[Congressional Record Volume 160, Number 56 (Monday, April 7, 2014)]
[House]
[Pages H2965-H2973]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
BUDGET AND ACCOUNTING TRANSPARENCY ACT OF 2014
General Leave
Mr. GARRETT. Mr. Speaker, I ask unanimous consent that all Members
may have 5 legislative days in which to revise and extend their remarks
on this bill, which is H.R. 1872, which is the Budget and Accounting
Transparency Act of 2014.
The SPEAKER pro tempore. Is there objection to the request of the
gentleman from New Jersey?
There was no objection.
Mr. GARRETT. Mr. Speaker, pursuant to House Resolution 539, I call up
the bill (H.R. 1872) to amend the Balanced Budget and Emergency Deficit
Control Act of 1985 to increase transparency in Federal budgeting, and
for other purposes, and ask for its immediate consideration.
The Clerk read the title of the bill.
The SPEAKER pro tempore. Pursuant to House Resolution 539, the
amendment in the nature of a substitute recommended by the Committee on
the Budget, printed in the bill is adopted. The bill, as amended, is
considered read.
The text of the bill, as amended, is as follows:
H.R. 1872
Be it enacted by the Senate and House of Representatives of
the United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Budget and Accounting
Transparency Act of 2014''.
TITLE I--FAIR VALUE ESTIMATES
SEC. 101. CREDIT REFORM.
(a) In General.--Title V of the Congressional Budget Act of
1974 is amended to read as follows:
``TITLE V--FAIR VALUE
``SEC. 500. SHORT TITLE.
``This title may be cited as the `Fair Value Accounting Act
of 2014'.
``SEC. 501. PURPOSES.
``The purposes of this title are to--
``(1) measure more accurately the costs of Federal credit
programs by accounting for them on a fair value basis;
``(2) place the cost of credit programs on a budgetary
basis equivalent to other Federal spending;
``(3) encourage the delivery of benefits in the form most
appropriate to the needs of beneficiaries; and
``(4) improve the allocation of resources among Federal
programs.
``SEC. 502. DEFINITIONS.
``For purposes of this title:
``(1) The term `direct loan' means a disbursement of funds
by the Government to a non-Federal borrower under a contract
that requires the repayment of such funds with or without
interest. The term includes the purchase of, or participation
in, a loan made by another lender and financing arrangements
that defer payment for more than 90 days, including the sale
of a Government asset on credit terms. The term does not
include the acquisition of a federally guaranteed loan in
satisfaction of default claims or the price support loans of
the Commodity Credit Corporation.
``(2) The term `direct loan obligation' means a binding
agreement by a Federal agency to make a direct loan when
specified conditions are fulfilled by the borrower.
``(3) The term `loan guarantee' means any guarantee,
insurance, or other pledge with respect to the payment of all
or a part of the principal or interest on any debt obligation
of a
[[Page H2966]]
non-Federal borrower to a non-Federal lender, but does not
include the insurance of deposits, shares, or other
withdrawable accounts in financial institutions.
``(4) The term `loan guarantee commitment' means a binding
agreement by a Federal agency to make a loan guarantee when
specified conditions are fulfilled by the borrower, the
lender, or any other party to the guarantee agreement.
``(5)(A) The term `cost' means the sum of the Treasury
discounting component and the risk component of a direct loan
or loan guarantee, or a modification thereof.
``(B) The Treasury discounting component shall be the
estimated long-term cost to the Government of a direct loan
or loan guarantee, or modification thereof, calculated on a
net present value basis, excluding administrative costs and
any incidental effects on governmental receipts or outlays.
``(C) The risk component shall be an amount equal to the
difference between--
``(i) the estimated long-term cost to the Government of a
direct loan or loan guarantee, or modification thereof,
estimated on a fair value basis, applying the guidelines set
forth by the Financial Accounting Standards Board in
Financial Accounting Standards #157, or a successor thereto,
excluding administrative costs and any incidental effects on
governmental receipts or outlays; and
``(ii) the Treasury discounting component of such direct
loan or loan guarantee, or modification thereof.
``(D) The Treasury discounting component of a direct loan
shall be the net present value, at the time when the direct
loan is disbursed, of the following estimated cash flows:
``(i) Loan disbursements.
``(ii) Repayments of principal.
``(iii) Essential preservation expenses, payments of
interest and other payments by or to the Government over the
life of the loan after adjusting for estimated defaults,
prepayments, fees, penalties, and other recoveries, including
the effects of changes in loan terms resulting from the
exercise by the borrower of an option included in the loan
contract.
``(E) The Treasury discounting component of a loan
guarantee shall be the net present value, at the time when
the guaranteed loan is disbursed, of the following estimated
cash flows:
``(i) Payments by the Government to cover defaults and
delinquencies, interest subsidies, essential preservation
expenses, or other payments.
``(ii) Payments to the Government including origination and
other fees, penalties, and recoveries, including the effects
of changes in loan terms resulting from the exercise by the
guaranteed lender of an option included in the loan guarantee
contract, or by the borrower of an option included in the
guaranteed loan contract.
``(F) The cost of a modification is the sum of--
``(i) the difference between the current estimate of the
Treasury discounting component of the remaining cash flows
under the terms of a direct loan or loan guarantee and the
current estimate of the Treasury discounting component of the
remaining cash flows under the terms of the contract, as
modified; and
``(ii) the difference between the current estimate of the
risk component of the remaining cash flows under the terms of
a direct loan or loan guarantee and the current estimate of
the risk component of the remaining cash flows under the
terms of the contract as modified.
``(G) In estimating Treasury discounting components, the
discount rate shall be the average interest rate on
marketable Treasury securities of similar duration to the
cash flows of the direct loan or loan guarantee for which the
estimate is being made.
``(H) When funds are obligated for a direct loan or loan
guarantee, the estimated cost shall be based on the current
assumptions, adjusted to incorporate the terms of the loan
contract, for the fiscal year in which the funds are
obligated.
``(6) The term `program account' means the budget account
into which an appropriation to cover the cost of a direct
loan or loan guarantee program is made and from which such
cost is disbursed to the financing account.
``(7) The term `financing account' means the nonbudget
account or accounts associated with each program account
which holds balances, receives the cost payment from the
program account, and also includes all other cash flows to
and from the Government resulting from direct loan
obligations or loan guarantee commitments made on or after
October 1, 1991.
``(8) The term `liquidating account' means the budget
account that includes all cash flows to and from the
Government resulting from direct loan obligations or loan
guarantee commitments made prior to October 1, 1991. These
accounts shall be shown in the budget on a cash basis.
``(9) The term `modification' means any Government action
that alters the estimated cost of an outstanding direct loan
(or direct loan obligation) or an outstanding loan guarantee
(or loan guarantee commitment) from the current estimate of
cash flows. This includes the sale of loan assets, with or
without recourse, and the purchase of guaranteed loans (or
direct loan obligations) or loan guarantees (or loan
guarantee commitments) such as a change in collection
procedures.
``(10) The term `current' has the same meaning as in
section 250(c)(9) of the Balanced Budget and Emergency
Deficit Control Act of 1985.
``(11) The term `Director' means the Director of the Office
of Management and Budget.
``(12) The term `administrative costs' means costs related
to program management activities, but does not include
essential preservation expenses.
``(13) The term `essential preservation expenses' means
servicing and other costs that are essential to preserve the
value of loan assets or collateral.
``SEC. 503. OMB AND CBO ANALYSIS, COORDINATION, AND REVIEW.
