Federal Credit Reform: Implementation of the Changed Budgetary Treatment of Direct Loans and Loan Guarantees








Prepared for Members and Committees of Congress



The Omnibus Budget Reconciliation Act of 1990 (P.L. 101-508) added Title V to the
Congressional Budget Act. Title V, also called the Federal Credit Reform Act of 1990 (the
FCRA), changed how the unified budget reports the cost of federal credit activities (i.e., federal
direct loans and loan guarantees). Before fiscal year 1992 (FY1992), for a given fiscal year, the
budgetary cost of a new direct loan or loan guarantee was the net cash flow for that fiscal year.
This cash flow measure did not accurately reflect the true cost of a loan or loan guarantee, which
is its subsidy cost over the entire life of the loan or loan guarantee; that is, its accrual cost. The
purposes of this report are to explain the credit reform provisions, examine their implementation,
and discuss proposed modifications.
Beginning with FY1992, federal credit reform legislation required that the reported budgetary
cost of a credit program equal the estimated subsidy costs at the time the credit is provided. The
FCRA defines the subsidy cost as “the estimated long-term cost to the government of a direct loan
or a loan guarantee, calculated on a net present value basis, excluding administrative costs.” This
places the cost of federal credit programs on a budgetary basis equivalent to other federal outlays.
This change means, because the subsidy costs of discretionary credit programs are now provided
through appropriations acts, the discretionary credit programs must then compete with other
discretionary programs on an equal basis. Funding for most mandatory credit programs (generally
entitlement programs) is provided by permanent appropriations. The Director of the Office of
Management and Budget (OMB) is responsible for coordinating the estimation of subsidy costs to
the government.
Since the passage of the FCRA, federal agencies, working with OMB, have steadily improved
their compliance with credit reform standards. In October 1990, the Federal Accounting
Standards Advisory Board was established. In August 1993, this board required that agencies’
accounting procedures be consistent with their budgetary procedures for their federal credit
programs. On August 5, 1997, the Balanced Budget Act of 1997 (P.L. 105-33) was enacted,
amending the FCRA to make some technical changes including codifying several guidelines set
by OMB.
Four proposals to modify current practice have been discussed: the principles of credit reform
could be applied to government-sponsored enterprises (GSEs), the principles of credit reform
could be extended to federal insurance programs, the administrative costs of credit programs
could be included in the calculation of the costs of these programs, and the budgetary cost of
capital for credit programs could be changed to include market risk.
This report will be updated as issues develop and/or in the event of new legislation.






Justifications for Credit Programs...................................................................................................1
Federal Credit Concepts..................................................................................................................2
Federal Credit............................................................................................................................2
Federal Credit Subsidies...........................................................................................................3
Concept of the Unified Budget..................................................................................................3
Budgetary Treatment of Credit Before FY1992..............................................................................4
Unified Budget..........................................................................................................................4
Credit Budget............................................................................................................................5
Federal Credit Reform Act of 1990.................................................................................................5
Purposes ....................................................................................................................... ............. 5
Subsidy Costs............................................................................................................................6
Estimation of Subsidies.............................................................................................................6
Budgetary Treatment.................................................................................................................6
Implementation ................................................................................................................................ 7
Agency ...................................................................................................................................... 7
Federal Accounting Standards Advisory Board........................................................................9
Balanced Budget Act of 1997.................................................................................................10
Possible Payment of Subsidy Costs by Recipients...................................................................11
Federal Credit in the President’s FY2009 Budget....................................................................11
Proposals for the Expansion of Reforms.......................................................................................13
Table A-1. Federal Credit Data, FY2007: Estimated Future Cost of Outstanding Federal
Credit Programs..........................................................................................................................16
Table D-1. Direct Loan Data, FY2009: Estimated 2009 Subsidy Rates, Budget Authority,
and Loan Levels for Proposed Direct Loans..............................................................................20
Table E-1. Loan Guarantee Data, FY2009: Estimated 2009 Subsidy Rates, Budget
Authority, and Loan Levels for Proposed Loan Guarantees......................................................22
Appendix A. Federal Credit Data..................................................................................................16
Appendix B. Budgetary Treatment of a Hypothetical Direct Loan..............................................18
Appendix C. Budgetary Treatment of a Hypothetical Loan Guarantee........................................19
Appendix D. Direct Loan Data......................................................................................................20
Appendix E. Loan Guarantee Data................................................................................................22





Author Contact Information..........................................................................................................23





efore FY1992, for a given fiscal year, the reported budgetary cost of a new loan or new
loan guarantee was its net cash flow for that fiscal year. This did not accurately reflect the
true cost of a loan or loan guarantee (federal credit) for the government, which is its B


