Appendix - Government-Sponsored Enterprises

[Appendix]
[Government-Sponsored Enterprises]
[From the U.S. Government Printing Office, www.gpo.gov]

[[Page 1123]]

GOVERNMENT-SPONSORED ENTERPRISES

This chapter contains descriptions of and data on the Government-
sponsored enterprises listed below. These enterprises were established
and chartered by the Federal Government for public policy purposes. They
are not included in the Federal budget because they are private
companies. However, because of their public purpose, detailed statements
of financial operations and condition are presented, to the extent such
information is available, on a basis that is as consistent as
practicable with the basis for the budget data of Government agencies.
These statements are not reviewed by the President; they are presented
as submitted by the enterprises.

--The Student Loan Marketing Association is a for-profit financial
corporation chartered by Congress in 1972 under the Higher
Education Act (HEA) to help increase the availability of student
loans. Sallie Mae carries out secondary market and other
functions.

--The Federal National Mortgage Association and the Federal Home
Loan Mortgage Corporation provide assistance to the secondary
market for residential mortgages. Both are supervised by the
Department of Housing and Urban Development for their roles
in helping to finance low-, moderate-, and middle-income
housing; both are regulated for financial safety and soundness
by the Office of Federal Housing Enterprise Oversight.

--Institutions of the Farm Credit System the Agricultural Credit
Bank and Farm Credit Banks--provide financial assistance to
agriculture. They are supervised by the Farm Credit
Administration.

--The Federal Agricultural Mortgage Corporation, under the
supervision of the Farm Credit Administration, provides a
secondary mortgage market for agricultural real estate and rural
housing loans as well as for farm and business loans guaranteed
by the U.S. Department of Agriculture.

--The Federal Home Loan Banks assist thrift institutions, banks,
insurance companies, and credit unions in providing financing
for housing and community development and are supervised by the
Federal Housing Finance Board.

STUDENT LOAN MARKETING ASSOCIATION

Student Loan Marketing Association

Status of Direct Loans (in millions of dollars)

----------------------------------------------------------------------------
Identification code 99-1500-0-3-502 2002 actual 2003 est. 2004 est.
----------------------------------------------------------------------------
1111 Limitation on direct loans........
1131 Direct loan obligations........... 13,245 15,272 17,230
--------- --------- ----------
1150 Total direct loan obligations..... 13,245 15,272 17,230
----------------------------------------------------------------------------

Cumulative balance of direct loans
outstanding:
1210 Outstanding, start of year........ 41,032 41,932 27,965
1231 Disbursements: Direct loan
disbursements................... 13,245 15,272 17,230
Repayments:

1251 Repayments and prepayments...... -1,921 -5,240 -3,657
1252 Proceeds from loan asset sales
or discounted................. -10,425 -24,000 -23,000
1264 Write-offs for default: Other
adjustments, net................ 1 1 1
--------- --------- ----------
1290 Outstanding, end of year........ 41,932 27,965 18,539
---------------------------------------------------------------------------

The Student Loan Marketing Association (Sallie Mae) was created as a
shareholder-owned government sponsored enterprise (GSE) by the Education
Amendments of 1972 to expand funds available for student loans by
providing liquidity to lenders engaged in the Federal Family Education
Loan Program (FFELP), formerly the guaranteed student loan program
(GSLP). 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 Corporation and must
wind down and be liquidated by September 30, 2008. In January 2002, the
GSE's board of directors announced that it expects to complete the
dissolution of the GSE by September 30, 2006. Under legislation passed
in 1998, if USA Education, Inc. affiliates with a depository
institution, the GSE must wind down within two years (unless such period
is extended by the Department of the Treasury).
The GSE provides liquidity through direct purchase of insured
student loans from eligible lenders and through warehousing advances,
which are loans to lenders secured by insured student loans, Government
or agency securities, or other acceptable collateral. In capital
shortage areas, the GSE is authorized, at the request of Federal
officials, to make insured loans directly to students. The GSE is
authorized to advance funds to State agencies that will provide loans to
students. The GSE is also authorized to provide a secondary market for
noninsured loans; to serve as a guarantee agency in support of loan
availability at the request of the Secretary of Education; to purchase
and underwrite student loan revenue bonds; to provide certain additional
services as determined by its board of directors to be supportive of the
credit needs of students generally; and to provide financing for
academic facilities and equipment. As described below, however, many of
these activities are limited or precluded under the privatization
legislation.
The GSE is authorized by the Health Professions Educational
Assistance Act of 1976 to provide a secondary market for federally
insured loans to graduate health professions students.
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 and serving, at the request
of the Secretary of Education, as a lender-of-last-resort. The GSE can
continue to make warehousing advances under contractual commitments
existing on August 7, 1997.
Operations.--The forecast data with respect to operations are based
on certain general economic and specific FFELP loan volume assumptions
and should not be relied upon as an official forecast of the
corporation's future business.

ANNUAL LOAN ACTIVITY

[In millions of dollars]

2002 actual 2003 est. 2004 est.
Guaranteed student loans:
Stafford:
Purchased....................... 8,098 8,489 9,577
Warehoused...................... 670 -- --
PLUS/SLS: Purchased............... 880 1,114 1,257
------------------------------------
Subtotal, Guaranteed student
loans....................... 9,648 9,603 10,834
Other............................... 3,597 5,669 6,396
------------------------------------
Total......................... 13,245 15,272 17,230
====================================

Financing.--The GSE is financed by borrowing in the private debt
markets and securitizing its assets. The GSE must

[[Page 1124]]

wind down and be liquidated by September 30, 2008 although the GSE has
announced that it expects to complete the wind-down and liquidation two
years earlier. All obligations of the GSE remaining upon liquidation
must be placed into a defeasance trust. The GSE's outstanding adjustable
rate cumulative preferred stock, which was required to be redeemed prior
to such date was redeemed on December 10, 2001.
The financial data contained in this material relating to future
periods represents estimates that have been prepared specifically for
inclusion in the President's Budget. These data should not be viewed as
official forecasts of the corporation's future position, nor should they
be used as a basis for making financial or investment decisions relating
to the corporation. The data have been developed on the basis of certain
economic assumptions that are subject to periodic review and revision.
Consequently, the estimates are subject to forecast error and actual
results from future business operations are likely to differ from these
data.