``(a) In General.--For the executive branch, the Director
shall be responsible for coordinating the estimates required
by this title. The Director shall consult with the agencies
that administer direct loan or loan guarantee programs.
``(b) Delegation.--The Director may delegate to agencies
authority to make estimates of costs. The delegation of
authority shall be based upon written guidelines,
regulations, or criteria consistent with the definitions in
this title.
``(c) Coordination With the Congressional Budget Office.--
In developing estimation guidelines, regulations, or criteria
to be used by Federal agencies, the Director shall consult
with the Director of the Congressional Budget Office.
``(d) Improving Cost Estimates.--The Director and the
Director of the Congressional Budget Office shall coordinate
the development of more accurate data on historical
performance and prospective risk of direct loan and loan
guarantee programs. They shall annually review the
performance of outstanding direct loans and loan guarantees
to improve estimates of costs. The Office of Management and
Budget and the Congressional Budget Office shall have access
to all agency data that may facilitate the development and
improvement of estimates of costs.
``(e) Historical Credit Programs Costs.--The Director shall
review, to the extent possible, historical data and develop
the best possible estimates of adjustments that would convert
aggregate historical budget data to credit reform accounting.
``SEC. 504. BUDGETARY TREATMENT.
``(a) President's Budget.--Beginning with fiscal year 2017,
the President's budget shall reflect the costs of direct loan
and loan guarantee programs. The budget shall also include
the planned level of new direct loan obligations or loan
guarantee commitments associated with each appropriations
request. For each fiscal year within the five-fiscal year
period beginning with fiscal year 2017, such budget shall
include, on an agency-by-agency basis, subsidy estimates and
costs of direct loan and loan guarantee programs with and
without the risk component.
``(b) Appropriations Required.--Notwithstanding any other
provision of law, new direct loan obligations may be incurred
and new loan guarantee commitments may be made for fiscal
year 2017 and thereafter only to the extent that--
``(1) new budget authority to cover their costs is provided
in advance in an appropriation Act;
``(2) a limitation on the use of funds otherwise available
for the cost of a direct loan or loan guarantee program has
been provided in advance in an appropriation Act; or
``(3) authority is otherwise provided in appropriation
Acts.
``(c) Exemption for Direct Spending Programs.--Subsections
(b) and (e) shall not apply to--
``(1) any direct loan or loan guarantee program that
constitutes an entitlement (such as the guaranteed student
loan program or the veteran's home loan guaranty program);
``(2) the credit programs of the Commodity Credit
Corporation existing on the date of enactment of this title;
or
``(3) any direct loan (or direct loan obligation) or loan
guarantee (or loan guarantee commitment) made by the Federal
National Mortgage Association or the Federal Home Loan
Mortgage Corporation.
``(d) Budget Accounting.--
``(1) The authority to incur new direct loan obligations,
make new loan guarantee commitments, or modify outstanding
direct loans (or direct loan obligations) or loan guarantees
(or loan guarantee commitments) shall constitute new budget
authority in an amount equal to the cost of the direct loan
or loan guarantee in the fiscal year in which definite
authority becomes available or indefinite authority is used.
Such budget authority shall constitute an obligation of the
program account to pay to the financing account.
``(2) The outlays resulting from new budget authority for
the cost of direct loans or loan guarantees described in
paragraph (1) shall be paid from the program account into the
financing account and recorded in the fiscal year in which
the direct loan or the guaranteed loan is disbursed or its
costs altered.
``(3) All collections and payments of the financing
accounts shall be a means of financing.
``(e) Modifications.--An outstanding direct loan (or direct
loan obligation) or loan guarantee (or loan guarantee
commitment) shall not be modified in a manner that increases
its costs unless budget authority for the additional cost has
been provided in advance in an appropriation Act.
``(f) Reestimates.--When the estimated cost for a group of
direct loans or loan guarantees for a given program made in a
single fiscal year is re-estimated in a subsequent year, the
difference between the reestimated cost and the previous cost
estimate shall be displayed as a distinct and separately
identified subaccount in the program account as a change in
program costs and a change in net interest. There is hereby
provided permanent indefinite authority for these re-
estimates.
``(g) Administrative Expenses.--All funding for an agency's
administrative costs associated with a direct loan or loan
guarantee program shall be displayed as distinct and
separately identified subaccounts within the same budget
account as the program's cost.
``SEC. 505. AUTHORIZATIONS.
``(a) Authorization for Financing Accounts.--In order to
implement the accounting required by this title, the
President is authorized to establish such non-budgetary
accounts as may be appropriate.
``(b) Treasury Transactions With the Financing Accounts.--
[[Page H2967]]
``(1) In general.--The Secretary of the Treasury shall
borrow from, receive from, lend to, or pay to the financing
accounts such amounts as may be appropriate. The Secretary of
the Treasury may prescribe forms and denominations,
maturities, and terms and conditions for the transactions
described in the preceding sentence, except that the rate of
interest charged by the Secretary on lending to financing
accounts (including amounts treated as lending to financing
accounts by the Federal Financing Bank (hereinafter in this
subsection referred to as the `Bank') pursuant to section
405(b)) and the rate of interest paid to financing accounts
on uninvested balances in financing accounts shall be the
same as the rate determined pursuant to section 502(5)(G).
``(2) Loans.--For guaranteed loans financed by the Bank and
treated as direct loans by a Federal agency pursuant to
section 406(b)(1), any fee or interest surcharge (the amount
by which the interest rate charged exceeds the rate
determined pursuant to section 502(5)(G) that the Bank
charges to a private borrower pursuant to section 6(c) of the
Federal Financing Bank Act of 1973 shall be considered a cash
flow to the Government for the purposes of determining the
cost of the direct loan pursuant to section 502(5). All such
amounts shall be credited to the appropriate financing
account.
``(3) Reimbursement.--The Bank is authorized to require
reimbursement from a Federal agency to cover the
administrative expenses of the Bank that are attributable to
the direct loans financed for that agency. All such payments
by an agency shall be considered administrative expenses
subject to section 504(g). This subsection shall apply to
transactions related to direct loan obligations or loan
guarantee commitments made on or after October 1, 1991.
``(4) Authority.--The authorities provided in this
subsection shall not be construed to supersede or override
the authority of the head of a Federal agency to administer
and operate a direct loan or loan guarantee program.
``(5) Title 31.--All of the transactions provided in the
subsection shall be subject to the provisions of subchapter
II of chapter 15 of title 31, United States Code.
``(6) Treatment of cash balances.--Cash balances of the
financing accounts in excess of current requirements shall be
maintained in a form of uninvested funds and the Secretary of
the Treasury shall pay interest on these funds. The Secretary
of the Treasury shall charge (or pay if the amount is
negative) financing accounts an amount equal to the risk
component for a direct loan or loan guarantee, or
modification thereof. Such amount received by the Secretary
of the Treasury shall be a means of financing and shall not
be considered a cash flow of the Government for the purposes
of section 502(5).
``(c) Authorization for Liquidating Accounts.--(1) Amounts
in liquidating accounts shall be available only for payments
resulting from direct loan obligations or loan guarantee
commitments made prior to October 1, 1991, for--
``(A) interest payments and principal repayments to the
Treasury or the Federal Financing Bank for amounts borrowed;
``(B) disbursements of loans;
``(C) default and other guarantee claim payments;
``(D) interest supplement payments;
``(E) payments for the costs of foreclosing, managing, and
selling collateral that are capitalized or routinely deducted
from the proceeds of sales;
``(F) payments to financing accounts when required for
modifications;
``(G) administrative costs and essential preservation
expenses, if--
``(i) amounts credited to the liquidating account would
have been available for administrative costs and essential
preservation expenses under a provision of law in effect
prior to October 1, 1991; and
``(ii) no direct loan obligation or loan guarantee
commitment has been made, or any modification of a direct
loan or loan guarantee has been made, since September 30,
1991; or
``(H) such other payments as are necessary for the
liquidation of such direct loan obligations and loan
guarantee commitments.
