................................. 11 22 10
Outstandings....................................................... 42 64 74
Urban and environmental credit guaranteed loan financing account:
Commitments........................................................ 12 11 ............
New guaranteed loans............................................... 147 37 11
Change in outstandings............................................. 127 11 -16
Outstandings....................................................... 534 545 529
Assistance for the independent states of the former Soviet Union:
Ukraine export credit insurance financing account:
Commitments........................................................ ............ ............ ............
New guaranteed loans............................................... ............ ............ ............
Change in outstandings............................................. -61 ............ ............
Outstandings....................................................... ............ ............ ............
Overseas Private Investment Corporation
Overseas Private Investment Corporation liquidating account:
Commitments........................................................ ............ ............ ............
New guaranteed loans............................................... ............ ............ ............
Change in outstandings............................................. -12 -14 -55
Outstandings....................................................... 69 55 ............
Overseas Private Investment Corporation guaranteed loan financing
account:
Commitments........................................................ 2,333 2,333 1,000
New guaranteed loans............................................... 426 600 800
Change in outstandings............................................. 291 100 250
Outstandings....................................................... 2,904 3,004 3,254
Small Business Administration
Pollution control equipment fund liquidating account:
Commitments........................................................ ............ ............ ............
New guaranteed loans............................................... ............ ............ ............
Change in outstandings............................................. -11 -11 -11
Outstandings....................................................... 46 35 24
[[Page 236]]
Business guaranteed loan financing account:
Commitments........................................................ 12,652 17,760 19,784
New guaranteed loans............................................... 10,785 7,534 7,738
Change in outstandings............................................. 3,072 4,150 4,261
Outstandings....................................................... 36,767 40,917 45,178
Business loan fund liquidating account:
Commitments........................................................ ............ ............ ............
New guaranteed loans............................................... 2 1 1
Change in outstandings............................................. -1,152 -579 -432
Outstandings....................................................... 2,652 2,073 1,641
Other Independent Agencies
Export-Import Bank of the United States
Export-Import Bank liquidating account:
Commitments........................................................ ............ ............ ............
New guaranteed loans............................................... ............ ............ ............
Change in outstandings............................................. -493 -350 -317
Outstandings....................................................... 1,214 864 547
Export-Import Bank guaranteed loan financing account:
Commitments........................................................ 12,165 14,664 15,040
New guaranteed loans............................................... 8,901 11,998 11,512
Change in outstandings............................................. 1,437 6,015 -554
Outstandings....................................................... 24,151 30,166 29,612
National Credit Union Administration
Credit union share insurance fund:
Commitments........................................................ 1 1 1
New guaranteed loans............................................... 1 1 1
Change in outstandings............................................. ............ ............ ............
Outstandings....................................................... 1 1 1
Presidio Trust
Presidio Trust guaranteed loan financing account:
Commitments........................................................ ............ ............ 100
New guaranteed loans............................................... ............ ............ 100
Change in outstandings............................................. ............ ............ 100
Outstandings....................................................... ............ ............ 100
-----------------------------------------
Subtotal, guaranteed loans (gross)
Commitments........................................................ 415,878 369,393 385,281
New guaranteed loans............................................... 388,160 348,340 354,137
Change in outstandings............................................. 88,677 123,817 102,364
Outstandings....................................................... 1,545,214 1,669,031 1,771,395
Less, secondary guaranteed loans: \1\
GNMA guarantees of FmHA/VA/FHA pools:
Commitments........................................................ -163,508 -114,311 -96,262
New guaranteed loans............................................... -163,508 -114,311 -96,262
Change in outstandings............................................. -27,844 -30,255 -7,435
Outstandings....................................................... -569,468 -599,723 -607,158
=========================================
Total, primary guaranteed loans: \2\
Commitments........................................................ 252,370 255,082 289,019
New guaranteed loans............................................... 224,652 234,029 257,875
Change in outstandings............................................. 60,833 93,562 94,929
Outstandings....................................................... 975,746 1,069,308 1,164,237
----------------------------------------------------------------------------------------------------------------
\1\ Loans guaranteed by FHA, VA, or FmHA are included above. GNMA places a secondary guarantee on these loans,
so they are deducted here to avoid double counting.
\2\ When guaranteed loans result in loans receivable, they are shown in the direct loan table.