subsidy cost over the entire life of the loan or loan guarantee. Using the old cash-flow method, it
was often difficult for policymakers to accurately monitor and therefore make informed decisions
about federal credit. In addition, administrators at agencies could understate costs by using
budgetary techniques such as generating “savings” from the fees on increased volumes of new
guarantees while ignoring the increase in expected losses and offsetting the (cash) cost of new
direct loans with current year collections from old loans.
To remedy these problems, Congress added a section on credit reform to the Omnibus Budget
Reconciliation Act of 1990 (OBRA90). The President signed OBRA90 into law (P.L. 101-508) on
November 5, 1990. The legislation added a new title to the Congressional Budget Act, Title V, the 1
Federal Credit Reform Act of 1990 (FCRA). Beginning with FY1992, the FCRA changed the
methodology in the unified budget for measuring and reporting the cost of federal direct loans
and federal loan guarantees from cash flow to accrual accounting.
The FCRA required that the budgetary cost of federal credit would be measured for any one year
as the net present value of the cost to the government of credit subsidies in the fiscal year that the
credit is provided. The Government Accountability Office (GAO), the Congressional Budget
Office (CBO), and the Office of Management and Budget (OMB) all recommended this new 2
measure of the cost of federal credit. Specific provisions of the FCRA represent compromises
within Congress and between the legislative and executive branches of the government.
The purposes of this report are to explain the provisions of the FCRA, examine the
implementation of credit reform including credit reform provisions of the Balanced Budget Act of
1997 (BBA97), and discuss proposed modifications of credit reform. In order to achieve these
objectives, it is necessary to initially discuss justifications for credit programs, federal credit 3
concepts, and the budgetary treatment of federal credit before the FCRA. Those interested in
federal credit programs may find the information in this report to be useful.

Federal credit programs may be economically justified on two grounds: equity and efficiency.
Equity concerns the distributions of income, consumption, and wealth. The distribution of income
has received the most emphasis among policy makers. Because economists cannot make
interpersonal comparisons of utility, the optimal distributions of income, consumption, and wealth
are normative; that is, they involve value judgments. In other words, economists cannot conclude
that one distribution is better than another. Many Members of Congress support redistributive

1 This report will be updated as issues develop and in the event of legislative change. For the most current information
about pending legislation, please consult the Legislative Information System (LIS) at http://www.congress.gov.
2 U.S. General Accounting Office, Budgetary Treatment of Federal Credit Programs, Report No. AFMD-89-42
(Washington: April 1989), p. 28.
3 Some of these concepts and the budgetary treatment of federal credit before the FCRA are presented in more detail in
the following source: James M. Bickley, “The Bush Administration’s Proposal for Credit Reform: Background,
Analysis, and Policy Issues, Public Budgeting & Finance, vol. 11, no. 1, spring 1991, pp. 50-65.



programs including credit programs to lessen income disparities. Some critics maintain that direct
subsidies can usually better target assistance to the needy than can credit programs.
If an economy is productively efficient, it cannot produce more of one good without reducing the
production of one or more other goods. For an economy to be efficient, private financial
intermediaries should allocate capital to its most productive uses. Private financial intermediaries
generally operate efficiently, but market imperfections do exist, and these imperfections may
cause an inadequate availability of credit in certain sectors of the economy. The Office of
Management and Budget (OMB) states that market imperfections that can justify federal
intervention “include insufficient information, limited ability to secure resources, insufficient 4
competition, and externalities.”

Numerous terms in financial economics have specific meanings for federal budget practices.
These terms include federal credit, federal credit subsidies, and the unified budget. Some of these
terms are defined in the FCRA.
The Office of Management and Budget defines federal credit as federal direct loans and federal
loan guarantees. The FCRA defines a direct loan as “a disbursement of funds by the government
to a nonfederal borrower under a contract that requires the repayment of such funds with or
without interest” [Section 502(1)]. According to the FCRA, a direct loan obligation is “a binding
agreement by a federal agency to make a direct loan when specified conditions are fulfilled by the
borrower” [Section 502(3)]. The FCRA defines a loan guarantee as a “pledge with respect to the
payment of all or a part of the principal or interest on any debt obligation of a non-federal
borrower to a non-federal lender” [Section 502(3)]. A loan guarantee commitment is “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 agreements” [Section 502(4)].
When either a direct loan obligation or a loan guarantee commitment is extended, the federal
government determines future credit flows because the government signs a contract to provide
credit. In some cases the specified conditions may not be met, and, consequently, credit will not
be provided even though a contract was signed. Furthermore, there is a time lag between the
signing of these contracts and the actual disbursement of a direct loan by the federal government
or the actual disbursement of a guaranteed loan by a private lender. In some cases, particularly for
credit for construction, credit may be disbursed by either the federal government or a private 5
lender in increments over several fiscal years.

4 U.S. Executive Office of the President, Office of Management and Budget, Analytical Perspectives, Budget of the
United States Government, Fiscal Year 2009 (Washington: GPO, 2008), pp. 69-70.
5 At the end of FY2007, outstanding direct federal loans totaled $260 billion and outstanding federally guaranteed loans
totaled $1,202 billion. For data on the estimated future cost of outstanding credit by program, see Appendix A. The
number of credit programs depends on the degree of aggregation, and data in Appendix A are highly aggregated.