Statement of Operations (in millions of dollars)

-----------------------------------------------------------------------------------------------
Identification code 99-1500-0-3-502 2001 actual 2002 actual 2003 est. 2004 est.
-----------------------------------------------------------------------------------------------
0101 Revenue........................... 2,952 2,527
0102 Expense........................... -2,850 -1,861
------------ -------------- ------------ -------------
0105 Net income or loss (-)............ 102 666
-----------------------------------------------------------------------------------------------

Balance Sheet (in millions of dollars)

1102 Treasury securities, par........ 1,597 1,727 1,624 1,543
1104 Agency securities, par..........
1106 Receivables, net................ 1,207 953 658 605
1201 Investments in other securities,
net............................. 4,829 2,442 2,319 2,498
1206 Receivables, net.................. 1,669 1,865 1,287 1,184
1207 Advances and prepayments.......... 11 58 40 37
Net value of assets related to
direct loans receivable and
acquired defaulted guaranteed
loans receivable:

1601 Direct loans, gross............. 41,185 42,094 28,073 18,611
1603 Allowance for estimated
uncollectible loans and
interest (-).................. -153 -162 -108 -72
------------ -------------- ------------ -------------
1699 Value of assets related to
direct loans................ 41,032 41,932 27,965 18,539
1801 Cash and other monetary assets.... 71 70 49 45
1803 Property, plant and equipment, net
*...............................
1901 Other assets...................... 310 524 361 332
------------ -------------- ------------ -------------
1999 Total assets.................... 50,726 49,571 34,303 24,783
LIABILITIES:
2202 Interest payable.................. 332 311 218 157
2203 Debt.............................. 47,321 45,720 32,100 22,964
2207 Other............................. 1,762 1,633 1,143 823
------------ -------------- ------------ -------------
2999 Total liabilities............... 49,415 47,664 33,461 23,944
NET POSITION:
3300 Invested Capital.................. 1,311 1,907 842 839
------------ -------------- ------------ -------------
3999 Total net position.............. 1,311 1,907 842 839
------------ -------------- ------------ -------------
4999 Total liabilities and net position 50,726 49,571 34,303 24,783
-----------------------------------------------------------------------------------------------
* In the first quarter of 2001, in accordance with the Privatization
Act, the GSE transferred substantially all of its fixed assets and real
estate to certain private non-GSE entities in USA education.

FEDERAL NATIONAL MORTGAGE ASSOCIATION

Portfolio Programs

Status of Direct Loans (in millions of dollars)

----------------------------------------------------------------------------
Identification code 99-2500-0-3-371 2002 actual 2003 est. 2004 est.
----------------------------------------------------------------------------
1131 Direct loan obligations........... 345,928 459,822 229,093
--------- --------- ----------
1150 Total direct loan obligations..... 345,928 459,822 229,093
----------------------------------------------------------------------------

Cumulative balance of direct loans
outstanding:
1210 Outstanding, start of year........ 700,484 759,733 885,814
Disbursements:

1231 Direct loan disbursements....... 294,678 439,638 229,961
1232 Purchase of loans assets........ 9,790 1,561 1,053
1251 Repayments: Repayments and
prepayments..................... -249,905 -315,118 -127,135
1264 Write-offs for default: Other
adjustments, net................ 4,686
--------- --------- ----------
1290 Outstanding, end of year........ 759,733 885,814 989,693
---------------------------------------------------------------------------

The Federal National Mortgage Association (Fannie Mae) is a
federally-chartered, privately-owned company with a public mission to
provide stability and to increase the liquidity of the residential
mortgage market and to help increase the availability of mortgage credit
to low- and moderate-income families and in underserved areas. In
carrying out its mission, Fannie Mae engages primarily in two forms of
business: investing in portfolios of residential mortgages and
guaranteeing residential mortgage securities. As of September 30, 2002,
Fannie Mae held a net mortgage portfolio totaling $751 billion and had
net outstanding guaranteed mortgage-backed securities of $990 billion.
Through a federal charter, Congress has equipped Fannie Mae with
certain attributes to help it carry out its public mission. These
include an exemption from state and local taxes (except real property
taxes), and an exemption of its debt and mortgage securities from
Securities and Exchange Commission registration requirements. An
additional advantage is that the Secretary of the Treasury may purchase
and hold up to $2.25 billion of securities issued by Fannie Mae under
terms and conditions and at prices determined by the Secretary to be
appropriate. Securities guaranteed by Fannie Mae and debt issued by the
company are solely the corporation's obligations and are not backed by
the full faith and credit of the U.S. Government. The common stock of
the corporation is owned by the public, is fully transferable, and
trades on the New York, Midwest, and Pacific stock exchanges.
Fannie Mae was established in 1938 to assist private markets in
providing a steady supply of funds for housing. Fannie Mae was
originally a subsidiary of the Reconstruction Finance Corporation and
was permitted to purchase only loans insured by the Federal Housing
Administration (FHA). In 1954, Fannie Mae was restructured as a mixed
ownership (part government, part private) corporation. Congress sold the
government's remaining interest in Fannie Mae in 1968 and completed the
transformation to private shareholder ownership in 1970. Using the
proceeds from the sale of subordinated debentures, Fannie Mae paid the
Treasury $216 million for the government's preferred stock, which was
retired, and for the Treasury's interest in the corporation's earned
surplus. As a result, the corporation was taken off the federal budget.
In 1992, Congress reaffirmed and clarified Fannie Mae's role in the
housing finance system through charter act amendments included in the
Federal Housing Enterprises Financial Safety and Soundness Act of 1992
(``The Act''). Fannie

[[Page 1125]]

Mae's charter purposes, as amended by the Act, are: ``to provide
stability in the secondary market for residential mortgages; respond
appropriately to the private capital market; provide ongoing assistance
to the secondary market for residential mortgages (including activities
relating to mortgages on housing for low- and moderate-income families
involving a reasonable economic return that may be less than the return
earned on other activities); and promote access to mortgage credit
throughout the Nation (including central cities, rural areas, and
underserved areas) by increasing the liquidity of mortgage investments
and improving the distribution of investment capital for residential
mortgage financing.''
In December 1995, the U.S. Department of Housing and Urban
Development (HUD) set affordable housing goals for 1996-1999 and
established the requirements for counting mortgage purchases to low- and
moderate-income families and families living in underserved areas with
specific census tract and minority concentration requirements. Under
that regulations, the low- and moderate-income goal was 42 percent; the
geographically targeted goal was 24 percent and the special affordable
housing goal was 14 percent. These goals were also in effect for 2000.
Fannie Mae exceeded all of the housing goals in 2000 with low- and
moderate-income purchases at 49 percent, geographically targeted
purchases at 31 percent, and special affordable housing purchases at 19
percent.
In October 2000, HUD set new affordable housing goals for the period
covering 2001 to 2003. The goals are 50 percent for the low- and
moderate-income goal, 31 percent for the geographically targeted goal,
and 20 percent for the special affordable housing goal.
In 2001, Fannie Mae dramatically expanded the financing it provided
for low- and moderate- income households, and for minority households.
In 2001, Fannie Mae financed over $87 billion in loans to nearly 680,000
minority families. It also financed over $132 billion in loans to over
1,500,000 low- and moderate-income families. Fannie Mae exceeded all of
the housing goals in 2001. From 1996 to 2001, Fannie Mae increased its
low- and moderate-income purchases from 45.4 percent to 52.0 percent,
its underserved areas purchases from 28.2 percent to 32.5 percent, and
its purchases for the special afforable goal from 17.4 percent to 21.6
percent.
The Act also established the Office of Federal Housing Enterprise
Oversight (OFHEO), an independent office within HUD, headed by a
Director who reports directly to the Congress. OFHEO has statutory
responsibility for ensuring that Fannie Mae is adequately capitalized
and operating in a safe and sound manner. Included among the express
statutory authorities of the Director is the authority to conduct
examinations of the financial health of the company and to issue minimum
and risk-based capital standards. The minimum capital requirements are
computed from statutorily established ratios that are applied to the
assets and off-balance sheet risks of Fannie Mae. The risk-based capital
standard determines the amount of capital that Fannie Mae must hold to
withstand the impact of simultaneous adverse credit and interest rate
stresses over a 10-year period, plus an additional 30 percent to cover
management and operations risk. Total capital (shareholder's equity plus
allowance for loan losses) at the end of September 2002 was $27.278
billion. The company has continued to remain in compliance with
applicable capital standards and has been deemed adequately capitalized
by OFHEO since its first classification in June 1993.
On September 30, 2002, OFHEO implemented its resk-based capital
stress test for the first time, finding that as of that date Fannie
Mae's total capital of $27.278 billion exceeded the risk based capital
requirement by $5.838 billion. In addition, responding to the
President's call for corporate leaders to provide the most accurate,
timely, and useful information, Fannie Mae made a voluntary and
irrevocable decision to register its common stock with the Securities
and Exchange Commission under the Securities and Exchange Act of 1934.
For the four quarters ending September 2002, Fannie Mae earned $6.2
billion.
The financial data contained in this material relating to future
periods represent estimates that have been prepared specifically for
inclusion in the President's Budget. These data should not be viewed as
an official forecast of the corporation's future position, nor should
they be used as a basis for making financial or investment decisions
relating to the corporation. The data have been developed on the basis
of certain economic assumptions that are subject to periodic review and
revision. Consequently, the estimates are subject to forecast error and
actual results from future business operations are likely to differ from
these data.