[[Page 237]]
Table 8-11. LENDING AND BORROWING BY GOVERNMENT-SPONSORED ENTERPRISES (GSEs) \1\
(in millions of dollars)
----------------------------------------------------------------------------------------------------------------
Estimate
Enterprise 1999 -------------------------
Actual 2000 2001
----------------------------------------------------------------------------------------------------------------
LENDING
Student Loan Marketing Association:
Net change............................................................ 8,329 -3,927 -6,030
Outstandings.......................................................... 37,797 33,870 27,840
Federal National Mortgage Association:
Portfolio programs:
Net change............................................................ 125,419 81,090 92,389
Outstandings.......................................................... 518,629 599,719 692,108
Mortgage-backed securities:
Net change............................................................ 46,936 20,023 29,285
Outstandings.......................................................... 674,297 694,320 723,605
Federal Home Loan Mortgage Corporation:
Portfolio programs:
Net change............................................................ 99,446 39,843 40,008
Outstandings.......................................................... 315,968 355,811 395,819
Mortgage-backed securities:
Net change............................................................ 38,526 87,619 101,540
Outstandings.......................................................... 529,213 616,832 718,372
Farm Credit System:
Agricultural credit bank: \2\
Net change............................................................ 1,481 452 1,176
Outstandings.......................................................... 18,093 18,545 19,721
Farm credit banks:
Net change............................................................ 1,762 1,143 1,973
Outstandings.......................................................... 45,823 46,966 48,939
Federal Agricultural Mortgage Corporation:
Net change............................................................ 1,009 1,261 1,576
Outstandings.......................................................... 2,057 3,318 4,894
Federal Home Loan Banks:
Net change............................................................ 121,375 2,043 2,043
Outstandings.......................................................... 366,842 368,885 370,928
--------------------------------------
Subtotal GSE lending (gross):
Net change............................................................ 444,283 229,547 263,960
Outstandings.......................................................... 2,508,719 2,738,266 3,002,226
Less guaranteed loans purchased by:
Student Loan Marketing Association:
Net change............................................................ 8,329 -3,927 -6,030
Outstandings.......................................................... 37,797 33,870 27,840
Federal National Mortgage Association:
Net change............................................................ 20,484 -254 1,220
Outstandings.......................................................... 52,110 51,856 53,076
Other:
Net change............................................................ 6,269 ........... ...........
Outstandings.......................................................... 20,794 20,794 20,794
--------------------------------------
Total GSE lending (net):
Net change............................................................ 409,201 181,872 268,770
Outstandings.......................................................... 2,398,018 2,652,540 2,900,516
BORROWING
Student Loan Marketing Association:
Net Change............................................................ 8,074 -4,466 -6,910
Outstandings.......................................................... 41,591 37,125 30,215
Federal National Mortgage Association:
Portfolio programs:
Net Change............................................................ 94,297 84,687 92,494
Outstandings.......................................................... 524,879 609,566 702,060
Mortgage-backed securities:
Net Change............................................................ 46,936 20,023 29,285
Outstandings.......................................................... 674,297 694,320 723,605
[[Page 238]]
Federal Home Loan Mortgage Corporation:
Portfolio programs:
Net Change............................................................ 104,627 62,427 39,088
Outstandings.......................................................... 341,014 403,441 442,529
Mortgage-backed securities:
Net Change............................................................ 38,526 87,619 101,540
Outstandings.......................................................... 529,213 616,832 718,372
Farm Credit System:
Agricultural credit bank: \2\
Net Change............................................................ 1,389 486 1,266
Outstandings.......................................................... 19,468 19,954 21,220
Farm credit banks:
Net Change............................................................ 2,373 1,818 2,169
Outstandings.......................................................... 50,087 51,905 54,074
Federal Agricultural Mortgage Corporation:
Net Change............................................................ 975 288 9
Outstandings.......................................................... 2,573 2,861 2,870
Federal Home Loan Banks:
Net Change............................................................ 141,210 ........... ...........
Outstandings.......................................................... 477,472 477,472 477,472
--------------------------------------
Subtotal GSE borrowing (gross):
Net change............................................................ 349,182 142,934 124,681
Outstandings.......................................................... 1,425,742 1,568,676 1,693,357
Less borrowing from other GSEs:
Net Change............................................................ 30,390 ........... ...........
Outstandings.......................................................... 96,387 96,387 96,387
Less purchase of Federal debt securities:
Net Change............................................................ -292 14 9
Outstandings.......................................................... 1,668 1,682 1,691
Less borrowing to purchase loans guaranteed by:
Student Loan Marketing Association:
Net Change............................................................ 8,329 -3,927 -6,030
Outstandings.......................................................... 37,797 33,870 27,840
Federal National Mortgage Association:
Net Change............................................................ 20,484 -254 1,220
Outstandings.......................................................... 52,110 51,856 53,076
Other:
Net Change............................................................ 6,269 ........... ...........