Federal credit recipients obtain funds on more favorable terms than they could receive from the
private market. OMB describes subsidies from federal direct loans as consisting of one or more of
the following:
• Interest rates below commercial levels,
• Longer maturities than fully private loans,
• Deferral of interest,
• Allowance of grace periods,
• Waiver or reduction of loan fees,
• Higher loan amount in relation to the value of the underlying enterprise than a
fully private loan, and
• Availability of funds to borrowers for purposes for which the private sector
would not lend—at virtually any interest rate under virtually any repayment 6
terms.
• The recipient of a federal loan guarantee receives a subsidy because the federal
government covers part or all of the default risk—a subsidy conveyed by lower
interest payments. Also, the federal government either does not levy a loan
guarantee fee or charges a smaller fee than a private insurer would charge.
Consequently, a lender can charge the borrower a lower interest rate. In addition,
with some guaranteed loans the federal government may pay to the lender part of 7
the interest due on a guaranteed loan. Thus, a federal loan guarantee with or
without a federal interest payment may provide a lower, equal, or higher level of
subsidy than a federal direct loan.
An important budget reform that preceded credit reform was the adoption of a unified budget.
Before 1967, the federal government most frequently used the administrative budget, which was
not comprehensive in coverage because it excluded the trust funds (for example, the Social
Security trust fund). The federal government also used two other broad budgets: the consolidated
cash budget and the national income accounts budget. Each of these three budgets had a different
coverage of federal programs and a different accounting method, consequently each had a 8
different surplus or deficit. Each of these budgets had weaknesses, and the simultaneous use of 9
three different budget concepts caused confusion.

6 U.S. Executive Office of the President, Office of Management and Budget, Special Analysis F, Federal Credit
Programs, Budget of the United States Government, Fiscal Year 1988 (Washington: GPO, 1987), p. F32.
7 Ibid., p. F33.
8 For an explanation of these budget concepts, see Report of the President’s Commission on Budget Concepts
(Washington: GPO, 1967), pp. 82-83.
9 Ibid., p. 1.





In March 1967, the President’s Commission on Budget Concepts was created and instructed to 10
make “a thorough and objective review of budgetary concepts.” In October 1967, the
Commission produced a comprehensive report with detailed recommendations on implementing a
unified budget. In its report, the Commission stated that the two basic functions of the federal 11
budget are resource allocation and macroeconomic stabilization. For resource allocation, the
Commission believed that the budget should “provide the integrated framework for information
and analyses from which the best possible choices can be made in allocating the public’s money 12
among competing claims.” This function of resource allocation should include comparisons 13
among government programs and between the public and private sectors. For macroeconomic
stabilization, the Commission maintained that the budget should contain detailed and accurate
information in order to evaluate the effects of federal fiscal activities.
Furthermore, the budget should include data necessary to undertake discretionary countercyclical 14
fiscal policy. Thus, the Commission recommended a unified budget that would be composed of
all federal activities including the trust funds and federal credit activities. The Commission
recommended that federal credit programs be measured by their cash flows, although it realized
that this procedure provided a poor measure of the economic and budgetary effects of federal
credit. In the FY1969 budget, the Johnson Administration adopted the unified budget concept, but
with some structural differences from the proposal of the Commission. The Johnson
Administration essentially adopted Commission recommendations of measuring credit by its cash
flows. Implementation of federal credit reform would improve the use of the unified budget for
resource allocation and macroeconomic stabilization as originally desired by the Commission.

Before the implementation of the Federal Credit Reform Act of 1990, the unified budget treated
federal credit in two different ways. The unified budget measured credit by its cash flows, but
also, after 1980, included a separate credit budget which measured and selectively controlled
gross credit flows.
The federal unified budget uses cash-basis accounting. Before FY1992, a new federal direct loan
was treated as a budget outlay in the current fiscal year, and repayments of principal and
payments of interest were treated as offsetting collections (negative outlays) in the future fiscal
years in which they occurred. If a loan recipient paid a fee, this fee was treated as an offsetting
collection. Loan defaults reduced repayments of principal and interest, and therefore offsetting
collections. Administrative expenses were reported as outlays. In a given fiscal year, the
budgetary cost of a loan program, not the individual loans, was its net cash flow. This equaled
new loans made plus any administrative expenses associated with these loans (rarely recognized
in the loan accounts) less any loan fees, repayments of principal, and payments of interest.

10 Ibid., p. 105.
11 Ibid., p. 14.
12 Ibid., p. 16.
13 Ibid.
14 Ibid., p. 18.





The federal acceptance of a contingent liability when a loan guarantee was provided was not
included in the federal budget because no cash flow occurred. The administrative costs of a
guarantee program were outlays in the fiscal year in which they occurred. Some guarantee
programs charge fees to the recipient, and these fees were considered offsetting collections. Any
federal outlays necessary to compensate lenders for any default losses covered by a federal
guarantee were not shown in the budget until they were actually paid.
In January 1980, the Office of Management and Budget introduced a federal credit budget to help
monitor and control the growth of federal credit, including new direct loan obligations and new
loan guarantee commitments. Federal credit was measured at the time that the government signed
a binding contract to provide credit assistance. Initially, the credit budget consisted of nonbinding
targets. Before FY1992, limits in the credit budget were included in the budget resolution and in 15
annual appropriation acts for discretionary credit programs but not mandatory credit programs.
Although the credit budget improved credit visibility, the credit budget did not measure or control
the size of subsidies.