Balance Sheet (in millions of dollars)

-----------------------------------------------------------------------------------------------
Identification code 99-2500-0-3-371 2001 actual 2002 actual 2003 est. 2004 est.
-----------------------------------------------------------------------------------------------
ASSETS:
1101 Fund balances..................... 267 10
Investments in US securities:

1102 Treasury securities, par........ 1,325 1,600
1104 Other........................... 58,342 51,758 56,255 71,067
Net value of assets related to
direct loans receivable and
acquired defaulted guaranteed
loans receivable:

1601 Direct loans (net of discount).. 655,318 728,723 880,524 972,594
1602 Federal Agencies................ 31,684 29,428 9,903 21,372
1603 Allowance for estimated
uncollectible loans and
interest (-).................. -201 -220 -260 -273
------------ -------------- ------------ -------------
1699 Value of assets related to
direct loans................ 686,801 757,931 890,167 993,693
1801 Cash and other monetary assets.... 19,686 26,141 7,417 10,741
1803 Property, plant and equipment, net 229 271
------------ -------------- ------------ -------------
1999 Total assets.................... 766,650 837,711 953,839 1,075,501
LIABILITIES:
2101 Accounts payable.................. 727 702
2102 Accrued interest payable.......... 8,628 9,248 10,011 11,029
2105 Other............................. 17 16
2203 Debt.............................. 726,992 800,255 909,686 1,023,547
2204 Estimated liability for loan
guarantees...................... 15,374 12,081 9,959 9,888
2206 Pension and other actuarial
liabilities..................... 402 444
2207 Subtotal, Federal taxes payable... 730 1
------------ -------------- ------------ -------------
2999 Total liabilities............... 752,870 822,747 929,656 1,044,464
NET POSITION:
Cumulative results of operations:

3300 Cumulative results of operations 24,541 28,779
3300 Change in Stockholder Equity.... -10,763 -13,815 24,183 31,037
------------ -------------- ------------ -------------
3999 Total net position.............. 13,778 14,964 24,183 31,037
------------ -------------- ------------ -------------
4999 Total liabilities and net position 766,650 837,711 953,839 1,075,501
-----------------------------------------------------------------------------------------------

mortgage-backed securities

Status of Direct Loans (in millions of dollars)

----------------------------------------------------------------------------
Identification code 99-2501-0-3-371 2002 actual 2003 est. 2004 est.
----------------------------------------------------------------------------
1131 Direct loan obligations........... 649,569 768,572 388,794
--------- --------- ----------
1150 Total direct loan obligations..... 649,569 768,572 388,794
----------------------------------------------------------------------------

Cumulative balance of direct loans
outstanding:
1210 Outstanding, start of year........ 1,228,131 1,458,945 1,637,638
1231 Disbursements: Direct loan
disbursements................... 623,991 768,572 388,794
1251 Repayments: Repayments and
prepayments..................... -393,177 -589,879 -259,625
--------- --------- ----------
1290 Outstanding, end of year........ 1,458,945 1,637,638 1,766,807
---------------------------------------------------------------------------

According to accounting practices for private corporations, the
mortgages in the pools of loans supporting the mortgage-backed
securities are considered to be owned by the holders of these
securities. Consequently, on the books of the Federal National Mortgage
Association (Fannie Mae), these mortgages

[[Page 1126]]

are not considered assets and the securities outstanding are not
considered liabilities. However, the concepts of the budget of the U.S.
Government consider these mortgages and mortgage-backed securities to be
assets and liabilities, respectively, of Fannie Mae. For the purposes of
this document, therefore, they are presented as assets and liabilities
in the accompanying schedules. On the schedule of Status of direct loans
for mortgage-backed securities, the items labeled ``New loans'' and
``Recoveries: Repayments and prepayments'' are budgetary terms. However,
from the Corporation's perspective, these items are ``Amounts issued''
and ``Amounts passed through to the holders of securities'',
respectively.
The financial data contained in this material relating to future
periods represent estimates that have been prepared specifically for
inclusion in the President's Budget. These data should not be viewed as
an official forecast of the corporation's future position, nor should
they be used as a basis for making financial or investment decisions
relating to the corporation. The data have been developed on the basis
of certain economic assumptions that are subject to periodic review and
revision. Consequently, the estimates are subject to forecast error and
actual results from future business operations are likely to differ from
these data.

Balance Sheet (in millions of dollars)

-----------------------------------------------------------------------------------------------
Identification code 99-2501-0-3-371 2001 actual 2002 actual 2003 est. 2004 est.
-----------------------------------------------------------------------------------------------
ASSETS:
Net value of assets related to
direct loans receivable and
acquired defaulted guaranteed
loans receivable:

1601 Direct loans, gross............. 1,228,734 1,459,533 1,638,221 1,767,397
1603 Allowance for estimated
uncollectible loans and
interest (-).................. -603 -588 -583 -590
------------ -------------- ------------ -------------
1699 Value of assets related to
direct loans................ 1,228,131 1,458,945 1,637,638 1,766,807
------------ -------------- ------------ -------------
1999 Total assets.................... 1,228,131 1,458,945 1,637,638 1,766,807
LIABILITIES:
2104 Resources payable................. 1,020,828 1,458,945 1,637,638 1,766,807
------------ -------------- ------------ -------------
2999 Total liabilities............... 1,020,828 1,458,945 1,637,638 1,766,807
-----------------------------------------------------------------------------------------------

FEDERAL HOME LOAN MORTGAGE CORPORATION

Portfolio Programs

Status of Direct Loans (in millions of dollars)

----------------------------------------------------------------------------
Identification code 99-4420-0-3-371 2002 actual 2003 est. 2004 est.
----------------------------------------------------------------------------
1131 Direct loan obligations........... 199,904 257,422 162,859
--------- --------- ----------
1150 Total direct loan obligations..... 199,904 257,422 162,859
----------------------------------------------------------------------------

Cumulative balance of direct loans
outstanding:
1210 Outstanding, start of year........ 470,850 530,694 586,800
1231 Disbursements: Direct loan
disbursements................... 199,904 257,422 162,859
1251 Repayments: Repayments and
prepayments..................... -140,060 -201,316 -101,959
--------- --------- ----------
1290 Outstanding, end of year........ 530,694 586,800 647,700
---------------------------------------------------------------------------