``(2) Amounts credited to liquidating accounts in any year
shall be available only for payments required in that year.
Any unobligated balances in liquidating accounts at the end
of a fiscal year shall be transferred to miscellaneous
receipts as soon as practicable after the end of the fiscal
year.
``(3) If funds in liquidating accounts are insufficient to
satisfy obligations and commitments of such accounts, there
is hereby provided permanent, indefinite authority to make
any payments required to be made on such obligations and
commitments.
``(d) Reinsurance.--Nothing in this title shall be
construed as authorizing or requiring the purchase of
insurance or reinsurance on a direct loan or loan guarantee
from private insurers. If any such reinsurance for a direct
loan or loan guarantee is authorized, the cost of such
insurance and any recoveries to the Government shall be
included in the calculation of the cost.
``(e) Eligibility and Assistance.--Nothing in this title
shall be construed to change the authority or the
responsibility of a Federal agency to determine the terms and
conditions of eligibility for, or the amount of assistance
provided by a direct loan or a loan guarantee.
``SEC. 506. TREATMENT OF DEPOSIT INSURANCE AND AGENCIES AND
OTHER INSURANCE PROGRAMS.
``This title shall not apply to the credit or insurance
activities of the Federal Deposit Insurance Corporation,
National Credit Union Administration, Resolution Trust
Corporation, Pension Benefit Guaranty Corporation, National
Flood Insurance, National Insurance Development Fund, Crop
Insurance, or Tennessee Valley Authority.
``SEC. 507. EFFECT ON OTHER LAWS.
``(a) Effect on Other Laws.--This title shall supersede,
modify, or repeal any provision of law enacted prior to the
date of enactment of this title to the extent such provision
is inconsistent with this title. Nothing in this title shall
be construed to establish a credit limitation on any Federal
loan or loan guarantee program.
``(b) Crediting of Collections.--Collections resulting from
direct loans obligated or loan guarantees committed prior to
October 1, 1991, shall be credited to the liquidating
accounts of Federal agencies. Amounts so credited shall be
available, to the same extent that they were available prior
to the date of enactment of this title, to liquidate
obligations arising from such direct loans obligated or loan
guarantees committed prior to October 1, 1991, including
repayment of any obligations held by the Secretary of the
Treasury or the Federal Financing Bank. The unobligated
balances of such accounts that are in excess of current needs
shall be transferred to the general fund of the Treasury.
Such transfers shall be made from time to time but, at least
once each year.''.
(b) Conforming Amendment.--The table of contents set forth
in section 1(b) of the Congressional Budget and Impoundment
Control Act of 1974 is amended by striking the items relating
to title V and inserting the following:
``TITLE V--FAIR VALUE
``Sec. 500. Short title.
``Sec. 501. Purposes.
``Sec. 502. Definitions.
``Sec. 503. OMB and CBO analysis, coordination, and review.
``Sec. 504. Budgetary treatment.
``Sec. 505. Authorizations.
``Sec. 506. Treatment of deposit insurance and agencies and other
insurance programs.
``Sec. 507. Effect on other laws.''.
SEC. 102. BUDGETARY ADJUSTMENT.
(a) In General.--Section 251(b)(1) of the Balanced Budget
and Emergency Deficit Control Act of 1985 is amended by
adding at the end the following new sentence: ``A change in
discretionary spending solely as a result of the amendment to
title V of the Congressional Budget Act of 1974 made by the
Budget and Accounting Transparency Act of 2014 shall be
treated as a change of concept under this paragraph.''.
(b) Report.--Before adjusting the discretionary caps
pursuant to the authority provided in subsection (a), the
Office of Management and Budget shall report to the
Committees on the Budget of the House of Representatives and
the Senate on the amount of that adjustment, the methodology
used in determining the size of that adjustment, and a
program-by-program itemization of the components of that
adjustment.
(c) Schedule.--The Office of Management and Budget shall
not make an adjustment pursuant to the authority provided in
subsection (a) sooner than 60 days after providing the report
required in subsection (b).
SEC. 103. EFFECTIVE DATE.
The amendments made by section 101 shall take effect
beginning with fiscal year 2017.
TITLE II--BUDGETARY TREATMENT
SEC. 201. CBO AND OMB STUDIES RESPECTING BUDGETING FOR COSTS
OF FEDERAL INSURANCE PROGRAMS.
Not later than 1 year after the date of enactment of this
Act, the Directors of the Congressional Budget Office and of
the Office of Management and Budget shall each prepare a
study and make recommendations to the Committees on the
Budget of the House of Representatives and the Senate as to
the feasability of applying fair value concepts to budgeting
for the costs of Federal insurance programs.
SEC. 202. ON-BUDGET STATUS OF FANNIE MAE AND FREDDIE MAC.
Notwithstanding any other provision of law, the receipts
and disbursements, including the administrative expenses, of
the Federal National Mortgage Association and the Federal
Home Loan Mortgage Corporation shall be counted as new budget
authority, outlays, receipts, or deficit or surplus for
purposes of--
(1) the budget of the United States Government as submitted
by the President;
(2) the congressional budget; and
(3) the Balanced Budget and Emergency Deficit Control Act
of 1985.
SEC. 203. EFFECTIVE DATE.
Section 202 shall not apply with respect to an enterprise
(as such term is defined in section 1303 of the Federal
Housing Enterprises Financial Safety and Soundness Act of
1992 (12 U.S.C. 4502)) after the date that all of the
following have occurred:
(1) The conservatorship for such enterprise under section
1367 of such Act (12 U.S.C. 4617) has been terminated.
(2) The Director of the Federal Housing Finance Agency has
certified in writing that such enterprise has repaid to the
Federal Government the maximum amount consistent with
minimizing total cost to the Federal Government of the
financial assistance provided to the enterprise by the
Federal Government pursuant to the amendments made by section
1117 of the Housing and Economic Recovery Act of 2008 (Public
Law 110-289; 122 Stat. 2683) or otherwise.
(3) The charter for the enterprise has been revoked,
annulled, or terminated and the authorizing statute (as such
term is defined in such section 1303) with respect to the
enterprise has been repealed.
[[Page H2968]]
TITLE III--BUDGET REVIEW AND ANALYSIS
SEC. 301. CBO AND OMB REVIEW AND RECOMMENDATIONS RESPECTING
RECEIPTS AND COLLECTIONS.
Not later than 1 year after the date of enactment of this
Act, the Director of the Office of Management and Budget
shall prepare a study of the history of offsetting
collections against expenditures and the amount of receipts
collected annually, the historical application of the
budgetary terms ``revenue'', ``offsetting collections'', and
``offsetting receipts'', and review the application of those
terms and make recommendations to the Committees on the
Budget of the House of Representatives and the Senate of
whether such usage should be continued or modified. The
Director of the Congressional Budget Office shall review the
history and recommendations prepared by the Director of the
Office of Management and Budget and shall submit comments and
recommendations to such Committees.
SEC. 302. AGENCY BUDGET JUSTIFICATIONS.
