[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)

-----------------------------------------------------------------------------------------------
Identification code   99-1500-0-3-502    2001 actual    2002 actual     2003 est.      2004 est.
-----------------------------------------------------------------------------------------------
    ASSETS:
      Investments in US securities:

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)

-----------------------------------------------------------------------------------------------
Identification code   99-4130-0-3-351    2001 actual    2002 actual     2003 est.      2004 est.
-----------------------------------------------------------------------------------------------
    ASSETS:
1201  Cash and investment securities....       4,775          5,269         5,805          6,037
1206  Accrued interest receivable on 
        loans...........................         174            135           137            143
      Net value of assets related to 
          direct loans receivable and 
          acquired defaulted guaranteed 
          loans receivable:

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)

-----------------------------------------------------------------------------------------------
Identification code   99-4160-0-3-371    2001 actual    2002 actual     2003 est.      2004 est.
-----------------------------------------------------------------------------------------------
    ASSETS:
1201  Cash and investment securities....      10,431         10,514        11,769         12,335
1206  Accrued Interest Receivable.......         677            530           511            535
      Net value of assets related to 
          direct loans receivable and 
          acquired defaulted guaranteed 
          loans receivable:

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)

-----------------------------------------------------------------------------------------------
Identification code   99-4180-0-3-351    2001 actual    2002 actual     2003 est.      2004 est.
-----------------------------------------------------------------------------------------------
    ASSETS:
1201  Investment in securities..........         853            853           853          1,000
1206  Receivables, net..................           4              4             4             50
1207  Advances and prepayments..........          18             18            18             50
      Net value of assets related to 
          direct loans receivable:

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)

-----------------------------------------------------------------------------------------------
Identification code   99-4200-0-3-371    2001 actual    2002 actual     2003 est.      2004 est.
-----------------------------------------------------------------------------------------------
    ASSETS:
      Investments in US securities:

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
-----------------------------------------------------------------------------------------------