The Federal Home Loan Mortgage Corporation (Freddie Mac), is a
federally-charted, shareholder-owned, private company with a public
mission to provide stability and increase the liquidity of the
residential mortgage market, and to help increase the availability of
mortgage credit to low- and moderate-income families and in underserved
areas. In carrying out its mission, Freddie Mac engages primarily in two
forms of business: investing in portfolios of residential mortgages and
guaranteeing residential mortgage securities. As of September 30, 2002,
Freddie Mac held a net mortgage portfolio totaling $531 billion and had
net outstanding guaranteed mortgage-backed securities of $730 billion.
Through a federal charter, Congress has equipped Freddie Mac with
certain advantages over wholly private firms in carrying out these
activities. These advantages include an exemption from state and local
taxes (except real property taxes), and an exemption for their debt and
mortgage securities from SEC filing registration requirements. An
additional advantage is that the Secretary of the Treasury may purchase
and hold up to $2.25 billion of securities issued by Freddie Mac under
terms and conditions and at prices determined by the Secretary to be
appropriate. Securities guaranteed by Freddie Mac and debt issued by the
company are explicitly not backed by the full faith and credit of the
U.S. Government. The common stock of the corporation is owned by private
shareholders is fully transferable, and trades on the New York and
Pacific stock exchanges.
Freddie Mac was established in 1970 under the Emergency Home Finance
Act. Congress chartered Freddie Mac to provide mortgage lenders with an
organized national secondary market enabling them to manage their
conventional mortgage portfolio more effectively and gain indirect
access to a ready source of additional funds to meet new demands for
mortgages. Freddie Mac serves as a conduit facilitating the flow of
investment dollars from the capital markets to mortgage lenders, and
ultimately, to homebuyers, increasing the amount of mortgage credit
available and making it more affordable.
The Financial Institutions Reform, Recovery, and Enforcement Act of
1989 (FIRREA) significantly changed the corporate governance of Freddie
Mac. The company's three member Board of Directors, which had
corresponded with the Federal Home Loan Bank Board, was replaced with an
eighteen member Board of Directors. Thirteen board members are elected
annually by shareholders and five are annually appointed by the
President of the United States. In addition, FIRREA converted Freddie
Mac's 60 million shares of non-voting, senior participating preferred
stock into voting common stock. As a result, the corporation was taken
off the federal budget.
FIRREA also clarified Freddie Mac's role in the housing finance
delivery system through amendments to its charter act. Specifically,
FIRREA established Freddie Mac's public mission: ``to provide stability
in the secondary market for residential mortgages; respond appropriately
to the private capital market; and provide ongoing assistance to the
secondary market for residential mortgages (including activities
relating to mortgages on housing for low- and moderate-income families
involving a reasonable economic return that may be less than the return
earned on other activities.'' The Federal Housing Enterprise Financial
Safety and Soundness Act of 1992 (``The Act'') added to Freddie Mac's
public mission the promotion of ``access to mortgage credit throughout
the Nation (including central cities, rural areas, and underserved
areas) by increasing the liquidity of mortgage investments and improving
the distribution of investment capital for residential mortgage
financing.''
The Act also established affordable housing goals that are designed
to improve the flow of mortgage funds to low- and moderate-income
families and families in central cities, rural areas, and other
underserved areas. In December 1995, the U.S. Department of Housing and
Urban Development (HUD) affordable housing goals for 1996-1999 and
established the requirements for counting mortgage purchases for meeting
these goals. The goals provide that, of the total number of dwelling
units financed by Freddie Mac's mortgage purchases, 42 percent meet the
low- and moderate-income goal, 24 percent meet the geographically
targeted goal, and 14 percent

[[Page 1127]]

meet the special affordable goal. Additionally, within the special
affordable goal was a multifamily mortgage purchase target for Freddie
Mac of $1.0 billion. In an October 2000 rule, HUD applied the 1996-1999
goals to 2000 and established new goals for 2001-2003: 50 percent for
the low- and moderate-income goal, 31 percent for the geographically
targeted goal, 20 percent for the special affordable housing goal and a
multifamily target for Freddie Mac of $2.1 billion.
Freddie Mac exceeded all of the housing goals in 2001 with low- and
moderate-income purchases of 53.4 percent, geographically targeted
purchases of 31.7 percent, special affordable purchases of 22.6 percent,
and the multifamily portion of the special affordable purchases of $4.7
billion in qualifying multifamily mortgages.
The Act also enhanced the regulatory oversight of Freddie Mac by
establishing the Office of Federal Housing Enterprise Oversight (OFHEO),
an independent office within HUD, headed by a Director appointed by the
President. OFHEO is responsible for ensuring that Freddie Mac is
adequately capitalized and operating in a safe and sound manner.
Included among the express statutory authorities of the Director is the
authority to conduct examinations of the financial health of the company
and to issue minimum and risk-based capital standards. The minimum
capital requirements are computed from statutorily established ratios
that are applied to the assets and off-balance sheet risks of Freddie
Mac. The risk-based capital standard determines the amount of capital
that Freddie Mac must hold to withstand the impact of simultaneous
adverse credit and interest rate stresses over a 10-year period, plus an
additional amount to cover management and operations risk. OFHEO
published risk-based capital standards in September 2001 that became
fully enforceable in September 2002.
On September 30, 2002, OFHEO implemented its risk-based capital
stress test for the first time. On December 30, 2002, OFHEO announced
that as of September 30, Freddie Mac's total capital of $23.101 billion
exceeded its risk-based capital requirement by $18.182 billion and that
Freddie Mac's core capital of $22.656 billion exceeded its minimum
capital requirement by $2.118 billion. In addition, responding to the
President's call for the corporate leader to provide the most accurate,
timely, and useful information, Freddie Mac made a voluntary and
irrevocable decision to register its common stock with the Securities
and Exchange Commission under the Securities and Exchange Act of 1934.
For the four quarters ending September 2002, Freddie Mac recorded
net income of $4.75 billion.
The financial data contained in this material relating to future
periods represent estimates that have been prepared specifically for
inclusion in the President's budget. These data should not be viewed as
an official forecast of the corporation's future position, nor should
they be used as a basis for making financial or investment decisions
relating to the corporation. The data have been developed on the basis
of certain economic assumptions that are subject to periodic review and
revision. Consequently, the estimates are subject to forecast error and
actual results from future business operations are likely to differ from
these data.
According to generally accepted accounting principles utilized by
private corporations, the mortgages in the pools of loans supporting PCs
are considered to be owned by the holder of these securities. Therefore,
Freddie Mac does not show these mortgages as assets. However, the budget
philosophy of the United States Government includes these mortgages and
mortgages pass-through securities as assets and liabilities,
respectively, of Freddie Mac. For the purpose of this document,
therefore, they are presented as assets and liabilities in the
accompanying schedules. On the Status of Direct Loans schedule for
mortgage pass-through securities, the items labeled ``Disbursements''
and ``Repayments'' are budgetary terms. However, from Freddie Mac's
perspective, these amounts represent ``Sales of PCs'' and ``Amounts
passed through to PC holders,'' respectively.