Reforming federal credit required that the budget, in the year in which the credit was provided,
include the multi-year net cash flows generated by a new direct or guaranteed loan. Thus, federal
credit would be recorded on an accrual basis but incorporated into a cash flow budget. Advocates
of credit reform maintained that the inclusion of credit subsidies in the unified budget would
equalize the budgetary treatment and therefore congressional consideration of federal credit and
noncredit programs. Federal credit programs could be compared on a dollar-for-dollar basis with
expenditures for noncredit programs and cost-benefit analysis could be more easily used to
evaluate specific federal credit programs. Credit reform was expected to improve the ability of
the unified budget to allocate resources and stabilize the economy. Numerous comprehensive
plans were proposed, beginning in 1983. These proposals culminated in the Federal Credit 16
Reform Act of 1990.
The four stated purposes of the FCRA were to
(1) measure more accurately the costs of federal credit programs;
(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

15 U.S. Executive Office of the President, Office of Management and Budget, Special Analysis F, Federal Credit
Programs, Budget of the United States Government, Fiscal Year 1990 (Washington: GPO, 1989), p. F4.
16 For hypothetical examples of the operation of a direct loan program and a loan guarantee program under the Federal
Credit Reform Act of 1990, see Appendix B and Appendix C.





(4) improve the allocation of resources among credit programs and other spending (Section 501
of the FCRA).
The FCRA never uses the word subsidy; nevertheless, the true budgetary and economic cost of a
federal credit program is the subsidy value at the time the credit is provided. The FCRA defines
the [subsidy] cost as “the estimated long-term cost to the government of a direct loan or loan
guarantee, calculated on net present value basis, excluding administrative costs and any incidental
effects on governmental receipts or outlays” [Section 502(5A)]. The discount rate used to
calculate subsidy costs in terms of present value is the “average interest rate on marketable 17
Treasury securities of similar maturity” [Section 502(5E)]. Hence, the subsidy cost of a program
is determined by the amount of credit provided and the discount rate used to calculate the net
present value of that credit.
Any government action that changes the estimated present value of an outstanding federal credit
program is counted in the budget in the year in which the change occurs as a change in the
subsidy cost of that program [Section 502(5D)]. For example, the federal government could
partially forgive the repayment of principal for low-income borrowers from a particular credit
program which would increase the subsidy cost of the program.
The Director of the Office of Management and Budget is responsible for coordinating the
estimation of subsidy costs. “The Director may delegate to agencies authority to make estimates
of costs” [Section 503(a)]. But these agencies must use written guidelines from the Director,
which are developed after consultation with the Director of the Congressional Budget Office. The
Director of OMB and the Director of CBO are responsible for developing more accurate
historical data on credit programs which are used to estimate subsidy costs (Section 503). The
President’s budget includes “the planned level of new direct loan obligations and new loan
guarantee commitments associated with each appropriations request” (Section 504).
Beginning with FY1992, discretionary programs providing new direct loan obligations and new
loan guarantee commitments require appropriations of budget authority equal to their estimated
subsidy costs. Credit entitlements (for example, guaranteed student loans) and existing credit
programs of the Commodity Credit Corporation have indefinite budget authority [Section 505(a-
c)] and do not need an annual appropriation.
An appropriation for the annual subsidy cost of each credit program is made into a budget
account called a credit program account. Funding for the subsidy costs of discretionary credit
programs is provided in appropriation acts and must compete with other discretionary programs
for funding available under the constraints of the budget resolution. Most mandatory credit
programs receive automatic funding for the amount of credit needed to meet the estimated

17 The derivation of the discount rate was revised by the Balanced Budget Act of 1997.





demand by beneficiaries. Mandatory programs are generally entitlement programs for which the
amount of funding depends on eligibility and benefits rules contained in substantive law. The
subsidy cost of federal credit is scored as an outlay in the fiscal year in which the credit is
disbursed by either the federal government or a private lender [504d]. For mandatory credit
programs, any additional cost from reestimates of subsidies for a credit program is covered by
permanent indefinite budget authority. This additional cost is displayed in a subaccount in the
credit program account.
Also, beginning with FY1992, each credit program has a nonbudget financing account. Each of
these nonbudget financing accounts receives payments from its associated credit program account
equal to the subsidy cost at the time a new loan or loan guarantee is provided. They also acquire
the value of the unsubsidized portion of the loans (actual disbursements by the government minus 18
the subsidy cost). These amounts are borrowed from the Treasury through the loan program.
Furthermore, the financing accounts contain all other cash flows between the public and the
government associated with each credit program [Section 502(5E6-7)]. These flows include “the
disbursement and repayment of loans, the payment of default losses on guarantees, and the 19
collection of interest and fees.” Because they are nonbudget, the cash flows into and out of these
accounts are not reflected in total outlay, receipts, or surplus/deficit. The budget authority of a
credit program provides the means for the credit program account to pay to the financing account
an amount equal to that program’s estimated subsidy costs. The off budget borrowing from the
Treasury for the unsubsidized portion of a credit program is included in the national debt.
Another special account, the liquidating account, includes all ongoing cash flows of each credit
program resulting from credit advanced prior to October 1, 1991 [Section 502(5E8)]. However,
the new budgetary procedures under the FCRA would apply to modifications made by the U.S. 20
government to credit terms on credit provided before FY1992.
The FCRA does not apply to the credit activities of the Federal Deposit Insurance Corporation,
the National Credit Union Administration, the Resolution Trust Corporation, national flood
insurance, the National Insurance Development Fund, crop insurance, or the Tennessee Valley
Authority (Section 506).

