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



[[Page 1203]]

 
                    GOVERNMENT-SPONSORED ENTERPRISES

    This chapter contains descriptions of the 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, and their securities are not backed by the full faith and 
credit of the Federal Government. However, because of their public 
purpose, detailed statements of financial 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.

    --The Federal Home Loan Banks assist thrift institutions, banks, 
        insurance companies, and credit unions in providing financing 
        for housing and community development.

    --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.

                                


 
                   STUDENT LOAN MARKETING ASSOCIATION

                   Student Loan Marketing Association

               Status of Direct Loans (in millions of dollars)

----------------------------------------------------------------------------
Identification code 99-1500-0-3-502      2003 actual   2004 est.   2005 est.
----------------------------------------------------------------------------
1131  Direct loan obligations...........      14,146
                                           ---------   ---------  ----------
1150  Total direct loan obligations.....      14,146
----------------------------------------------------------------------------

    Cumulative balance of direct loans 
                outstanding:
1210  Outstanding, start of year........      41,932
1231  Disbursements: Direct loan 
        disbursements...................      14,146
      Repayments:

1251    Repayments and prepayments......      -1,889
1252    Proceeds from loan asset sales 
          or discounted.................     -26,266
1264  Write-offs for default: Other 
        adjustments, net................
                                           ---------   ---------  ----------
1290    Outstanding, end of year........      27,923
---------------------------------------------------------------------------
    Note: Consistent with Government-wide practice for GSEs, information 
for 2004 and 2005 was not required to be collected.

    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 reorganized in 1997 pursuant to the authority 
granted by the Student Loan Marketing Association Reorganization Act of 
1996. Under the Reorganization Act, the GSE became 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 SLM Corporation 
(then named 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. The GSE is 
authorized, at the request of Federal officials, to make insured loans 
directly to students as a lender of last resort. 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]

                                     2003 actual  2004 est.   2005 est.
Guaranteed student loans:
  Stafford:
    Purchased.......................       8,864       7,178       1,238
    Warehoused......................         253          --          --
  PLUS/SLS: Purchased...............         919         885         153
                                    ------------------------------------
      Subtotal, Guaranteed student 
        loans.......................      10,036       8,063       1,391
Other...............................       4,110       4,845         836
                                    ------------------------------------
      Total.........................      14,146      12,908       2,227
                                    ====================================

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

[[Page 1204]]

sance 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.

                             Balance Sheet (in millions of dollars)

-----------------------------------------------------------------------------------------------
Identification code   99-1500-0-3-502    2002 actual    2003 actual     2004 est.      2005 est.
-----------------------------------------------------------------------------------------------
    ASSETS:
      Investments in US securities:

1102    Treasury securities, par........       1,727          1,731
1104    Agency securities, par..........
1106    Receivables, net................         953            429
1201  Investments in other securities, 
        net.............................       2,442          1,408
1206  Receivables, net..................       1,865             29
1207  Advances and prepayments..........          58              9
      Net value of assets related to 
          direct loans receivable and 
          acquired defaulted guaranteed 
          loans receivable:

1601    Direct loans, gross.............      42,094         27,971
1603    Allowance for estimated 
          uncollectible loans and 
          interest (-)..................        -162            -48
                                        ------------ --------------  ------------  -------------
1699      Value of assets related to 
            direct loans................      41,932         27,923
1801  Cash and other monetary assets....          70             12
1803  Property, plant and equipment, net 
        *...............................
1901  Other assets......................         524            224
                                        ------------ --------------  ------------  -------------
1999    Total assets....................      49,571         31,765
    LIABILITIES:
2202  Interest payable..................         311            265
2203  Debt..............................      45,720         26,821
2207  Other.............................       1,633          2,331
                                        ------------ --------------  ------------  -------------
2999    Total liabilities...............      47,664         29,417
    NET POSITION:
3300  Invested Capital..................       1,907          2,348
                                        ------------ --------------  ------------  -------------
3999    Total net position..............       1,907          2,348
                                        ------------ --------------  ------------  -------------
4999  Total liabilities and net position      49,571         31,765
-----------------------------------------------------------------------------------------------
    Note: Consistent with Government-wide practice for GSEs, information 
for 2004 and 2005 was not required to be collected.
    * 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      2003 actual   2004 est.   2005 est.
----------------------------------------------------------------------------
1131  Direct loan obligations...........     627,557
                                           ---------   ---------  ----------
1150  Total direct loan obligations.....     627,557
----------------------------------------------------------------------------

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

1231    Direct loan disbursements.......     656,912
1232    Purchase of loans assets........       5,512
1251  Repayments: Repayments and 
        prepayments.....................    -493,141
1264  Write-offs for default: Other 
        adjustments, net................      -6,344
                                           ---------   ---------  ----------
1290    Outstanding, end of year........     922,672
---------------------------------------------------------------------------
    Note: Consistent with Government-wide practice for GSEs, information 
for 2004 and 2005 was not required to be collected.