Balance Sheet (in millions of dollars)

-----------------------------------------------------------------------------------------------
Identification code 99-4420-0-3-371 2001 actual 2002 actual 2003 est. 2004 est.
-----------------------------------------------------------------------------------------------
ASSETS:
1201 Investments in other securities,
net............................. 65,964 89,355 70,422 78,038
1206 Receivables, net.................. 22,762 31,024 23,732 22,020
Net value of assets related to
direct loans receivable and
acquired defaulted guaranteed
loans receivable:

1601 Retained mortgage inventory..... 475,213 542,568 595,562 655,901
1603 Allowances (-).................. -327 -153 -168 -185
------------ -------------- ------------ -------------
1699 Value of assets related to
direct loans................ 474,886 542,415 595,394 655,716
1801 Cash and other monetary assets.... 583 7,116 5,608 6,215
1803 Property, plant and equipment, net 774 1,095 838 777
1901 Other assets...................... 6,938 10,975 8,396 7,790
------------ -------------- ------------ -------------
1999 Total assets.................... 571,907 681,980 704,390 770,556
LIABILITIES:
2101 Accounts payable.................. 763 530 546 599
2202 Interest payable.................. 4,452 5,243 5,403 5,925
2203 Debt.............................. 531,312 618,651 637,561 699,126
2207 Other Liabilities................. 20,874 34,990 36,060 39,541
------------ -------------- ------------ -------------
2999 Total liabilities............... 557,401 659,414 679,570 745,191
NET POSITION:
3100 Invested capital.................. 14,506 22,566 24,820 25,365
------------ -------------- ------------ -------------
3999 Total net position.............. 14,506 22,566 24,820 25,365
------------ -------------- ------------ -------------
4999 Total liabilities and net position 571,907 681,980 704,390 770,556
-----------------------------------------------------------------------------------------------

Mortgage-Backed Securities

Status of Direct Loans (in millions of dollars)

----------------------------------------------------------------------------
Identification code 99-4440-0-3-371 2002 actual 2003 est. 2004 est.
----------------------------------------------------------------------------
1131 Direct loan obligations........... 342,244 431,996 209,536
--------- --------- ----------
1150 Total direct loan obligations..... 342,244 431,996 209,536
----------------------------------------------------------------------------

Cumulative balance of direct loans
outstanding:
1210 Outstanding, start of year........ 635,844 730,341 853,209
1231 Disbursements: Direct loan
disbursements................... 342,244 431,996 209,536
1251 Repayments: Repayments and
prepayments..................... -247,747 -309,128 -144,713
--------- --------- ----------
1290 Outstanding, end of year........ 730,341 853,209 918,032
---------------------------------------------------------------------------

Balance Sheet (in millions of dollars)

-----------------------------------------------------------------------------------------------
Identification code 99-4440-0-3-371 2001 actual 2002 actual 2003 est. 2004 est.
-----------------------------------------------------------------------------------------------
ASSETS:
1901 Underlying Mortgages.............. 635,844 730,341 853,209 918,032
------------ -------------- ------------ -------------
1999 Total assets.................... 635,844 730,341 853,209 918,032
LIABILITIES:
2104 Resources payable................. 635,844 730,341 853,209 918,032
------------ -------------- ------------ -------------
2999 Total liabilities............... 635,844 730,341 853,209 918,032
-----------------------------------------------------------------------------------------------

FARM CREDIT SYSTEM

The Farm Credit System is a government sponsored enterprise that
provides privately financed credit to agricultural and rural
communities. The major functional entities of the system are: (1)
Agricultural Credit Bank (ACB), (2) Farm Credit Banks (FCB), and (3)
direct lender associations. The history and specific functions of the
bank entities are discussed after the presentation of financial
schedules for each bank entity. As part of the Farm Credit System (FCS),
these entities are regulated and examined by the Farm Credit
Administration (FCA), an independent Federal agency. The ad

[[Page 1128]]

ministrative costs of FCA are financed by assessments of system
institutions. System banks finance loans from sales of bonds to the
public and their own capital funds. The system bonds issued by the banks
are not guaranteed by the U.S. Government either as to principal or
interest. The bonds are backed by an insurance fund, administered by the
Farm Credit System Insurance Corporation (FCSIC), an independent Federal
agency that collects insurance premiums from member banks to pay its
administrative expenses and fund insurance reserves. All of the banks'
current operating expenses are paid from their own income and do not
require budgetary resources from the Federal Government.

Agricultural Credit Bank

CoBank, ACB is headquartered in Denver, Colorado and serves eligible
cooperatives nationwide, and provides funding to Agricultural Credit
Associations (ACAs) in one of its regions. CoBank, ACB is the only
Agricultural Credit Bank in the Farm Credit System. An ACB operates
under statutory authority that combines the authorities of a FCB and a
Bank for Cooperatives (BC). In exercising its FCB authority, CoBank
ACB's charter limits its lending to ACAs located in the region
previously served by the Farm Credit Bank of Springfield. As an entity
lending to Cooperatives, CoBank is independently chartered to provide
credit and related services nationwide to eligible cooperatives
primarily engaged in farm supply, grain, marketing and processing
(including sugar and dairy). CoBank also makes loans to rural utilities,
including telecommunications companies and it provides international
loans for the financing of agricultural exports.

Status of Direct Loans (in millions of dollars)

----------------------------------------------------------------------------
Identification code 99-4130-0-3-351 2002 actual 2003 est. 2004 est.
----------------------------------------------------------------------------
1131 Direct loan obligations........... 71,546 75,000 75,000
--------- --------- ----------
1150 Total direct loan obligations..... 71,546 75,000 75,000
----------------------------------------------------------------------------

Cumulative balance of direct loans
outstanding:
1210 Outstanding, start of year........ 19,588 20,466 23,878
1231 Disbursements: Direct loan
disbursements................... 71,491 75,000 75,000
1251 Repayments: Repayments and
prepayments..................... -70,538 -71,646 -74,115
Write-offs for default:

1263 Direct loans.................... -75
1264 Other adjustments, net.......... 58 70
--------- --------- ----------
1290 Outstanding, end of year........ 20,466 23,878 24,833
---------------------------------------------------------------------------

Statement of Operations (in millions of dollars)

-----------------------------------------------------------------------------------------------
Identification code 99-4130-0-3-351 2001 actual 2002 actual 2003 est. 2004 est.
-----------------------------------------------------------------------------------------------
0101 Total interest income............. 1,689 1,226 1,456 1,514
0102 Total interest expense............ -1,223 -672 -926 -963
------------ -------------- ------------ -------------
0105 Net income or loss (-)............ 466 554 530 551
0111 Other income...................... 41 52 42 43
0112 Other expense..................... -301 -374 -320 -333
------------ -------------- ------------ -------------
0115 Net income or loss (-)............ -260 -322 -278 -290
------------ -------------- ------------ -------------
0191 Total revenues.................... 1,730 1,278 1,498 1,557
------------ -------------- ------------ -------------
0192 Total expenses.................... -1,524 -1,046 -1,246 -1,296
------------ -------------- ------------ -------------
0195 Total income or loss (-).......... 206 232 252 261
------------ -------------- ------------ -------------
0199 Total comprehensive income........ 206 232 252 261
-----------------------------------------------------------------------------------------------

Balance Sheet (in millions of dollars)