The Federal Credit Reform Act of 1990 was brief; it covered only five and one-half pages of the 21
U.S. Code and Administrative News. Numerous details necessary to make the act completely

18 These transfers within the government represent transfers of budgetary resources rather than actual financial
resources.
19 U.S. Executive Office of the President, Office of Management and Budget, Analytical Perspectives, Budget of the
United States Government, Fiscal Year 2009, p. 359.
20 U.S. Executive Office of the President, Office of Management and Budget, The Budget System and Concepts, Budget
of the United States Government, Fiscal Year 2003 (Washington: GPO, 2002), p. 15.
21 U.S. Code, Congressional and Administrative News, 101st Cong., 2nd sess., vol. 6, ( St. Paul: MN, West Publishing
Co., 1991), pp. 610-615.





operational were absent. Furthermore, many federal agencies had inadequate financial and 22
accounting systems to implement credit reform.
On July 2, 1992, OMB issued a revised circular, which improved and clarified instructions for 23
credit budget formulation. Furthermore, OMB simplified its credit subsidy model to make it 24
easier for agencies to estimate direct loan and loan guarantee subsidies. In November 2000, 25
OMB updated Circular A-129 concerning the budgetary treatment of federal credit programs.
On November 2, 2005, OMB also revised Circular A-11 to include federal credit reform
procedures. In Circular A-11, OMB explains to agencies how they should fill out credit schedules 26
in preparing their budget requests. Federal agencies working with OMB have steadily improved
their compliance with credit reform standards.
Since the passage of the FCRA, OMB has continued to assist agencies in upgrading the quality of
subsidy estimates. Beginning with FY1994, agencies have recorded reestimates of the cost of
their credit programs. Since FY1994, aggregate subsidy estimates have been adjusted upward or 27
downward annually. In the aggregate, upward subsidy reestimates of $23.519 billion were 28
partially offset by downward subsidy reestimates of $16.623 billion.
The trend for the subsidy reestimates has been for the magnitude to increase, but in May 2001, 29
CBO stated that it lacked any methodology to forecast the direction or size of future reestimates.
The FCRA provided for permanent indefinite authority to cover the cost of reestimates so that
new appropriations are not needed. Agencies are required to incorporate improved knowledge 30
into their subsidy estimates for future direct loan obligations and loan guarantee commitments.
The Government Accountability Office examined subsidy estimates for 10 credit programs in five
agencies for the period of fiscal years 1992 through 1998. GAO found problems with supporting
documentation for subsidy estimates and the reliability of subsidy rate estimates and reestimates 31
in each agency. But GAO concluded that agencies showed improvement in documenting 32
estimates in each agency.

22 David B. Pariser, Implementing Federal Credit Reform: Challenges Facing Public Sector Financial Manager, Public
Budgeting & Finance, vol. 12, no. 4, winter 1992, p. 28.
23 U.S. Executive Office of the President, Office of Management and Budget, Budget of the United States Government,
Fiscal Year 1994 (Washington: GPO, 1993), p. 49.
24 Ibid.
25 U.S. Executive Office of the President. Office of Management and Budget, Policies for Federal Credit Programs
and Non-Tax Receivables, Circular A-129, (Washington: continually updated), p. 27.
26 OMB’s Circulars A-11 and A-129 are available at http://www.whitehouse.gov/omb/circulars/, visited April 3, 2005.
27 U.S. Executive Office of the President, Office of Management and Budget, Analytical Perspectives, Budget of the
United States Government, Fiscal Year 2004 (Washington: GPO, 2003), p. 217 and Analytical Perspectives, Budget of
the United States Government, Fiscal Year 2009, p. 96.
28 Ibid.
29 U.S. Congressional Budget Office, An Analysis of the President’s Budgetary Proposals for Fiscal Year 2002
(Washington: May 2002), p. 4.
30 U.S. Executive Office of the President, Office of Management and Budget, Federal Credit Supplement, Budget of the
United States Government, Fiscal Year 1997 (Washington: GPO, 1996), pp. 48-49.
31 U.S. General Accounting Office, Credit Reform: Greater Effort Needed to Overcome Persistent Cost Estimation
Problems, Report no. AIMD-98-14 (Washington: GPO, March 1998), pp. 9-10.
32 Ibid., p. 11.