Outstandings.......................................................... 20,794 20,794 20,794
--------------------------------------
Total GSE borrowing (net):
Net change............................................................ 284,002 147,101 129,482
Outstandings.......................................................... 1,216,986 1,364,087 1,493,569
----------------------------------------------------------------------------------------------------------------
\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 offficial GSE forecasts of future activity, nor
are they reviewed by the President. 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 remaining Bank for Cooperatives was combined with the Agricultural credit bank as of July 1, 1999.
Agricultural credit bank data for 1999 include data for Bank for Cooperatives.
[[Page 239]]
Table 8-12. GOVERNMENT-SPONSORED ENTERPRISE PARTICIPATION IN THE CREDIT MARKET\1\
(dollar amounts in billions)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Actual
--------------------------------------------------------------------------------------------------
1965 1970 1975 1980 1985 1990 1995 1996 1997 1998 1999
--------------------------------------------------------------------------------------------------------------------------------------------------------
Total net lending in credit market \2\............... 66.8 88.2 169.6 336.9 829.3 704.1 720.4 727.1 713.5 975.3 1,091.4
Government-sponsored enterprise loans................ 1.2 4.9 5.3 21.4 57.9 115.4 125.7 141.5 112.8 293.1 284.0
GSE lending participation rate (percent)............. 1.8 5.6 3.1 6.4 7.0 16.4 17.4 19.5 15.8 30.1 26.0
========================================================================================================================================================
Total net borrowing in credit market \2\............. 66.8 88.2 169.6 336.9 829.3 704.1 720.4 727.1 713.5 975.3 1,091.4
Government-sponsored enterprise borrowing............ 1.4 5.2 5.5 24.1 60.7 90.0 68.2 161.2 107.9 276.2 346.8
GSE borrowing participation rate (percent)........... 2.1 5.9 3.2 7.2 7.3 12.8 9.5 35.7 15.1 36.6 31.8
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ Government-sponsored enterprises (GSEs) are financial intermediaries. GSE borrowing (lending) is nevertheless compared with total credit market
borrowing (lending) by nonfinancial sectors, because GSE borrowing (lending) is a proxy for the borrowing (lending) by nonfinancial sectors that the
GSEs assist through intermediation. The GSEs assist the ultimate nonfinancial borrower by purchasing its loans from the initial, direct lender or by
other methods, which they finance by issuing securities themselves in the credit market. Borrowing and lending include mortgage-backed securities,
because the GSEs assist nonfinancial borrowers through this type of intermediation as well as by types of intermediation that involve financial
instruments recognized on the GSEs' balance sheets. The data for this table are adjusted, with some degree of approximation, to remove double counting
in making a comparison with other Federal and federally guaranteed transactions. GSE borrowing and lending are calculated net of transactions between
components of GSEs and transactions in guaranteed loans; GSE borrowing is also calculated net of borrowing from other GSEs and purchases of Federal
debt securities.
\2\ Total net borrowing (or lending) in credit market by domestic nonfinancial sectors, excluding equities. Credit market borrowing (lending) is the
acquisition (loan) of funds other than equities through formal credit channels. Financial sectors are omitted from the series used in this table to
avoid double counting, since financial intermediaries borrow in the credit market primarily in order to finance lending in the credit market.
Equities, trade credit, security credit, and other sources of funds are also excluded from this series. Source: Federal Reserve Board flow of funds
accounts. Estimates for 2000 and 2001 are not available.
[[Page 240]]
Table 8-13. BORROWING BY FINANCING VEHICLES \1\
(in millions of dollars)
----------------------------------------------------------------------------------------------------------------
Estimate
Financing Vehicle 1999 -------------------------
Actual 2000 2001
----------------------------------------------------------------------------------------------------------------
Financing Corporation (FICO):
Net change............................................................ 1 1 2
Outstandings.......................................................... 8,146 8,147 8,149
Resolution Funding Corporation (REFCORP):
Net change............................................................ -2 -3 -2
Outstandings.......................................................... 30,067 30,064 30,062
--------------------------------------
Subtotal, gross borrowing:
Net change............................................................ -1 -2 0
Outstandings.......................................................... 38,213 38,211 38,211
Less purchases of Federal debt securities:
Net change............................................................ 7 551 595
Outstandings.......................................................... 6,617 7,168 7,763
--------------------------------------
Total, net borrowing:
Net change............................................................ -8 -549 -595
Outstandings.......................................................... 31,596 31,047 30,452
----------------------------------------------------------------------------------------------------------------
\1\ Financing vehicles are Government corporations established pursuant to law in order to provide financing for
a Federal program but excluded from the on-budget and off-budget totals. FICO and REFCORP borrowed from the
public in the past but have not loaned to the public. During the period covered by this table, the change in
debt outstanding is due solely to the amortization of discounts and premiums. No sale or redemption of debt
securities occurred in 1999 or is estimated to occur in 2000 or 2001.