    The Federal National Mortgage Association (Fannie Mae) is a 
Government-sponsored enterprise (GSE) in the housing finance market. On 
September 10, 2003 and October 16, 2003, the Secretaries of the 
Departments of Housing and Urban Development and the Treasury announced 
a proposal to strengthen regulation of all the housing GSEs, including 
Fannie Mae.
    As a housing GSE, 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, 2003, Fannie Mae held a net mortgage portfolio 
totaling $917 billion and had net outstanding guaranteed mortgage-backed 
securities of $1,211 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 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.''

[[Page 1205]]

                             Balance Sheet (in millions of dollars)

-----------------------------------------------------------------------------------------------
Identification code   99-2500-0-3-371    2002 actual    2003 actual     2004 est.      2005 est.
-----------------------------------------------------------------------------------------------
    ASSETS:
1101  Fund balances.....................          10             46
      Investments in US securities:

1102    Treasury securities, par........       1,600          1,150
1104    Other...........................      51,758         51,525
      Net value of assets related to 
          direct loans receivable and 
          acquired defaulted guaranteed 
          loans receivable:

1601    Direct loans (net of discount)..     728,723        902,445
1602    Federal Agencies................      29,428         18,813
1603    Allowance for estimated 
          uncollectible loans and 
          interest (-)..................        -220            -86
                                        ------------ --------------  ------------  -------------
1699      Value of assets related to 
            direct loans................     757,931        921,172
1801  Cash and other monetary assets....      26,141         45,003
1803  Property, plant and equipment, net         271            275
                                        ------------ --------------  ------------  -------------
1999    Total assets....................     837,711      1,019,171
    LIABILITIES:
2101  Accounts payable..................         702          1,449
2102  Accrued interest payable..........       9,248          9,139
2105  Other.............................          16             18
2203  Debt..............................     800,255        975,734
2204  Estimated liability for loan 
        guarantees......................      12,081         15,602
2206  Pension and other actuarial 
        liabilities.....................         444            487
2207  Subtotal, Federal taxes payable...           1           -782
                                        ------------ --------------  ------------  -------------
2999    Total liabilities...............     822,747      1,001,647
    NET POSITION:
3300  Cumulative results of operations..      28,779         49,425
3300  Change in Stockholder Equity......     -13,815        -31,901
                                        ------------ --------------  ------------  -------------
3999    Total net position..............      14,964         17,524
                                        ------------ --------------  ------------  -------------
4999  Total liabilities and net position     837,711      1,019,171
-----------------------------------------------------------------------------------------------
    Note: Consistent with Government-wide practice for GSEs, information 
for 2004 and 2005 was not required to be collected.

                                

                         mortgage-backed securities

               Status of Direct Loans (in millions of dollars)

----------------------------------------------------------------------------
Identification code 99-2501-0-3-371      2003 actual   2004 est.   2005 est.
----------------------------------------------------------------------------
1131  Direct loan obligations...........   1,255,963
                                           ---------   ---------  ----------
1150  Total direct loan obligations.....   1,255,963
----------------------------------------------------------------------------

    Cumulative balance of direct loans 
                outstanding:
1210  Outstanding, start of year........   1,458,945
1231  Disbursements: Direct loan 
        disbursements...................   1,255,963
1251  Repayments: Repayments and 
        prepayments.....................    -913,380
                                           ---------   ---------  ----------
1290    Outstanding, end of year........   1,801,528
---------------------------------------------------------------------------
    Note: Consistent with Government-wide practice for GSEs, information 
for 2004 and 2005 was not required to be collected.

    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 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.