CBO examined credit subsidy re-estimates for the period of FY1993 through FY1999. CBO
concluded that
Projecting the losses and costs from federal credit assistance is difficult, and errors are
inevitable. Although various incentives may exist for agencies to underestimate credit
subsidies, the Congressional Budget Office’s analysis of corrected reestimates does not
reveal any pattern of bias in initial subsidy estimates. However, another problem was
uncovered: the reestimates reported in the presidents budget are in such disorder that
analysts cannot rely on them. A few modest changes in current practice could reduce 33
agencies errors in preparing, reporting, and accounting for estimates and reestimates.
OMB established on-budget receipt accounts to receive payments of earnings from the financing
accounts in those unusual cases where federal credit programs are estimated to produce net 34
income, that is, have negative subsidies. Usually payments into a program’s receipt account are 35
recorded in the Treasury’s general fund as offsetting receipts. “In a few cases, the receipts are
earmarked in a special fund established for the program and are available for appropriation for the 36
program.” In the FY2009 Budget, FHA mortgage guarantees account for most of the estimated 37
negative subsidies.
In October 1990, the Federal Accounting Standards Advisory Board (FASAB or “the Board”) was
established by the Secretary of the Treasury, the Director of OMB, and the Comptroller General
to consider and recommend accounting principles for the federal government. On September 15,
1992, the Board issued an exposure draft recommending accounting standards for federal credit
programs on a basis consistent with credit reform. The Board received numerous substantive
comments that were considered in revising its exposure draft, and on August 23, 1993, OMB 38
issued the Board’s revised report titled Accounting for Direct Loans and Loan Guarantees. This
report provided extensive detail, including numerous arithmetic examples, clarifying credit 39
reform practices. It further required that federal agencies use of present value accounting for 40
federal credit programs be consistent with the Federal Credit Reform Act of 1990. Thus, for

33 David Torregrosa,Credit Subsidy Reestimates, 1993-99,” Public Budgeting & Finance, vol. 21, no. 2, summer
2001, p. 114.
34 Marvin Phaup,Credit Reform, Negative Subsidies, and FHA, Public Budgeting & Finance, vol. 16, no. 1, spring
1996, p. 24.
35 U.S. Executive Office of the President, Office of Management and Budget, Analytical Perspectives, Budget of the
United States Government, Fiscal Year 2007 (Washington: GPO, 2006), p. 390.
36 Ibid.
37 For a comprehensive analysis of these negative subsidies, see Congressional Budget Office, Subsidy Estimates for
FHA Mortgage Guarantees, (Washington: Nov. 2003).
38 For a discussion of the Boards conclusions on issues raised these comments, see U.S. Executive Office of the
President, Office of Management and Budget, Accounting for Direct Loans and Loan Guarantees: Statement of the
Federal Financial Accounting Standards, no. 2 (Washington: Aug. 23, 1993), pp. 21-42.
39 For a detailed example of the estimation of credit subsidies, see U.S. General Accounting Office, Credit Subsidy
Estimates for the Sections 7(a) and 504 Business Loan Programs, Report no. T-RCED-97-197 (Washington: GPO, July
16, 1997), p. 19.
40 U.S. Executive Office of the President, Office of Management and Budget, Accounting for Direct Loans and Loan
Guarantees: Statement of the Federal Financial Accounting Standards, pp. 21-42.





their credit programs, agencies’ accounting procedures are now required to be consistent with
their budgetary procedures.
On August 5, 1997, the Balanced Budget Act of 1997 (P.L. 105-33) was enacted.41 This law
(BBA97) amended the Federal Credit Reform Act of 1990 to make some technical changes
including codifying several OMB guidelines. Important changes were:
First, agencies are required to use the same discount rate to calculate the subsidy when they
obligate budget authority for direct loans and loan guarantees and when submitting the agency’s 42
budget justification for the President’s budget. Thus, the dollar value of loans for a specific
credit program is known when Congress considers subsidy appropriations for that program. Prior
to this change, agencies had used interest rates from the preceding calendar quarter to calculate 43
the subsidy at the time a direct loan was advanced or a loan guarantee was obligated.
Second, agencies are required to use the same forecast assumptions (for example, default and
recovery rates) to calculate subsidy rates when they obligate credit and when preparing the 44
President’s budget.
Third, agencies are required to transfer end-of-year unobligated balances in liquidating accounts
(revolving funds for direct loans and loan guarantees made prior to the effective date of the 45
FCRA) to the general fund as soon as practicable after the close of the fiscal year.
Fourth, the same interest rate must be used on financing account debt (which generates interest
payments to the Treasury), financing account balances, and the discount rate used to calculate 46
subsidy costs.
Fifth, the definition of the term “cost” is modified so that the discount rate is based on the timing
of cash flows instead of on the term of the loan. Under this new approach, in the President’s
budget, a series of different rates would be used to calculate the present value of cost flows over a
multi-year period. For example, for a 10-year direct loan (or loan guarantee), costs in the first
year would be discounted using the interest rate on a one-year Treasury bill, costs in the second
year would be discounted using the interest rate on a two-year Treasury note, etc. Under the prior
approach, the interest rate of a 10-year Treasury note would have been used as the discount rate.
This prior method proved to be inferior because the flow of semiannual interest payments and the
repayment of full principal on the last payment date did not match up well with yearly cost 47
flows.

41 For a summary of the contents of the Budget Enforcement Act of 1997, see CRS Report 97-930, The Budget
Enforcement Act of 1997: A Fact Sheet, by Robert Keith, Jan. 23, 2004.
42 U.S. Executive Office of the President, Office of Management and Budget, Analytical Perspectives, Budget of the
United States, Fiscal Year 1999 (Washington: GPO, 1998), p. 170.
43 Ibid.
44 Ibid.
45 Ibid.
46 Ibid.
47 U.S. Congress, Conference Committee, Balanced Budget Act of 1997, Conference Report to Accompany H.R. 2015,
(continued...)