1601 Direct loans, gross............. 19,588 20,466 23,878 24,833
1603 Allowance for estimated
uncollectible loans and
interest (-).................. -324 -379 -411 -421
------------ -------------- ------------ -------------
1699 Value of assets related to
direct loans................ 19,264 20,087 23,467 24,412
1803 Property, plant and equipment, net 450 476 438 432
------------ -------------- ------------ -------------
1999 Total assets.................... 24,663 25,967 29,847 31,024
LIABILITIES:
2104 Resources payable................. 363 417 276 298
Accounts payable:

2201 Consolidated systemwide and
other bank bonds.............. 21,275 22,513 26,199 27,247
2201 Notes payable and other
interest-bearing liabilities.. 604 601 610 626
2202 Accrued interest payable.......... 222 149 152 155
------------ -------------- ------------ -------------
2999 Total liabilities............... 22,464 23,680 27,237 28,326
NET POSITION:
3300 Cumulative results of operations.. 2,199 2,287 2,610 2,698
------------ -------------- ------------ -------------
3999 Total net position.............. 2,199 2,287 2,610 2,698
------------ -------------- ------------ -------------
4999 Total liabilities and net position 24,663 25,967 29,847 31,024
-----------------------------------------------------------------------------------------------

Statement of Changes in Net Worth (in millions of dollars)

-----------------------------------------------------------------------------------------------
99-4130 2001 actual 2002 actual 2003 est. 2004 est.
-----------------------------------------------------------------------------------------------
Beginning balance of net worth.......... 1,753 2,199 2,287 2,610
============ ============== ============ =============

Capital stock and participations
issued.............................. 300 0 230 1
Capital stock and participations
retired............................. 58 72 75 82
Net income............................ 207 232 252 262
Cash/Dividends/Patronage Distributions (48) (79) (84) (93)
Other, net............................ 45 7 0 0
------------ -------------- ------------ -------------
Ending balance of net worth............. 2,199 2,287 2,610 2,698
-----------------------------------------------------------------------------------------------

Financing Activities (in millions of dollars)

-----------------------------------------------------------------------------------------------
99-4130 2001 actual 2002 actual 2003 est. 2004 est.
-----------------------------------------------------------------------------------------------
Beginning balance of outstanding system
obligations......................... 20,971 21,275 22,513 26,199
============ ============== ============ =============

Consolidated systemwide and other bank
bonds issued........................ 7,038 9,680 10,000 10,500
Consolidated systemwide and other bank
bonds retired....................... 6,897 8,252 6,324 9,462
Consolidated systemwide notes, net.... 162 12 10 10
Other (Net)........................... 0 (201) 0 0
------------ -------------- ------------ -------------
Ending balance of outstanding system
obligations......................... 21,275 22,513 26,199 27,247
-----------------------------------------------------------------------------------------------

Farm Credit Banks

Status of Direct Loans (in millions of dollars)

----------------------------------------------------------------------------
Identification code 99-4160-0-3-371 2002 actual 2003 est. 2004 est.
----------------------------------------------------------------------------
1131 Direct loan obligations........... 65,114 60,122 59,567
--------- --------- ----------
1150 Total direct loan obligations..... 65,114 60,122 59,567
----------------------------------------------------------------------------

Cumulative balance of direct loans
outstanding:
1210 Outstanding, start of year........ 52,445 58,165 60,690
1231 Disbursements: Direct loan
disbursements................... 65,102 59,034 58,426
1251 Repayments: Repayments and
prepayments..................... -59,380 -56,509 -56,259
1264 Write-offs for default: Other
adjustments, net................ -2
--------- --------- ----------
1290 Outstanding, end of year........ 58,165 60,690 62,857
---------------------------------------------------------------------------
Note.--Loans outstanding at end of year do not include nonaccrual
loans and sales contracts.

The Agricultural Credit Act of 1987 (1987 Act) required the Federal
Land Banks (FLBs) and Federal Intermediate Credit Banks (FICBs) to merge
into a Farm Credit Bank (FCB) in each of the 12 Farm Credit districts.
The FCBs

[[Page 1129]]

operate under statutory authority that combines the prior authorities of
the FLB and the FICB. No merger occurred in the Jackson district in 1988
because the FLB was in receivership. Pursuant to section 410(e) of the
1987 Act, as amended by the Farm Credit Banks Safety and Soundness Act
of 1992, the FICB of Jackson merged with the FCB of Columbia on October
1, 1993. Mergers and consolidations of FCBs across district lines, that
began in 1992 continued through mid-1995. As a result of this
restructuring activity, 6 FCBs headquartered in the following cities,
remain: AgFirst FCB, Columbia, South Carolina; AgriBank FCB, St. Paul,
Minnesota; FCB of Wichita, Wichita, Kansas; FCB of Texas, Austin, Texas;
and Western FCB, Sacramento, California.
The FCBs serve as discount banks and as of October 1, 2002 provided
funds to 15 Federal Land Credit Associations (FLCA), 3 Production Credit
Associations (PCAs), and 85 Agricultural Credit Associations (ACAs).
These direct lender associations, in turn, make short-term production
loans (PCAs and ACAs) and long-term real estate loans (FLCAs and ACAs)
to eligible farmers and ranchers. FCBs can also lend to local financing
institutions, including commercial banks, as authorized by the Farm
Credit Act of 1971, as amended.
All the capital stock of the FICB's, from organization in 1923 to
December 31, 1956, was held by the U.S. Government. The 1956 Act
provided a long-range plan for the eventual ownership of the credit
banks by the production credit associations and the gradual retirement
of the Government's investment in the banks. This retirement was
accomplished in full on December 31, 1968. The last of the Government
capital that had been invested in the FLB's was repaid in 1947.

Statement of Operations (in millions of dollars)

-----------------------------------------------------------------------------------------------
Identification code 99-4160-0-3-371 2001 actual 2002 actual 2003 est. 2004 est.
-----------------------------------------------------------------------------------------------
0101 Total interest income............. 3,631 2,646 2,607 2,826
0102 Total interest expense............ -3,076 -2,093 -2,077 -2,285
------------ -------------- ------------ -------------
0105 Net income or loss (-)............ 555 553 530 541
0111 Other income...................... 79 96 67 60
0112 Other expenses.................... -225 -133 -221 -217
------------ -------------- ------------ -------------
0115 Net income or loss (-)............ -146 -37 -154 -157
------------ -------------- ------------ -------------
0191 Total revenues.................... 3,710 2,742 2,674 2,886
------------ -------------- ------------ -------------
0192 Total expenses.................... -3,301 -2,226 -2,298 -2,502
------------ -------------- ------------ -------------
0195 Total income or loss (-).......... 409 516 376 384
------------ -------------- ------------ -------------
0199 Total comprehensive income........ 409 516 376 384
-----------------------------------------------------------------------------------------------

Balance Sheet (in millions of dollars)

1601 Direct loans, gross............. 52,446 58,169 61,873 65,281
1603 Allowance for estimated
uncollectible loans and
interest (-).................. -252 -153 -153 -154
------------ -------------- ------------ -------------
1699 Value of assets related to
direct loans................ 52,194 58,016 61,720 65,127
1803 Property, plant and equipment, net 396 412 349 357
------------ -------------- ------------ -------------
1999 Total assets.................... 63,698 69,472 74,349 78,354
LIABILITIES:
2104 Resources payable................. 443 513 517 517
Accounts payable:

2201 Consolidated systemwide and
other bank bonds.............. 58,010 63,794 68,438 72,203
2201 Notes payable and other
interest-bearing liabilities.. 360 370 297 301
2202 Accrued interest payable.......... 447 367 398 416
------------ -------------- ------------ -------------
2999 Total liabilities............... 59,260 65,044 69,650 73,437
NET POSITION:
3300 Cumulative results of operations.. 4,437 4,428 4,699 4,917
------------ -------------- ------------ -------------
3999 Total net position.............. 4,437 4,428 4,699 4,917
------------ -------------- ------------ -------------
4999 Total liabilities and net position 63,697 69,472 74,349 78,354
-----------------------------------------------------------------------------------------------

Statement of Changes in Net Worth (in millions of dollars)

-----------------------------------------------------------------------------------------------
99-4160 2001 actual 2002 actual 2003 est. 2004 est.
-----------------------------------------------------------------------------------------------
Beginning balance of net worth.......... 4,377 4,437 4,428 4,699
============ ============== ============ =============

Capital stock and participations
issued.............................. 93 80 109 82
Capital stock and participations
retired............................. 142 260 29 27
Surplus Retired....................... 9 2 16 0
Net income............................ 409 516 375 384
Cash/Dividends/Patronage Distributions (289) (247) (222) (229)
Other, net............................ (1) (97) 54 9
------------ -------------- ------------ -------------
Ending balance of net worth............. 4,437 4,428 4,699 4,917
-----------------------------------------------------------------------------------------------

Financing Activities (in millions of dollars)

--------------------------------------------------------------------
99-4160 2001 actual 2002 actual 2003 est. 2004 est.
--------------------------------------------------------------------
Beginning balance of outstanding system
obligations........................... 52,115 58,010 64,029 70,077
============== ============== ============= ==============

Consolidated systemwide and other bank
bonds issued........................ 38,723 50,737 52,063 55,383
Consolidated systemwide and other bank
bonds retired....................... 34,342 44,692 47,184 50,841
Consolidated systemwide notes, net.... 1,514 (26) 1,169 (453)
-------------- -------------- ------------- --------------

Ending balance of outstanding system
obligations........................... 58,010 64,029 70,077 74,165
-------------------------------------------------------------------------------------------------------

Federal Agricultural Mortgage Corporation

(Farmer Mac)

Farmer Mac is authorized under the Farm Credit Act of 1971 (the
Act), as amended by the Agricultural Credit Act of 1987, to create a
secondary market for agricultural real estate and rural home mortgages.
The Farmer Mac title of the Act was amended by the 1990 farm bill to
authorize Farmer Mac to purchase, pool, and securitize the guaranteed
portions of farmer program, rural business and community development
loans guaranteed by the United States Department of Agriculture (USDA).
The Farmer Mac title was further amended in 1991 to clarify Farmer Mac's
authority to issue debt obligations, provide for the establishment of
minimum capital standards, establish the Office of Secondary Market
Oversight at the Farm Credit Administration (FCA), and expand the
agency's rulemaking authority. Most recently, the Farm Credit System
Reform Act of 1996 (1996 Act) amended the Farmer Mac title to allow
Farmer Mac to purchase loans directly from lenders and to issue and
guarantee mortgage-backed securities without requiring that a minimum
cash reserve or subordinated (first loss) interest be maintained by
poolers as had been required under its original authority. The 1996 Act
expanded FCA's regulatory authority to include provisions for
establishing a conservatorship or receivership, if necessary, and
provided for increased core capital requirements at Farmer Mac phased in
over three years.
Farmer Mac operates through two programs, ``Farmer Mac I,'' which
involves mortgage loans secured by first liens on agricultural real
estate or rural housing (qualified loans), and ``Farmer Mac II,'' which
involves the guaranteed portions of USDA guaranteed loans. Farmer Mac
operates by: (i) purchasing, or committing to purchase, newly originated
or existing qualified loans or guaranteed portions from lenders; (ii)
purchasing ``AgVantage'' bonds backed by qualified loans or guaranteed
portions from lenders; and (iii) exchanging qualified loans or
guaranteed portions for guaranteed securities.

[[Page 1130]]

Loans purchased by Farmer Mac are aggregated into pools that back Farmer
Mac guaranteed securities which are held by Farmer Mac or sold into the
capital markets. Farmer Mac is intended to attract new capital for
financing qualified loans and guaranteed portions, foster increased
long-term, fixed-rate lending, and provide greater liquidity to
agricultural and rural lenders.
Farmer Mac is governed by a 15 member Board of Directors. Ten Board
members are elected by stockholders, including five by the Farm Credit
System and five by commercial lenders. Five are appointed by the
President, subject to Senate confirmation.

Financing

Financial support and funding for Farmer Mac's operations come from
several sources: sale of common and preferred stock; issuance of debt
obligations; and net income from operations. Under procedures specified
in the Act, Farmer Mac may issue obligations to the U.S. Treasury in a
cumulative amount not to exceed $1.5 billion to fulfill its guarantee
obligations.
As of September 30, 2002, Farmer Mac's core capital exceeded
statutory requirements. Additionally, Farmer Mac's regulatory capital
(core capital plus the allowance for loan loses) exceeded the amount of
required regulatory capital as determined by the risk-based capital
rule, with which Farmer Mac was required to be in compliance on May 23,
2002.

Guarantees

Farmer Mac provides a guarantee of timely payment of principal and
interest on securities backed by qualified loans or pools of qualified
loans. These securities are not guaranteed by the United States, and are
not ``government securities''.
Farmer Mac is subject to reporting requirements under securities
laws and its guaranteed mortgage-backed securities are subject to
registration with the Securities and Exchange Commission under the 1933
and 1934 Securities Acts.

Regulation

Farmer Mac is federally regulated by the FCA's Office of Secondary
Market Oversight (OSMO). OSMO is responsible for the supervision,
examination of and rulemaking for Farmer Mac.

Status of Guaranteed Loans (in millions of dollars)

----------------------------------------------------------------------------
Identification code 99-4180-0-3-351 2002 actual 2003 est. 2004 est.
----------------------------------------------------------------------------
2131 Guaranteed loan commitments....... 2,306 1,000 1,000
--------- --------- ----------
2150 Total guaranteed loan commitments. 2,306 1,000 1,000
----------------------------------------------------------------------------

Cumulative balance of guaranteed loans
outstanding:
2210 Outstanding, start of year........ 4,894 6,000 6,000
2231 Disbursements of new guaranteed
loans........................... 2,306 1,000 1,000
2251 Repayments and prepayments........ -1,200 -1,000 -1,000
--------- --------- ----------
2290 Outstanding, end of year........ 6,000 6,000 6,000
----------------------------------------------------------------------------

Memorandum:
2299 Guaranteed amount of guaranteed
loans outstanding, end of year.. 6,000 6,000 6,000
---------------------------------------------------------------------------

Statement of Operations (in millions of dollars)

-----------------------------------------------------------------------------------------------
Identification code 99-4180-0-3-351 2001 actual 2002 actual 2003 est. 2004 est.
-----------------------------------------------------------------------------------------------
Revenue:
0101 Net Interest Income............... 22 25 25 30
0101 Guarantee Fee Income.............. 10 12 12 15
0102 Expense........................... -23 -27 -27 -30
------------ -------------- ------------ -------------
0105 Net income or loss (-)............ 9 10 10 15
------------ -------------- ------------ -------------
0199 Total comprehensive income........ 9 10 10 15
-----------------------------------------------------------------------------------------------