                             Balance Sheet (in millions of dollars)

-----------------------------------------------------------------------------------------------
Identification code   99-2501-0-3-371    2002 actual    2003 actual     2004 est.      2005 est.
-----------------------------------------------------------------------------------------------
    ASSETS:
      Net value of assets related to 
          direct loans receivable and 
          acquired defaulted guaranteed 
          loans receivable:

1601    Direct loans, gross.............   1,459,533      1,802,241
1603    Allowance for estimated 
          uncollectible loans and 
          interest (-)..................        -588           -713
                                        ------------ --------------  ------------  -------------
1699      Value of assets related to 
            direct loans................   1,458,945      1,801,528
                                        ------------ --------------  ------------  -------------
1999    Total assets....................   1,458,945      1,801,528
    LIABILITIES:
2104  Resources payable.................   1,458,945      1,801,528
                                        ------------ --------------  ------------  -------------
2999    Total liabilities...............   1,458,945      1,801,528
-----------------------------------------------------------------------------------------------
    Note: Consistent with Government-wide practice for GSEs, information 
for 2004 and 2005 was not required to be collected.

                                


 
                 FEDERAL HOME LOAN MORTGAGE CORPORATION

                           Portfolio Programs

               Status of Direct Loans (in millions of dollars)

----------------------------------------------------------------------------
Identification code 99-4420-0-3-371      2003 actual   2004 est.   2005 est.
----------------------------------------------------------------------------
1131  Direct loan obligations...........
                                           ---------   ---------  ----------
1150  Total direct loan obligations.....
----------------------------------------------------------------------------

    Cumulative balance of direct loans 
                outstanding:
1210  Outstanding, start of year........
1231  Disbursements: Direct loan 
        disbursements...................
1251  Repayments: Repayments and 
        prepayments.....................
                                           ---------   ---------  ----------
1290    Outstanding, end of year........
---------------------------------------------------------------------------
    Note: Consistent with Government-wide practice for GSEs, information 
for 2004 and 2005 was not required to be collected.

    The Federal Home Loan Mortgage Corporation (Freddie Mac) is a 
Government-sponsored enterprise (GSE) in the housing finance market. On 
September 10, 2003 and October 16, 2003, the Secretaries of the 
Departments of Housing and Urban Development and the Treasury announced 
a proposal to strengthen regulation of all the housing GSEs, including 
Freddie Mac.
    As a housing GSE, 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.
    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 its 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.

[[Page 1206]]

    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.
    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. In addition, FIRREA converted 
Freddie Mac's 60 million shares of non-voting, senior participating 
preferred stock into voting common stock.
    Financial data for Freddie Mac is not presented here because the 
company has not yet reported financial results for 2003. In addition, on 
November 21, 2003, Freddie Mac announced the results of its restatement 
of previously issued consolidated financial statements for the years 
2000 and 2001 and the first three quarters of 2002 and the revision of 
fourth quarter and full-year consolidated financial statements for 2002 
(collectively referred to as the ``restatement''). This restatement has 
changed the data provided last year in the 2004 Budget. Restated data 
for 2002 has not yet been audited.

                             Balance Sheet (in millions of dollars)

-----------------------------------------------------------------------------------------------
Identification code   99-4420-0-3-371    2002 actual    2003 actual     2004 est.      2005 est.
-----------------------------------------------------------------------------------------------
    ASSETS:
1201  Investments in other securities, 
        net.............................
1206  Receivables, net..................
      Net value of assets related to 
          direct loans receivable and 
          acquired defaulted guaranteed 
          loans receivable:

1601    Retained mortgage inventory.....
1603    Allowances (-)..................
                                        ------------ --------------  ------------  -------------
1699      Value of assets related to 
            direct loans................
1801  Cash and other monetary assets....
1803  Property, plant and equipment, net
1901  Other assets......................
                                        ------------ --------------  ------------  -------------
1999    Total assets....................
    LIABILITIES:
2101  Accounts payable..................
2202  Interest payable..................
2203  Debt..............................
2207  Other Liabilities.................
                                        ------------ --------------  ------------  -------------
2999    Total liabilities...............
    NET POSITION:
3100  Invested capital..................
                                        ------------ --------------  ------------  -------------
3999    Total net position..............
                                        ------------ --------------  ------------  -------------
4999  Total liabilities and net position
-----------------------------------------------------------------------------------------------
    Note: Consistent with Government-wide practice for GSEs, information 
for 2004 and 2005 was not required to be collected.