Rather than having the federal government pay for the subsidy costs of credit programs, a credit
program may result in the subsidy costs being paid in some cases by credit recipients. The Energy
Policy Act of 2005, P.L. 109-58, includes Title XVII—Incentives for Innovative Technologies.
Section 1702 (b) states that
No [loan] guarantee shall be made unless(1) an appropriation for the cost has been made;
or (2) the Secretary [of Energy] has received from the borrower a payment in full for the cost
of the obligation and deposited the payment into the Treasury.
This law does not state anything about an appropriations ceiling on the volume of loan guarantees
that could be financed by the borrowers paying the estimated costs. Some observers argue that
loan guarantees with the recipients paying the estimated costs should not be provided unless there 48
is a cap on appropriations. As of June 16, 2008, no loan guarantees for innovative fuel
technology have been made.
In the FY2009 budget, direct loans obligated and loan guarantees committed before FY1992
remain recorded on a cash flow basis. Unless modified, these “old” loans and loan guarantees will
remain in their liquidating accounts. Also, in the FY2009 budget, as in all budgets since the
FY1992 budget, explicit subsidy estimates for all credit programs have been made by OMB or by
agencies using OMB guidelines. In the early 1990s, “OMB developed a model for estimating
subsidies which ... [has been] used by all agencies in their budget estimates and therefore 49
provides consistency and uniformity in the discounting method.” The loan characteristic
variables in this estimation model, which are still used today, are loan maturity period, borrower
interest rate, grace period, upfront fees, annual fees, other fees, assumed default rate, rate of 50
recovery on defaults, and percent of loan guaranteed (for loan guarantee programs only). In
addition, OMB breaks down estimated subsidy rates into four components: defaults (net of 51
recoveries), interest, fees, and all other.
For FY2009, the four direct loan programs with the highest levels of proposed subsidy budget
authority in the President’s budget are the Department of Education’s Federal Direct Student
Loan Program ($250 million), the Small Business Administration’s Disaster Loan Program ($158
million), the Department of Transportation’s Federal-aid to Highways Loan Program ($100
million), and the Department of Agriculture’s Credit Insurance Fund Program Account ($88

(...continued)
H.Rept. 105-217, 105th Cong., 1st sess. (Washington: July 30, 1997), pp. 996-997.
48 For a comprehensive analysis of this issue, see U.S. Government Accountability Office, DOE Loan Guarantee
Program for Projects That Employ Innovative Technologies, Report no. GAO-07-339R, Feb. 28, 2007, 44 pp.
49 U.S. Executive Office of the President, Office of Management and Budget, Handout on Credit Reform (Washington:
Jan. 31, 1991), p. 13.
50 U.S. Executive Office of the President, Office of Management and Budget, Federal Credit Supplement, Budget of the
United States Government, Fiscal Year 2009 (Washington: GPO, 2008), pp. 9, 13.
51 Ibid.





million).52 For FY2009, the aggregate level of proposed subsidy budget authority is $737 53
million.
For FY2009, OMB estimates an aggregate proposed value of new direct loans of $32,809 54
million. The four programs with the largest proposed dollar value of direct loans are the
Department of Education’s Federal Direct Student Loan Program ($21,048 million), the
Department of Agriculture’s Rural Electrification and Telecommunications Loan Program
($4,790 million), the Department of Agriculture’s Rural Water and Waste Disposal Program 55
($1,269 million), and the Small Business Administration’s Disaster Loan Program ($1,061).
For FY2009, the loan guarantee program with the highest levels of proposed subsidy budget
authority in the President’s budget is the Department of Education’s Federal Family Education 56
Loan Program ($2,407 million), which was far higher than any other program. For FY2009, the
aggregate level of proposed subsidy budget authority for proposed loan guarantees was $1,216 57
million, which was reduced by the negative subsidy budget authority of six programs. The three
programs with the highest proposed negative subsidy budget authority were the Department of
Housing and Urban Development’s FHA-Mutual Mortgage Insurance (-$749 million), the
Export-Import Bank Loan Program (-$248 million), and Veterans Affairs’ Housing Program 58
(-$236 million).
For FY2009, OMB estimates an aggregate proposed value of guaranteed loans of $361,849 59
million. For FY2009, the four guarantee programs with the highest estimated dollar value were
the Department of Housing and Urban Development’s FHA-Mutual Mortgage Insurance Program
($151,280 million), Department of Education’s Federal Family Education Loan Program
($109,117 million), Veterans Affairs’ Housing Program ($35,817 million), and the Small Business 60
Administration’s General Business Loan Program ($28,000 million).
The Federal Credit Reform Act of 1990 decreased the importance of the credit budget because the
control of credit subsidies largely replaced limits on gross credit flows as a determinant of the
amount new federal credit for each program. For FY2009, estimated appropriations acts
limitations on credit loan levels are proposed, although the term “credit budget” is not used by 61
OMB. But these appropriations acts’ limitations on credit loan levels are set too high to
realistically affect the amount of credit extended.