Section 1108 of title 31, United States Code, is amended by
inserting at the end the following new subsections:
``(h)(1) Whenever any agency prepares and submits written
budget justification materials for any committee of the House
of Representatives or the Senate, such agency shall post such
budget justification on the same day of such submission on
the `open' page of the public website of the agency, and the
Office of Management and Budget shall post such budget
justification in a centralized location on its website, in
the format developed under paragraph (2). Each agency shall
include with its written budget justification the process and
methodology the agency is using to comply with the Fair Value
Accounting Act of 2014.
``(2) The Office of Management and Budget, in consultation
with the Congressional Budget Office and the Government
Accountability Office, shall develop and notify each agency
of the format in which to post a budget justification under
paragraph (1). Such format shall be designed to ensure that
posted budget justifications for all agencies--
``(A) are searchable, sortable, and downloadable by the
public;
``(B) are consistent with generally accepted standards and
practices for machine-discoverability;
``(C) are organized uniformly, in a logical manner that
makes clear the contents of a budget justification and
relationships between data elements within the budget
justification and among similar documents; and
``(D) use uniform identifiers, including for agencies,
bureaus, programs, and projects.
``(i)(1) Not later than the day that the Office of
Management and Budget issues guidelines, regulations, or
criteria to agencies on how to calculate the risk component
under the Fair Value Accounting Act of 2014, it shall submit
a written report to the Committees on the Budget of the House
of Representatives and the Senate containing all such
guidelines, regulations, or criteria.
``(2) For fiscal year 2017 and each of the next four fiscal
years thereafter, the Comptroller General shall submit an
annual report to the Committees on the Budget of the House of
Representatives and the Senate reviewing and evaluating the
progress of agencies in the implementation of the Fair Value
Accounting Act of 2014.
``(3) Such guidelines, regulations, or criteria shall be
deemed to be a rule for purposes of section 553 of title 5
and shall be issued after notice and opportunity for public
comment in accordance with the procedures under such
section.''.
The SPEAKER pro tempore. The gentleman from New Jersey (Mr. Garrett)
and the gentleman from Maryland (Mr. Van Hollen) each will control 30
minutes.
The Chair recognizes the gentleman from New Jersey.
Mr. GARRETT. I yield myself such time as I may consume.
Mr. Speaker, let me begin by thanking the chairman of the Budget
Committee, Chairman Paul Ryan, and the Budget Committee staff as well
for their hard work on H.R. 1872, the Budget and Accounting
Transparency Act.
As many have talked about before, our budget process in this country
is broken. Simply put, we need to make the budget process more
transparent. So the bill before the House today, the Budget and
Accounting Transparency Act, is, as we like to say, a commonsense
attempt to introduce more sunshine and common sense into our budget
process. So what would this legislation do?
Most importantly, the bill will require that the Federal Government
apply something called fair value accounting. Now, that is the same
credit accounting standards as the private sector uses when making or
guaranteeing loans. So fair value accounting provides a more robust or
more complete picture of the cost to the taxpayer of government loan
programs or government lending programs. So fair value accounting
accomplishes this how? By accounting for an additional market-risk
premium.
Also, the bill recognizes the budgetary impact of government-
sponsored enterprises of Fannie Mae and Freddie Mac. So this bill would
then bring these wards of the taxpayer from out of the shadows and onto
the budget.
So why exactly do we need this specific piece of legislation here
today? Well, without getting into the weeds too much, the simplest
explanation is that there is no such thing in this country or in the
world as a free lunch when it comes to a government program. The costs
are always borne by someone, and in this case, it is borne by the
American people.
The facts indicate that not only is government costly, but also
government costs more than we all initially expected. So the burden of
government rarely comes in under budget. Nowhere does this ring truer
than the Federal Housing Administration program, also called FHA, and
their mortgage insurance. See, it defies common sense FHA, according to
administration's Federal accounting rules, that they actually make
money, they say, for the government.
How do they do so? Well, it is only through the alchemy of government
accounting can you transform a mortgage portfolio of figurative lead
into gold and still remain true to the law.
So this free money comes courtesy of what? It comes courtesy of the
Federal Credit Reform Act of 1990. This is the Federal accounting
program and the standard that we operate today.
Under FCRA's cooked accounting rules, the cost of Federal mortgage
insurance is determined on the basis of a subsidy cost, including the
risk that the borrowers default on a mortgage; and by using the
Treasury rate, it does not account for market risk or overall systemic
risk.
So, what does that mean? Unlike fair value accounting, which
appropriately incorporates a premium for market risk, the current law
fails to reflect the true cost to the American taxpayer of these FHA
mortgage-backed insurance.
Let me give you an example. In the 2011 report, the nonpartisan CBO,
the Congressional Budget Office, compared the cost of the current
system of FHA of a single-family mortgage insurance on both the current
law and what we have here, which is fair value basis.
What did CBO find? Well, CBO estimated that, under the current
accounting, FHA would actually raise--raise--$4.4 billion for the
government in 2012. Sounds pretty good. But if you actually dug into
the numbers and use fair value basis--which, as I said before, is what
the private sector would be forced to do--with an appropriate
accounting of market risk--and of course, market risk is there--then
what did CBO find? CBO then estimated that FHA would not gain $4.4
billion, but that FHA would actually lose $3.5 billion over the exact
same period.
Why is this? Because CBO believes that fair value provides a fuller
picture of a program's budgetary impact. So it now employs fair value
basis accounting as a standard procedure for Federal loan programs and
Federal loan guarantee programs such as FHA.
However, where is the problem? The problem is the Obama
administration has strongly resisted the move to fair value accounting,
and instead, they cling to the current program instead.
Let me give you another example. In 2010, President Obama effectively
nationalized the Federal student lending program. The President then
immediately spent the savings, if you will--remember, I talked about
some of these before--on his signature health care law.
What is the problem? The problem is that there is a growing gap now
between how much money was borrowed and backed by the U.S. taxpayer--
that means you and I--and how much money is actually being repaid by
the graduates.
Let me give you some numbers. Based on the Department of Education
data, there is a $99 billion gap between what has been borrowed and
what has been paid back since only 2010. Remember, the President said
these loans would actually make money for the Federal Government.
Instead, the actual numbers are coming in that it is costing a $99
billion gap.
So, the bill before us today, the Budget and Accounting Transparency
Act, fixes these shortcomings by requiring that market risk to be
explicitly included in estimates of Federal credit programs. What will
that do? That will bring Federal budget practice in line with what has
long been standard practice in the private sector.
[[Page H2969]]
Specifically, it requires the executive branch and Congress to use
fair value accounting in calculating the cost of Federal credit
programs that consider not only the borrowing cost of the Federal
Government, but also the cost of the market risk of the Federal
Government in incurring or issuing any of these loans or loan guarantee
programs.
And so, with mounting debt and a lackluster job growth, it is time to
force the government to play by the same economic rules as every single
American family and business has to. It is not fair to keep putting the
American taxpayer on the hook.
I reserve the balance of my time.
Mr. VAN HOLLEN. Mr. Speaker, I yield myself as much time as I may
consume.
Let me say at the outset that we welcome any proposals to improve the
budget process, but it is a mistake to suggest that simply tinkering
with the budget process will somehow solve our problems.
The bigger issue in the Congress has been an unwillingness of many
people to compromise, and at the end of the day, in order to make
budgets work, you have to have give-and-take. So, for example, the
reason we saw our government shut down last October had nothing to do
with the budget process. It had to do with the fact that our Republican
colleagues said they were going to shut down the government as a means
to try and shut down the Affordable Care Act, to shut down ObamaCare.