                                

                       Mortgage-Backed Securities

               Status of Direct Loans (in millions of dollars)

----------------------------------------------------------------------------
Identification code 99-4440-0-3-371      2003 actual   2004 est.   2005 est.
----------------------------------------------------------------------------
1131  Direct loan obligations...........
                                           ---------   ---------  ----------
1150  Total direct loan obligations.....
----------------------------------------------------------------------------

    Cumulative balance of direct loans 
                outstanding:
1210  Outstanding, start of year........
1231  Disbursements: Direct loan 
        disbursements...................
1251  Repayments: Repayments and 
        prepayments.....................
                                           ---------   ---------  ----------
1290    Outstanding, end of year........
---------------------------------------------------------------------------
    Note: Consistent with Government-wide practice for GSEs, information 
for 2004 and 2005 was not required to be collected.

                             Balance Sheet (in millions of dollars)

-----------------------------------------------------------------------------------------------
Identification code   99-4440-0-3-371    2002 actual    2003 actual     2004 est.      2005 est.
-----------------------------------------------------------------------------------------------
    ASSETS:
1901  Underlying Mortgages..............
                                        ------------ --------------  ------------  -------------
1999    Total assets....................
    LIABILITIES:
2104  Resources payable.................
                                        ------------ --------------  ------------  -------------
2999    Total liabilities...............
-----------------------------------------------------------------------------------------------
    Note: Consistent with Government-wide practice for GSEs, information 
for 2004 and 2005 was not required to be collected.

                                


 
                      FEDERAL HOME LOAN BANK SYSTEM

                         Federal Home Loan Banks

               Status of Direct Loans (in millions of dollars)

----------------------------------------------------------------------------
Identification code  99-4200-0-3-371    2003 actual    2004 est.   2005 est.
----------------------------------------------------------------------------
1111  Limitation on direct loans........
1131  Direct loan obligations...........  5,625,130
                                        -----------  -----------  ----------
1150  Total direct loan obligations.....  5,625,130
  -------------------------------------------------------------------------
    Cumulative balance of direct loans outstanding:
1210  Outstanding, start of year........    537,812
1231  Disbursements: Direct loan 
        disbursements...................  5,625,130
1251  Repayments: Repayments and 
        prepayments..................... -5,545,018
1264  Write-offs for default: Other 
        adjustments, net................     -4,018
                                        -----------  -----------  ----------
1290    Outstanding, end of year........    613,906
----------------------------------------------------------------------------
    Note: Consistent with Government-wide practice for GSEs, information 
for 2004 and 2005 was not required to be collected.

    The Federal Home Loan Bank System is a Government-sponsored 
enterprise (GSE) in the housing finance market. On September 10, 2003 
and October 16, 2003, the Secretaries of the Departments of Housing and 
Urban Development and the Treasury announced a proposal to strengthen 
regulation of all the housing GSEs, including the Federal Home Loan Bank 
System.

    The 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 12 Federal Home Loan Banks (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 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.

[[Page 1207]]

    Advances outstanding on September 30, 2003 totaled approximately 
$506 billion, a net increase of approximately $15 billion from the 
September 30, 2002 level of $491 billion.

    The principal source of funds for the lending operation is the sale 
of consolidated obligations to the public. On September 30, 2003, $717 
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 $31 billion and total capital amounted to $39 
billion as of September 30, 2003. 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 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.

    In 2002, the Administration requested all GSEs, including the FHLBs, 
to voluntarily register their equity securities with the Securities and 
Exchange Commission (SEC). This voluntary registration is part of the 
Administration's efforts to have GSEs undergo the same scrutiny process 
as other corporate enterprises. The FHLBs have still not registered with 
the SEC, and, as a result, their financial statements are not subject to 
the same level of transparency and review as public companies. (Freddie 
Mac similarly has failed to commence registration with the SEC, in spite 
of its prior commitment to do so. Fannie Mae registered with the SEC 
effective March 31, 2003.)