Balance Sheet (in millions of dollars)

1401 Direct loans receivable, gross.. 1,998 2,198 2,198 2,000
1402 Interest receivable............. 46 55 55 75
------------ -------------- ------------ -------------
1499 Net present value of assets
related to direct loans..... 2,044 2,253 2,253 2,075
1801 Cash and other monetary assets.... 89 100 100 500
------------ -------------- ------------ -------------
1999 Total assets.................... 3,008 3,228 3,228 3,675
LIABILITIES:
2201 Accounts payable.................. 6 7 7 25
2202 Interest payable.................. 18 21 21 75
2203 Debt.............................. 2,870 3,074 3,064 3,385
2204 Liabilities for loan guarantees... 9 11 11 20
------------ -------------- ------------ -------------
2999 Total liabilities............... 2,903 3,113 3,103 3,505
NET POSITION:
3300 Invested capital.................. 105 115 125 170
------------ -------------- ------------ -------------
3999 Total net position.............. 105 115 125 170
------------ -------------- ------------ -------------
4999 Total liabilities and net position 3,008 3,228 3,228 3,675
-----------------------------------------------------------------------------------------------

FEDERAL HOME LOAN BANK SYSTEM

Federal Home Loan Banks

Status of Direct Loans (in millions of dollars)

-----------------------------------------------------------------------------------------------
Identification code 99-4200-0-3-371 2002 actual 2003 est. 2004 est.
-----------------------------------------------------------------------------------------------
1111 Limitation on direct loans........
1131 Direct loan obligations........... 3,684,259 3,684,259 3,684,259
------------ -------------- ------------
1150 Total direct loan obligations..... 3,684,259 3,684,259 3,684,259
--------------------------------------------------------------------------------------------------
Cumulative balance of direct loans
outstanding:
1210 Outstanding, start of year........ 489,413 537,812 537,812
1231 Disbursements: Direct loan
disbursements................... 3,684,259 3,684,386 3,684,386
1251 Repayments: Repayments and
prepayments..................... -3,644,317 -3,684,386 -3,684,386
1264 Write-offs for default: Other
adjustments, net................ 8,457
------------ -------------- ------------
1290 Outstanding, end of year........ 537,812 537,812 537,812
-----------------------------------------------------------------------------------------------

The 12 Federal Home Loan Banks were chartered by the Federal Home
Loan Bank Board under the authority of the Federal Home Loan Bank Act of
1932 (the Act). The FHLBanks are under the supervision of the Federal
Housing Finance Board. The common mission of the FHLBanks is to
facilitate the extension of credit through their members. To accomplish
this mission, the FHLBanks make loans, called advances, and provide
other credit products and services to their 7,992 member commercial
banks, savings associations, insurance companies, and credit unions.
Advances and letters of credit must be fully secured by eligible
collateral and long-term advances may be made only for the purpose of
providing funds for residential housing finance. However, ``community
financial institutions'' may also use long-term advances to finance
small businesses, small farms, and small agribusinesses. Additionally,
specialized advance programs provide funds for community reinvestment
and affordable housing programs. All regulated financial depositories
and insurance companies engaged in residential housing finance are
eligible for membership. Each FHLBank operates in a geographic district
designated by the Board and together the

[[Page 1131]]

FHLBanks cover all of the United States as well as the District of
Columbia, Puerto Rico, the Virgin Islands, Guam, American Samoa, and the
Northern Mariana Islands.
Advances outstanding on September 30, 2002 totaled approximately
$491 billion, a net increase of approximately $24 billion from the
September 30, 2001 level of $469 billion.
The principal source of funds for the lending operation is the sale
of consolidated obligations to the public. On September 30, 2002, $611
billion of these obligations were outstanding. The consolidated
obligations are not guaranteed by the U.S. Government as to principal or
interest. Other sources of lendable funds include members' deposits and
capital. Deposits totaled $29 billion and total capital amounted to $36
billion as of September 30, 2002. Funds not immediately needed for
advances to members are invested.
The capital stock of the Federal Home Loan Banks is owned entirely
by the members. Initially the U.S. Government purchased stock of the
banks in the amount of $125 million. The banks had repurchased the
Government's investment in full by mid-1951.
The operating expenses of the FHLBanks are paid from their own
income and are not included in the Budget of the United States. Included
in these expenses are the assessments by the Finance Board to cover its
administrative and other costs. The Finance Board's budget and
expenditures, however, are included in the budget of the United States.
The Act, as amended in 1989, requires each FHLBank to operate an
Affordable Housing Program (AHP). Each FHLBank provides subsidies in the
form of direct grants or below-market rate advances for members that use
the funds for qualifying affordable housing projects. The FHLBank System
sets aside for its AHPs the greater of $100 million annually or 10
percent of net income. The Act, as amended in 1999, also requires that
the FHLBanks contribute 20 percent of net earnings annually to assist in
the payment of interest on bonds issued by the Resolution Funding
Corporation.
The forecast data for 2003 and 2004 contained in this material
represents estimates and should not be construed as an official forecast
of the FHLBanks System's future position.

Statement of Operations (in millions of dollars)

-----------------------------------------------------------------------------------------------
Identification code 99-4200-0-3-371 2001 actual 2002 actual 2003 est. 2004 est.
-----------------------------------------------------------------------------------------------
0101 Revenue........................... 36,404 26,247 26,247 26,247
0102 Expense (excludes payments to
REFCORP)........................ -34,312 -23,830 -23,830 -23,830
------------ -------------- ------------ -------------
0105 Net income or loss (-)............ 2,092 2,417 2,417 2,417
-----------------------------------------------------------------------------------------------

Balance Sheet (in millions of dollars)

1102 Treasury securities, net........ 206 206 206 206
1201 Investments in other securities,
net............................. 193,470 215,261 215,261 215,261
1206 Accounts receivable............... 3,248 3,014 3,014 3,014
1401 Net value of assets related to
direct loans receivable: Direct
loans receivable, gross......... 489,413 537,812 537,812 537,812
1801 Cash and other monetary assets.... 1,013 573 573 573
1803 Property, plant and equipment, net 126 140 140 140
1901 Other assets...................... 3,712 4,223 4,223 4,223
------------ -------------- ------------ -------------
1999 Total assets.................... 691,188 761,229 761,229 761,229
LIABILITIES:
2101 REFCORP and Affordable Housing
Program......................... 778 822 822 822
2202 Interest payable.................. 5,538 5,383 5,383 5,383
2203 Debt.............................. 611,338 667,561 667,561 667,561
Other:

2207 Deposit funds and other
borrowings.................... 29,571 30,197 30,197 30,197
2207 Other........................... 10,839 21,312 21,312 21,312
------------ -------------- ------------ -------------
2999 Total liabilities............... 658,064 725,275 725,275 725,275
NET POSITION:
3100 Invested capital.................. 33,124 35,954 35,954 35,954
------------ -------------- ------------ -------------
3999 Total net position.............. 33,124 35,954 35,954 35,954
------------ -------------- ------------ -------------
4999 Total liabilities and net position 691,188 761,229 761,229 761,229
-----------------------------------------------------------------------------------------------