It was clear that that was not going to work. We are not about to
strip millions of Americans from the new insurance protections they
have. Despite that, our colleagues pursued that strategy, and we saw 16
days of unnecessary and unproductive government shutdown. That was not
a problem of process; it was a problem of politics.
Now, with respect to this bill, I would say to the gentleman from New
Jersey that, if your bill were limited to bringing Fannie and Freddie
on budget, we would join you. We would welcome you in that. But, as you
know, this bill does much more than that. In fact, it fundamentally
changes the way we account for credit programs, Federal credit
programs, including things like the student loan programs.
Now, the gentleman from New Jersey mentioned the impact on the FHA. A
couple years ago--I think it was 3 years ago--on the Budget Committee
we actually had a hearing on this subject. This bill was then on the
floor in 2012. At that time, many of us said that, before we consider
the other changes that this bill proposes, at least we should have a
hearing in the Budget Committee to determine what the impact will be on
student loan programs, Small Business Administration programs, veterans
loan programs, at least we should have that information. Yet 3 years
have gone by. We are now back with the same bill on the floor with no
hearings to try and judge what impact it would have on student loan
programs.
I want to mention the student loan programs in particular.
The gentleman said that the President had ``nationalized'' the
student loan program. Let me just translate what that means. It had
been that the big banks were essentially a conduit for all of our
student loan programs. They were taking very little risk, but they were
pocketing big profits just as a middle man, a middle man without risks
but taking the profits. So Democrats proposed that we go to a direct
loan program to try and make sure the taxpayer dollar actually did what
we hoped it would do, which was provide more students with loans to
help more of them afford college. So, yes, we got rid of the middle man
and we used the savings to try to increase--and in fact, did increase--
the amount of funds available so more students could afford to go to
college.
Now, this bill comes along, and it would actually change the way we
account for student loans, to artificially make those student loans
look more expensive on the budget than they would otherwise be from a
budget perspective.
Now, maybe this isn't surprising. After all, just last week in the
House Budget Committee, we debated the House Republican budget. In
fact, that Republican budget is going to be here and debated on the
floor of the House tomorrow. We will start debate on that budget. That
budget significantly cuts the student loan program. So one of the
things it does is it charges students interest on their loans while
they are still in college.
{time} 1615
That is about $41 billion of additional interest costs they put onto
students. At the same time, in their budget, they protect special
interest tax breaks for hedge fund owners, big oil companies and the
like. So that is what their budget does.
Now, this piece of legislation would address that from a different
direction. It actually would artificially increase the cost on the
budget books of student loans going forward.
Let me just read from a letter from a Dr. Reischauer, who was the
former head of the Congressional Budget Office. He writes:
The accounting convention used since enactment of the
Credit Reform Act of 1990 already reflects the risks that
borrowers will default on their loans or loan guarantees.
Under Credit Reform, costs are already based on the expected
actual cash flow from the direct loans and guarantees. This
bill proposes to place an additional budgetary cost on top of
the actual cash flows.
Then he goes on to point out that that may be something that Members
want to consider during debate, but to actually put that artificial
inflation in the budget actually is potentially misleading to people
who are looking at the budget.
So, like so many bills around here that are misnamed, this one, named
the Budget Transparency and Accountability Act, actually reduces budget
transparency by putting in the budget a cost for student loans that is
actually artificially increased.
I would suggest to my colleagues that we reject this particular
proposal.
Again, if the gentleman had brought to the floor a bill that simply
put Freddie and Fannie on budget that would be fine. But this bill
actually is a vehicle to inflate the actual costs of things like
student loans, at the same time where we have a Republican budget
coming to the floor that actually cuts those student loans.
At this point, Mr. Speaker, I ask unanimous consent that the balance
of my time be controlled by the gentleman from Kentucky (Mr. Yarmuth).
The SPEAKER pro tempore. Is there objection to the request of the
gentleman from Maryland?
There was no objection.
Mr. YARMUTH. Mr. Speaker, I reserve the balance of my time.
Mr. GARRETT. Mr. Speaker, I yield myself such time as I may consume,
and if I can catch him before he leaves, the ranking member of the
Budget Committee, I appreciate all of your comments. I won't touch on
all of them, but I will touch on one or two.
In a sign of bipartisanship, I would like to extend to you, not
knowing where this bill may end up in the future of things here in the
House and the Senate, but extend to you an invitation to cosponsor with
me what you said twice during your remarks that you seemed to be on the
same page as I am and as I have been for a long time with regard to the
GSEs and have fair value accounting applied to them and on budget.
I would extend that invitation to you.
Mr. VAN HOLLEN. Will the gentleman yield?
Mr. GARRETT. I yield to the gentleman from Maryland.
Mr. VAN HOLLEN. Mr. Garrett, what I said was I support the part of
your amendment that puts them on budget.
Mr. GARRETT. Right.
Mr. VAN HOLLEN. So, to the extent that that is your question on the
budget, I am happy to join with you on that. I wish you would join with
us now in reconsidering your proposals to change the student loan
calculations, but we may be asking too much at this point.
Mr. GARRETT. So, as I say, my staff will talk to your staff on that,
and thank you for your other comments.
Mr. Speaker, I will insert into the Record a letter dated January 30
from the American Action Forum, which is an organization run by former
CBO Director Douglas Holtz-Eakin--and I won't go into detail--but he
basically wrote to express his complete support of H.R. 3581, the
Budget and Accounting Transparency Act of 2014, for the
[[Page H2970]]
very reasons that we have set forth here already.
Mr. Speaker, I am not seeing any other speakers at this time. I do
see there are several other speakers on the other side, so I reserve
the balance of my time.
American Action Forum,
January 30, 2012.
Hon. Paul Ryan,
Longworth House Office Building,
Washington, DC.
Dear Chairman Ryan: I am writing to express my support for
H.R. 3581, ``The Budget and Accounting Transparency Act of
2011,'' in particular those provisions that would incorporate
fair value accounting (FVA) into the federal budget process.
As you are well aware, a core objective in federal budgeting
is to accurately display the scale and timing of the
expenditure of taxpayer resources. Since sovereign tax and
borrowing powers should always be used judiciously, there is
a premium on doing so as accurately as possible.
In some cases this is straightforward. Consider, for
example, a discretionary appropriation. The scale of the
overall commitment is clear and in some cases it is
straightforward to budget the timing of the ultimate outlays
as well. Federal credit programs, however, present particular
difficulties. The timing of budgetary cash flows differs
dramatically between direct loans and federal loan
guarantees--even in cases when the ultimate economic impact
is identical. The Federal Credit Reform Act of 1990 (FCRA)
took an important step forward by equalizing the timing of
their budgetary treatment. Direct loans and loan guarantees
are both recorded in the budget during the year in which the
commitment is incurred, regardless of the duration and timing
of the federal assistance.
This was an important step in the right direction. However,
estimating the scale of required taxpayer resources remains
problematic. In particular, the ability of loan recipients to
make timely and complete repayments will be influenced by
future individual, household, and economy-wide economic
conditions. In the same way, the obligation of the federal
government to undertake guarantee payments will be driven by
similar forces.