                             Balance Sheet (in millions of dollars)

-----------------------------------------------------------------------------------------------
Identification code   99-4200-0-3-371    2002 actual    2003 actual     2004 est.      2005 est.
-----------------------------------------------------------------------------------------------
    ASSETS:
      Investments in US securities:

1102    Treasury securities, net........         206            220
1201  Investments in other securities, 
        net.............................     215,261        186,194
1206  Accounts receivable...............       3,014          2,657
1401  Net value of assets related to 
        direct loans receivable: Direct 
        loans receivable, gross.........     537,812        613,893
1801  Cash and other monetary assets....         573            791
1803  Property, plant and equipment, net         140            165
1901  Other assets......................       4,223          5,423
                                        ------------ --------------  ------------  -------------
1999    Total assets....................     761,229        809,343
    LIABILITIES:
2101  REFCORP and Affordable Housing 
        Program.........................         822            801
2202  Interest payable..................       5,383          4,759
2203  Debt..............................     667,561        716,886
2207  Deposit funds and other borrowings      30,197         31,138
2207  Other.............................      21,312         16,915
                                        ------------ --------------  ------------  -------------
2999    Total liabilities...............     725,275        770,499
    NET POSITION:
3100  Invested capital..................      35,954         38,844
                                        ------------ --------------  ------------  -------------
3999    Total net position..............      35,954         38,844
                                        ------------ --------------  ------------  -------------
4999  Total liabilities and net position     761,229        809,343
-----------------------------------------------------------------------------------------------
    Note: Consistent with Government-wide practice for GSEs, information 
for 2004 and 2005 was not required to be collected.


 
                           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 administrative 
costs of FCA are financed by assessments of system institutions and the 
Federal Agricultural Mortgage Corporation. 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 two of its regions. CoBank, ACB is the only 
Agricultural Credit Bank (ACB) in the Farm Credit System. An ACB 
operates under statutory authority that combines the authorities of a 
Farm Credit Bank (FCB) and a Bank for Cooperatives (BC). In exercising 
its FCB authority, CoBank ACB's charter limits its lending to ACAs 
located in the northeast and northwest regions of the country. 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      2003 actual   2004 est.   2005 est.
----------------------------------------------------------------------------
1111  Limitation on direct loans........
1131  Direct loan obligations...........      66,556
                                           ---------   ---------  ----------
1150  Total direct loan obligations.....      66,556
----------------------------------------------------------------------------

    Cumulative balance of direct loans 
                outstanding:
1210  Outstanding, start of year........      20,466
1231  Disbursements: Direct loan 
        disbursements...................      66,518
1251  Repayments: Repayments and 
        prepayments.....................     -63,486
      Write-offs for default:

1263    Direct loans....................         -35
1264    Other adjustments, net..........
                                           ---------   ---------  ----------
1290    Outstanding, end of year........      23,463
---------------------------------------------------------------------------
    Note: Consistent with Government-wide practice for GSEs, information 
for 2004 and 2005 was not required to be collected.

                             Balance Sheet (in millions of dollars)

-----------------------------------------------------------------------------------------------
Identification code   99-4130-0-3-351    2002 actual    2003 actual     2004 est.      2005 est.
-----------------------------------------------------------------------------------------------
    ASSETS:
1201  Cash and investment securities....       5,269          5,916
1206  Accrued interest receivable on 
        loans...........................         135            112

[[Page 1208]]

      Net value of assets related to 
          direct loans receivable and 
          acquired defaulted guaranteed 
          loans receivable:

1601    Direct loans, gross.............      20,466         23,463
1603    Allowance for estimated 
          uncollectible loans and 
          interest (-)..................        -379           -435
                                        ------------ --------------  ------------  -------------
1699      Value of assets related to 
            direct loans................      20,087         23,028
1803  Property, plant and equipment, net         476            428
                                        ------------ --------------  ------------  -------------
1999    Total assets....................      25,967         29,484
    LIABILITIES:
2104  Resources payable.................         417            309
2201  Consolidated systemwide and other 
        bank bonds......................      22,513         25,448
2201  Notes payable and other interest-
        bearing liabilities.............         601          1,003
2202  Accrued interest payable..........         149            132
                                        ------------ --------------  ------------  -------------
2999    Total liabilities...............      23,680         26,892
    NET POSITION:
3300  Cumulative results of operations..       2,287          2,592
                                        ------------ --------------  ------------  -------------
3999    Total net position..............       2,287          2,592
                                        ------------ --------------  ------------  -------------
4999  Total liabilities and net position      25,967         29,484
-----------------------------------------------------------------------------------------------
    Note: Consistent with Government-wide practice for GSEs, information 
for 2004 and 2005 was not required to be collected.

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

-----------------------------------------------------------------------------------------------
                      99-4130            2002 actual    2003 actual     2004 est.      2005 est.
-----------------------------------------------------------------------------------------------
Beginning balance of net worth..........       2,199          2,287         2,592          2,688
                                        ============ ==============  ============  =============

  Capital stock and participations 
    issued..............................           0            229             0              0
  Capital stock and participations 
    retired.............................          72            102            80             72
  Net income............................         232            256           267            275
  Cash/Dividends/Patronage Distributions        (79)           (92)          (91)           (94)
  Other, net............................           7             14             0              0
                                        ------------ --------------  ------------  -------------
Ending balance of net worth.............       2,287          2,592         2,688          2,797
-----------------------------------------------------------------------------------------------

                         Financing Activities (in millions of dollars)

-----------------------------------------------------------------------------------------------
                      99-4130            2002 actual    2003 actual     2004 est.      2005 est.
-----------------------------------------------------------------------------------------------
Beginning balance of outstanding system 
    obligations.........................      21,275         22,513        25,448         26,619
                                        ============ ==============  ============  =============

  Consolidated systemwide and other bank 
    bonds issued........................       9,680         13,958        10,000         11,000
  Consolidated systemwide and other bank 
    bonds retired.......................       8,252          8,974         8,929          9,980
  Consolidated systemwide notes, net....          12        (1,756)           100            100
  Other (Net)...........................       (201)          (292)             0              0
                                        ------------ --------------  ------------  -------------
Ending balance of outstanding system 
    obligations.........................      22,513         25,448        26,619         27,739
-----------------------------------------------------------------------------------------------

                                

                            Farm Credit Banks

               Status of Direct Loans (in millions of dollars)

----------------------------------------------------------------------------
Identification code 99-4160-0-3-371      2003 actual   2004 est.   2005 est.
----------------------------------------------------------------------------
1111  Limitation on direct loans........
1131  Direct loan obligations...........      74,678
                                           ---------   ---------  ----------
1150  Total direct loan obligations.....      74,678
----------------------------------------------------------------------------

    Cumulative balance of direct loans 
                outstanding:
1210  Outstanding, start of year........      58,165
1231  Disbursements: Direct loan 
        disbursements...................      76,160
1251  Repayments: Repayments and 
        prepayments.....................     -75,973
1264  Write-offs for default: Other 
        adjustments, net................           1
                                           ---------   ---------  ----------
1290    Outstanding, end of year........      58,353
---------------------------------------------------------------------------
    Note: Consistent with Government-wide practice for GSEs, information 
for 2004 and 2005 was not required to be collected.
    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 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 have continued to date. As a 
result of this restructuring activity, 4 FCBs headquartered in the 
following cities, remain: AgFirst FCB, Columbia, South Carolina; 
AgriBank FCB, St. Paul, Minnesota; U.S. Ag Bank, FCB, Wichita, Kansas; 
and FCB of Texas, Austin, Texas.
    The FCBs serve as discount banks and as of October 1, 2003 provided 
funds to 13 Federal Land Credit Associations (FLCA) and 86 Agricultural 
Credit Associations (ACAs). These direct lender associations, in turn, 
make short-term production loans and long-term real estate loans 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. 

                             Balance Sheet (in millions of dollars)

-----------------------------------------------------------------------------------------------
Identification code   99-4160-0-3-371    2002 actual    2003 actual     2004 est.      2005 est.
-----------------------------------------------------------------------------------------------
    ASSETS:
1201  Cash and investment securities....      10,514         13,931
1206  Accrued Interest Receivable.......         530            382
      Net value of assets related to 
          direct loans receivable and 
          acquired defaulted guaranteed 
          loans receivable:

1601    Direct loans, gross.............      58,169         58,353
1603    Allowance for estimated 
          uncollectible loans and 
          interest (-)..................        -153           -151
                                        ------------ --------------  ------------  -------------
1699      Value of assets related to 
            direct loans................      58,016         58,202
1803  Property, plant and equipment, net         412            408
                                        ------------ --------------  ------------  -------------
1999    Total assets....................      69,472         72,923
    LIABILITIES:
2104  Resources payable.................         513            335
2201  Consolidated systemwide and other 
        bank bonds......................      63,794         67,640
2201  Notes payable and other interest-
        bearing liabilities.............         370            409
2202  Accrued interest payable..........         367            355
                                        ------------ --------------  ------------  -------------
2999    Total liabilities...............      65,044         68,739
    NET POSITION:
3300  Cumulative results of operations..       4,428          4,184
                                        ------------ --------------  ------------  -------------
3999    Total net position..............       4,428          4,184
                                        ------------ --------------  ------------  -------------
4999  Total liabilities and net position      69,472         72,923
-----------------------------------------------------------------------------------------------
    Note: Consistent with Government-wide practice for GSEs, information 
for 2004 and 2005 was not required to be collected.