While such future individual and economic conditions are
uncertain, reliable techniques exist to estimate the likely
size of the taxpayer obligation. Unfortunately, FCRA
needlessly restricts the analyses to credit risk--the
probability of failure to fully repay--while ignoring the
fact that the timing of those failures matters enormously. As
the past few years have starkly reminded every American, the
need to tax, borrow and otherwise deprive the private sector
of another dollar has far greater implications during the
depths of economic distress than during periods of robust
economic growth. Adoption of FVA would rectify this oversight
I recognize that significant reform to budget procedures
should not be undertaken lightly. However, my views are
informed by the fact that during my tenure as director, the
Congressional Budget Office undertook a number of studies of
the implications of accounting fully for economic risks in
the budgetary treatment of financial commitments like credit
programs. In example after example (pension guarantees;
deposit insurance; flood insurance; student loans; and
assistance for Chrysler and America West Airlines), it
becomes clear that an incomplete assessment of risks leads to
misleading budget presentations and may engender poor policy
decisions. FVA would be a significant step toward improving
this informational deficit.
My views are echoed by a wide array of budget experts. In
March 2010, CBO issued a new report recommending the use of
FVA for federal student loan programs on the grounds that
budget rules do ``not include the costs to taxpayers that
stem from certain risks involved in lending.'' In addition,
the Pew-Peterson Commission on Budget Reform proposed ``fair-
value accounting'' for credit programs and the President's
National Commission on Fiscal Responsibility and Reform
advocated for reform of budget concepts that would more
accurately reflect costs.
In addition to these research views, there is a track
record of success. FVA has already been used successfully for
the budgetary treatment of the Temporary Asset Relief Program
of 2008 (TARP) and the federal assistance to Fannie Mae and
Freddie Mac.
Last but not least, H.R. 3581 would also fix another
shortcoming of FCRA; namely that the administrative costs
associated with federal operations are not included in the
budget cost and must be provided for elsewhere. H.R. 3581
would require that administrative costs (called ``essential
preservation services'') to be accounted for up-front,
thereby balancing the playing field.
In sum, I believe that the Congress should adopt fair value
accounting and, in particular, pass H.R. 3581 in a timely
fashion. I would be happy to discuss any aspect of this issue
in greater detail.
Sincerely,
Douglas Holtz-Eakin.
Mr. YARMUTH. Mr. Speaker, I yield 3 minutes to the gentleman from New
Jersey (Mr. Pascrell).
Mr. PASCRELL. Mr. Speaker, I rise in strong opposition to this
legislation. This is an illusion, another one.
The NCAA Men's Basketball National Championship game is tonight. I
know that many of my colleagues are looking forward to watching some
high-level competition from these two great squads. However, at some
point, you can be assured, you will see one team's coach yelling at the
referees. Guaranteed. They will be screaming in their faces, convinced
that they are calling too many fouls and that they are being biased
against their team. You can be assured that the coach yelling at the
refs the most will be the one whose team is losing.
This is basically the same thing that is happening here on the floor
today, Mr. Speaker, on this bill, and all the other so-called budget
process. You can't get away from process. You don't want to talk about
results. You are always talking about process, process, and process,
trying to work the refs because you are losing this argument.
The ref in this case is the nonpartisan Congressional Budget Office.
You referred to that many, many times, nonpartisan Congressional Budget
Office.
The bill before us today, offered by my colleague from New Jersey,
would require the Congressional Budget Office to score Federal loan
guarantee programs in a way that makes them appear more expensive than
they actually are. That is what you are all about.
I have served on this Budget Committee for the last 4 years. We can't
do our job right if we don't have accurate estimates of what Federal
programs really cost.
This bill will absolutely make our job harder by making us work with
inaccurate data. In fact, all in all, the Congressional Budget Office
estimates that this bill, your bill, would have increased the estimated
cost of Federal credit programs in 2014, would have increased them by
$50 million, all by waving your magic wand.
Now, this isn't really about finding the best technical way to
measure the costs of each program. That is what you say. It is working
the refs in a way that would make even Coach K proud.
It is nothing but a dishonest attempt to make worthy government
programs appear more costly, so that those who are ideologically
opposed to government and government spending can more easily undermine
those very programs. That is what this is all about.
The SPEAKER pro tempore. The time of the gentleman has expired.
Mr. YARMUTH. I yield the gentleman an additional minute.
Mr. PASCRELL. My colleagues on the other side of the aisle don't like
the Federal loan guarantee programs that help first-time homebuyers,
that help less fortunate Americans pay for their education. They are
willing to cook the books in order to make a better case for their
elimination.
Mr. Speaker, we could do better than this. We can argue about these
programs on their merits instead of resorting to budgeting sleight-of-
hand, process.
I am strongly opposed to the bill. We could be voting to raise the
minimum wage and give a raise to 27.8 million Americans to $10.10 per
hour. That is what we should be debating on this floor.
We could finally consider the immigration reform legislation that the
Senate passed nearly a year ago. We should be debating the UI--
unemployment insurance--rates to restore unemployment benefits to more
than 2 million Americans, including 125,000 in our own State of New
Jersey.
But, instead, we are here today considering a bill that does nothing
except enable the majority's fringe ideology, pave the way for even
more cuts to the most vulnerable in the future.
Mr. GARRETT. Mr. Speaker, I yield myself such time as I may consume.
Just two couple of points. Process is important. I guess you could be
opposed to process--the gentleman from New Jersey referenced the NCAA.
If there were no rules and all the players could just go out and do
anything they wanted to, I guess we could say we could rack up a lot of
points and scores and do very well.
But there is a reason and there is a method to the game, and that is
why you do have rules. And that is actually why you do have the refs.
Yeah, the coaches on both sides will complain, but the refs, at the end
of the day, are the ones that say, hey, these are what the rules are,
and let's play within the confines of them.
[[Page H2971]]
Now the second point I was going to make is, I understand this issue
is pretty difficult and pretty complicated. The bill is not that long.
But the gentleman from New Jersey has it completely backwards when he
says, look, Mr. Garrett, you want to go by the CBO, don't you? You want
to apply this to the CBO, and that is what your bill is going to do.
No, that is not what I said. I do agree with the CBO. The CBO already
does this. It is the CBO that is calling for this. It was the past
chairman, the past director of the CBO who says what I just entered
into the Record--that we should be doing this. This is already done
that way, I inform my colleague from New Jersey.
What we are saying is, if he and I agree that the CBO is, as he just
said, this nonpartisan entity which has the right way of handling it,
they are handling it the right way.
We are now simply saying, administration, you should be doing what
the gentleman from New Jersey and I both say should be done here, what
the CBO is saying should be done here, and apply it to OMB and how the
administration does it.
So the gentleman has it completely reversed as to what the bill
actually says.
Mr. PASCRELL. Will the gentleman yield?
Mr. GARRETT. I yield to the gentleman from New Jersey.
Mr. PASCRELL. Thank you very much to my colleague from New Jersey.
First of all, no one on this side of the aisle ever suggested that we
need no rules.
See, what you are trying to do is put everyone at extremes, and that
is where we are many times because you are the majority and we are the
minority. And I respect that.
But don't say we don't want the rules. We fought for rules.
Mr. GARRETT. Reclaiming my time, what I was just pointing out is you
are saying that both sides' coaches were going to be yelling at the
refs and they wanted their side, win or lose.
If you want to use your analogy, in a game there has to be rules, and
we are saying that the rules that should apply are the rules that--you
indicated the CBO is a nonpartisan entity, that they are doing it the
right way, and we are saying, exactly.
The CBO is nonpartisan. They are calling for this type of application
of the rules. And if we agree on that point, and if you dig into the
bill and realize that we are saying it is not to make sure that CBO
does it, but that the administration does it.
So reread the bill. You will understand what we are trying to do. And
I think, at the end of the day, you and I may actually agree.
Mr. Speaker, I reserve the balance of my time.
Mr. YARMUTH. Mr. Speaker, may inquire how much time we have?
The SPEAKER pro tempore. The gentleman from Kentucky has 19\1/2\
minutes remaining. The gentleman from New Jersey has 18\1/2\ minutes
remaining.
Mr. YARMUTH. Mr. Speaker, I yield an additional 1\1/2\ minutes to the
gentleman from New Jersey (Mr. Pascrell).
Mr. PASCRELL. I thank the gentleman.
Mr. Speaker, this isn't as complicated as one would pretend it to be.
First of all, the CBO says, if this was the law of the land, in other
words, if this bill would have been passed by both the House and the
Senate when it first came up, it would have cost us $50 billion more in
the 2014 budget.
Now, I find that hard to believe that you would accept that, when you
practically, the gentleman that I am speaking to right now, through the
Chair, has voted ``no'' on everything under the Sun. So I find that
difficult to believe.
There need to be rules, particularly in all financial matters. Those
rules have a purpose.
I am telling you, this is a process question and this does not, in
any manner, shape, or form enhance the passage of a budget that we can
live with, we Americans.
Mr. YARMUTH. Mr. Speaker, I yield myself as much time as I may
consume.
One of the interesting elements of this debate is, and I think it is
pretty clear that we have not a total disagreement of opinion on the
two sides, we both want the same objective, which is a fair and honest
accounting of what programs cost the taxpayer or how they may benefit
the taxpayer.
We do know that it is pretty generally agreed that by moving toward
the fair accounting method, the fair value method, that we would be
creating a higher cost, or at least the budget would indicate a higher
cost for many of the loan programs that we have been talking about. But
we don't know exactly what the ultimate impact would be and which
method would be more accurate.
{time} 1630
But we don't know exactly what the ultimate impact would be and which
method would be more accurate.
OMB does not support this proposal. OMB says it has a hard time
figuring out how it could assess market-based value, so we don't have
total disagreement here.
We are in search of the same objective; but there is another element
of this that I think we have to consider, in that, when we compare loan
programs in the private sector to loan programs from the government, we
are not always comparing apples and apples. We are comparing two very
different motivations.
In the private sector, when a financial institution makes a loan, its
entire objective is to create return for its investors and
stockholders. The loan is essentially isolated in purpose. You advance
funds, you expect a return, and that is the ultimate objective.
When the government creates a loan program, it is not just to make
money for the government. In fact, that is often not even considered.
What we are trying to do in many cases is to create an additional
outcome--an ancillary outcome that is the primary objective of the
program.
For instance, with student loans, we are trying to create more
college graduates throughout this country. Understanding that the more
college graduates we have, from a strictly financial standpoint, the
Treasury will benefit because people will be earning higher incomes and
paying higher tax rates.
When we are talking about housing programs, we are looking at things
like the VA--the VA housing program. We are trying to find a way to
help veterans, many of whom come back from deployments disoriented,
dislocated, and without any way to find housing. We are trying to
create programs that will help repay our obligations to our veterans.
There are many other areas. We have an advanced vehicle manufacturing
loan program. I know about this program very well because it was part
of that loan program that resulted in a $600 million investment in the
Louisville assembly plant in my district in Kentucky and now has added
more than 3,000 new employees in my district.
So the objective there was not necessarily--as a matter of fact, it
wasn't at all to make money for the government. It was to help
stimulate the production of energy-efficient appliances and to promote
advanced technologies throughout our vehicle sector.
So, again, just to say because there is an associated risk that is
recognized in the private sector by financial institutions does not
imply that we should necessarily say that that same risk is equally
important in the Federal budgeting process because, again, we have
essentially ulterior motives in virtually every loan program that we
have.
So we understand, again, as the ranking member Mr. Van Hollen of
Maryland said: We do want transparency; we want to make sure that the
American people know exactly what the programs cost.
Probably, more importantly, internally, we need to know what these
programs cost because we have to make policy decisions as to whether
they are benefiting the country as a whole, benefiting the taxpayers,
and benefiting the Treasury.
The question is, without the kind of analysis that the ranking member
suggested, what we actually determined through hearings and
discussions, what the cost of the student loan program would be, how
many students we potentially are cutting out of the student loan
program, what we might be doing
[[Page H2972]]
in the energy sector by imposing higher costs through the budgeting
process and, therefore, a lower participation rate through the actual
program, whether we are actually damaging the economy and the budget in
different ways, not just on the direct costs versus benefits of the
actual loan program; so these are some of the considerations.
This is why we say this is a bill that is not ready for prime time,
and we think that we could be spending a better time in this body on
more important measures to help the American people.
With that, I reserve the balance of my time.
Mr. GARRETT. I yield myself such time as I may consume.
Mr. Speaker, before I yield to the chairman of the full committee, I
want to go back to the gentleman from New Jersey who made the point as
to which side of this issue is OMB and CBO on, and it is a process
issue.
But it is important that, during an appearance before the House
Budget Committee, where we considered this legislation, the director of
the--and I will stress this point again--the nonpartisan CBO,
Congressional Budget Office, stated, ``We believe that the fair value
method of accounting''--which is what is in this bill--``for Federal
credit transaction programs provides a more comprehensive measure of a
program's true cost.''
This is exactly why we bring this bill to the floor. I know the
gentleman indicated that a partisan OMB takes a different view, but the
nonpartisan CBO takes the view of this legislation, that we should make
sure that there is complete transparency.
Then all the points that the gentleman makes, as far as making the
decision as to how many students we should be able to have in these
programs, how large is the housing program, and so on and so forth,
then we can more accurately make those final determinations once we
have the actual numbers accurately before us, and that is all this
legislation really does.
With that, I yield such time as he may consume to the gentleman from
Wisconsin (Mr. Ryan), who was able to get a budget out of the Budget
Committee in record time the other night, the chairman of the Budget
Committee.
Mr. RYAN of Wisconsin. I thank the gentleman from New Jersey (Mr.
Garrett) for yielding, and I also want to thank him for his hard work
on this issue and for bringing this to our attention.
Look, it is really simple, Mr. Speaker. When Washington makes or
guarantees a loan, it is putting taxpayers at risk. Our budget rules
don't account for all of that risk.
We understate the cost of Federal credit programs by about $50
billion a year. That is what the current accounting rules do. Current
accounting rules make it look like the government is making all this
money from all these loans when, in reality, we are consistently
overstating their profitability.
Let me give you one example. Our current rules led to the projections
that the FHA--those loans made between 1992 and 2012 would save us $45
billion. It sounded like a great deal, a $45 billion boon to the
Federal Government.
In reality, those loans cost us $15 billion of hard-working taxpayer
dollars. That is a swing of $60 billion. It is not about imposing
costs. This bill is about recognizing the actual costs of what this
government does. That is really what this is all about.
CBO has reviewed this time and again. The gentleman from New Jersey
just mentioned this, and they have very much concluded, like the
private sector, that budgeting Federal credit programs should use fair
value accounting as the most accurate method for these programs.
Washington needs to be up front with taxpayers about the true cost of
its decisions because the taxpayers themselves are the ones who are on
the hook, but that is what the Garrett bill would do.
We can't also forget that the Office of Management and Budget--which
is a more political office under the service of the President--they are
ignoring the cost of Fannie Mae and Freddie Mac. In fact, OMB shows
them as saving money when they are huge liabilities.