[[Page 1209]]

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

-----------------------------------------------------------------------------------------------
                      99-4160            2002 actual    2003 actual     2004 est.      2005 est.
-----------------------------------------------------------------------------------------------
Beginning balance of net worth..........       4,437          4,428         4,184          4,959
                                        ============ ==============  ============  =============

  Capital stock and participations 
    issued..............................          80            518           519             85
  Capital stock and participations 
    retired.............................         260            186            58             39
  Surplus Retired.......................           2              1         (230)              0
  Net income............................         516            369           357            403
  Cash/Dividends/Patronage Distributions       (247)          (383)         (272)          (268)
  Other, net............................        (97)          (560)             0              0
                                        ------------ --------------  ------------  -------------
Ending balance of net worth.............       4,428          4,184         4,959          5,140
-----------------------------------------------------------------------------------------------

              Financing Activities (in millions of dollars)

    --------------------------------------------------------------------
                    99-4160                 2002 actual     2003 actual      2004 est.      2005 est.
    --------------------------------------------------------------------
Beginning balance of outstanding system 
  obligations...........................           58,010          63,794         67,641          80,348
                                           ==============  ==============  =============  ==============

  Consolidated systemwide and other bank 
    bonds issued........................           50,737          55,816         52,723          54,522
  Consolidated systemwide and other bank 
    bonds retired.......................           44,692          45,027         47,553          48,581
  Consolidated systemwide notes, net....            (262)         (6,942)          7,537         (2,280)
                                           --------------  --------------  -------------  --------------

Ending balance of outstanding system 
  obligations...........................           63,794          67,641         80,348          84,009
-------------------------------------------------------------------------------------------------------

                                

                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 core 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. 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, 2003, 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      2003 actual   2004 est.   2005 est.
----------------------------------------------------------------------------
2131  Guaranteed loan commitments.......       1,000
                                           ---------   ---------  ----------
2150  Total guaranteed loan commitments.       1,000
----------------------------------------------------------------------------

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

    Memorandum:
2299  Guaranteed amount of guaranteed 
        loans outstanding, end of year..       6,000
---------------------------------------------------------------------------
    Note: Consistent with Government-wide practice for GSEs, information 
for 2004 and 2005 was not required to be collected.

                             Balance Sheet (in millions of dollars)

-----------------------------------------------------------------------------------------------
Identification code   99-4180-0-3-351    2002 actual    2003 actual     2004 est.      2005 est.
-----------------------------------------------------------------------------------------------
    ASSETS:
1201  Investment in securities..........         853          1,083
1206  Receivables, net..................           4             39
1207  Advances and prepayments..........          18             18
      Net value of assets related to 
          direct loans receivable:

1401    Direct loans receivable, gross..       2,198          2,501
1402    Interest receivable.............          55             42
                                        ------------ --------------  ------------  -------------
1499      Net present value of assets 
            related to direct loans.....       2,253          2,543
1801  Cash and other monetary assets....         100            513
                                        ------------ --------------  ------------  -------------
1999    Total assets....................       3,228          4,196

[[Page 1210]]

    LIABILITIES:
2201  Accounts payable..................           7             98
2202  Interest payable..................          21             30
2203  Debt..............................       3,074          3,838
2204  Liabilities for loan guarantees...          11             26
                                        ------------ --------------  ------------  -------------
2999    Total liabilities...............       3,113          3,992
    NET POSITION:
3300  Invested capital..................         115            204
                                        ------------ --------------  ------------  -------------
3999    Total net position..............         115            204
                                        ------------ --------------  ------------  -------------
4999  Total liabilities and net position       3,228          4,196
-----------------------------------------------------------------------------------------------
    Note: Consistent with Government-wide practice for GSEs, information 
for 2004 and 2005 was not required to be collected.

                                