Since 2008, Fannie and Freddie have been wards of the State. They are
wholly-owned subsidiaries of the Federal Government, and in 2013, the
GSEs accounted for 60 percent of first lien mortgage originations.
Taxpayers are exposed to over $5 trillion of outstanding liabilities.
OMB keeps it off budget.
Despite the fact that, if they ever go under, if anything happens
again, like it did recently, guess who gets stuck with the tab--the
taxpayers. We cannot look at our budget through rose-colored glasses.
We have to be as clear-eyed as possible. We need transparency. We need
real accounting. We owe it to our taxpayers.
So this bill would require the government to use fair value
accounting. It would require OMB to be more honest about Fannie and
Freddie's true costs, and it would build on the best practices in the
private sector, so that we, in Congress, can make better-informed
decisions about the hard-working taxpayers and what we are committing
for them on their behalf.
That is all this is. It doesn't impose a cost on anybody. It simply
recognizes the actual costs that are occurring.
Mr. YARMUTH. I yield myself such time as I may consume.
Mr. Speaker, I certainly appreciate Chairman Ryan's comments and
agree with many of them.
I think one of the points that is important to consider here though
is, while he mentions one case involving FHA, there are a number of
loan programs throughout the government which don't necessarily fall
into that same category; and many of them are very, very critical to
our Nation.
If you talk about water supply loans, water system loans, there are
many loan programs that affect rural America. In addition to the
student loans, we have, again, the Advanced Technology Vehicle
Manufacturing Loan Program.
There are many across the board, and what this legislation would do
would essentially treat them all as exactly the same, and we know that
that is not necessarily necessary.
Under the TARP program--TARP was actually accounted for in the budget
using the fair value standard that is proposed in this legislation, so
we actually have a history of treating some loan programs differently
than others.
What we would say is: Why don't we take the time to have hearings on
this proposal to actually consider the impact of an across-the-board
standard on a variety of different kinds of loan programs? This is why
we keep saying this is a bill that is not ready for prime time.
There may be a considerable amount of merit in applying this
accounting standard to some of the loan programs in the Federal
portfolio, but that doesn't mean it is appropriate or helpful in
assessing the impact on every loan program.
Furthermore, what we do know about virtually every analysis is that
using the market-based risk analysis that Mr. Garrett's bill proposes
would, under our budgeting rules, do two things.
One, it would add to the cost of virtually every loan program. There
certainly is no instance in which his analysis would say a loan program
would cost any less, and what that would also do is create a misleading
picture of how much that loan program actually ends up costing the
taxpayers on a cash basis.
Just because there is an intangible risk factor attached to a loan
program in the budget does not mean that that will ultimately be
realized, and, in fact, we may never understand if it is realized by
the taxpayers.
So for all of these reasons, again, we would oppose the legislation
and not because we think it is a horrible idea. We just think it is an
idea that has not been vetted nearly sufficiently enough and could have
a serious detrimental impact on many very, very important loan programs
that benefit the American people.
With that, I reserve the balance of my time.
Mr. GARRETT. I yield myself such time as I may consume
Just one point to that. I have sat through that committee now for a
number of years, and since this is an issue that I have been somewhat
following for that period of time, I knew that your statement saying
that we haven't had the time and haven't spent
[[Page H2973]]
the time on hearings and what have you just did not ring true.
So I dug through it, and the fact of the matter is that we have
actually had two hearings and two related markups on this legislation,
and I think that gives us the information we need now to go forward.
Secondly, to the point that you make that the various programs are
unique in their nature, absolutely, and that is why this legislation
allows fair value accounting to be applied individually and evaluate
each program accordingly.
We do all that in this legislation. It comes about through the
multiple hearings and markups that we have had, and I think now is the
time to go forward and give the American public the transparency that
they are asking for.
With that, I reserve the balance of my time.
Mr. YARMUTH. I yield myself the balance of my time.
Mr. Speaker, the gentleman is correct, but not in a totally accurate
way. We have had a hearing about budget processes in which this was
discussed. We have not had a hearing dedicated solely to this
legislation in which we could actually flesh out the impact on these
various loan programs that I mentioned.
So in conclusion, I think, to kind of summarize where we are, this
proposal may be a perfectly appropriate proposal. We wish that we could
have more time and more analysis to determine whether we do more damage
than good.
We both seek to have the most accurate budgeting process and the most
accurate process for assessing the value of important government loan
programs. That is a shared goal of both Republicans and Democrats.
We think that this bill is not effectively and sufficiently fleshed
out to make that kind of determination at this point. We think there
are far more important things that this body ought to be dealing with,
including raising the minimum wage, extending unemployment benefits,
working on developing infrastructure for this country, as we all know
is critically needed, all of those things that would help stimulate the
economy and create jobs.
{time} 1645
For all of these reasons that I have mentioned and my ranking member,
Mr. Van Hollen, mentioned, we oppose this legislation and urge a vote
``no.''
With that, I yield back the balance of my time.
Mr. GARRETT. Mr. Speaker, I will be brief, and I yield myself such
time as I may consume.
Just to set the record straight, actually, we did have hearings on
this, and we did have markup hearings on this back in June of 2011. We
dug into it at that period of time. The legislation, essentially the
same, just in a different cycle, is, in essence, what we have before us
today, so we have had that opportunity.
But I will say this. If we see this legislation continue on the floor
today and if we see this bill actually pass today, I extend to the
gentleman and the members of the committee--or anyone on the other side
of the aisle--that my door is open to try to make changes to it that
you see appropriate, to make it have the flexibility that you think is
not in the bill, which I think is in this bill, and so on and so forth.
So I stand ready to continue to work with you on it. But I think that
after the hearings we have had and the importance of this legislation,
now is the time to move forward.
One last point on this, and I think the chairman of the committee
made the point, but let me just reiterate this. At the end of the day,
it does not add any additional costs to the American taxpayer. What
this bill does is just make transparent the cost that is already there.
I am trying to come up with a simple analogy, but fair value accounting
is not necessarily one of the simplest things you can find an analogy
for, but I guess it might be like this:
You would not go to the store and just go through with your credit
card swiping it along, buying the things that you need or think that
you need not knowing what they actually cost as you leave the store,
just putting them on your bill, knowing that at the end of the day, at
the end of the month, you may get a statement. Knowing that you are
going to have to pay for that bill, you wouldn't go to the store and do
that any more than you should right now with the American public, put
them, by using the taxpayers' credit card for all these programs,
worthwhile as they may, necessary as they may be, you shouldn't just be
swiping that credit card not knowing exactly what the bottom line is,
not knowing what the actual cost to the American taxpayer is.
That is all this bill does is just give us that information. And with
that information in hand, then we can come together, Republican and
Democrat alike, on those areas that we all agree on are necessary for
this country and necessary that we expend funds on, with that
information in hand, and do it in a more prudent, efficient, and
effective manner than we have been in the past where we have done
without the information.
With that, then, I urge a ``yes'' vote on this bill, and I yield back
the balance of my time.
The SPEAKER pro tempore (Mr. Poe of Texas). All time for debate has
expired.
Pursuant to House Resolution 539, the previous question is ordered on
the bill, as amended.
The question is on the engrossment and third reading of the bill.
The bill was ordered to be engrossed and read a third time, and was
read the third time.
The SPEAKER pro tempore. Pursuant to clause 1(c) of rule XIX, further
consideration of H.R. 1872 is postponed.
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