52 U.S. Executive Office of the President, Office of Management and Budget, Analytical Perspectives, Budget of the
United States Government, Fiscal Year 2009, p. 97.
53 Ibid. For data on subsidy budget authority on each direct loan program, see Appendix D.
54 Ibid.
55 Ibid. For data on proposed loan levels on each direct loan program, see Appendix D.
56 Ibid., p. 98.
57 Ibid.
58 Ibid. For data on subsidy budget authority on each loan guarantee program, see Appendix E.
59 Ibid.
60 Ibid.
61 For estimated appropriations acts limitations on credit loan levels for FY2009 by program, see Analytical
Perspectives, Budget of the United States, Fiscal Year 2009, pp. 102-103.






Four major proposals to expand credit reform have been discussed in recent years. First, the
principles of credit reform could be applied to government-sponsored enterprises (GSEs). GSEs
are privately-owned financial intermediaries, which were established and chartered by the federal
government. GSEs pay lower interest rates on their securities because investors generally believe
that securities issued by GSEs have an implied federal guarantee, making them appear less risky
than other private sector securities. Proponents of extending credit reform principles to GSEs
argue that the federal government has already “bailed out” one GSE (the Farm Credit System).
Hence, proponents argue that credit reform should cover the subsidy costs to taxpayers of GSEs.
Opponents argue that the subsidy costs of GSEs are difficult to quantify; furthermore, the federal
government has no legal responsibility to “bail out” GSEs. Opponents also maintain that the
current exclusion of administrative costs and a risk premium would probably result in subsidy
costs of approximately zero.
Second, the principles of credit reform could be extended to federal insurance, which currently is 62
primarily treated on a cash flow basis. Most federal insurance consists of deposit insurance or 63
pension insurance. The Government Accountability Office maintains that credit reform could 64
improve the budgetary information and incentives for federal insurance. But, for some federal
insurance programs, significant difficulties exist in accurately estimating future claims for losses.
Often historical data are unavailable, frequent program modifications occur, and fundamental 65
changes take place in the activities insured. “Many federal insurance programs cover complex,
case-specific, or catastrophic risks that the private sector has historically been unwilling or unable 66
to cover.”
The complexity of the issues involved and the need to build agency capacity to generate such
estimates suggest that it is not feasible to integrate accrual-based costs directly into the 67
budget at this time.
GAO suggests that a supplemental approach should precede the full inclusion of insurance
programs under credit reform. Thus, GAO recommends that accrual-based cost measures be
initially included along with cash-based estimates as supplemental information in the budget 68
documents.

62 For a comprehensive analysis of the current budgetary treatment of a federal insurance program, see Congressional
Budget Office, The Budgetary Treatment of Subsidies in the National Flood Insurance Program, Testimony of Donald
B. Marron, Acting Director, before the Senate Committee on Banking, Housing, and Urban Affairs, Jan. 25, 2006.
63 U.S. General Accounting Office, Budget Issues: Budgeting for Federal Insurance Programs, Report no. AIMD-97-
16 (Washington: Sept. 1997), p. 6.
64 Ibid., p. 7.
65 U.S. General Accounting Office, Budget Issues: Budgeting for Federal Insurance Programs, Testimony before the
Budget Task Force, Committee on the Budget, House of Representatives, Report no. T-AIMD-98-147 (Washington:
April 23, 1998), p. 9.
66 Ibid.
67 Ibid., p. 13.
68 U.S. General Accounting Office, Budget Issues: Budgeting for Federal Insurance Programs, Report no. AIMD-97-
16, p. 10.





Some opponents of the inclusion of insurance programs maintain that because the current subsidy
measure excludes administrative costs and a risk premium, some major insurance programs
would record negative subsidies.
The Comprehensive Budget Process Reform Act of 1999, H.R. 853 in the first session of the 106th
Congress, as introduced in the House on June 24, 1999, would have extended credit reform to
federal insurance programs. But, H.R. 853 as reported in the House on August 5, 1999, did not
include those sections extending credit reform to federal insurance programs.
Third, as was discussed in the 1990 debate, administrative costs of credit programs could be
included in the calculation of the costs of these programs. Proponents argue that the current
exclusion of these costs understates the actual costs of credit programs. Proponents also stress
that cost comparisons among credit programs are distorted. For example, the administrative costs
per $1 million of credit are higher for direct student loans than guaranteed student loans.
Opponents argue that agencies have difficulty separating the administrative costs of their credit
programs from their general administrative costs.
Fourth, the budgetary cost to taxpayers of providing federal credit could be changed to include 69
market risk. Currently, the FCRA requires the “discounting of expected cash flows at the 70
interest rate on risk-free Treasury securities (the rate at which the government borrows money).”
CBO’s report on federal credit subsidies examined two ways of including the market price for
risk: risk-adjusted discount rates and options-pricing methods.
The risk-adjusted discount rate (ADR) method “adds a spread—the difference between the
interest rate on a Treasury security and the rate on a risky security—to Treasury rates and uses the 71
resulting adjusted rate to discount expected cash flows associated with a loan.” The ADR
method results in a higher discount rate for both costs and revenues and, with a few exceptions
for negative subsidies, raises the net cost of credit programs.
“An option is a marketable security which allows the owner to buy (or sell) another security at a 72
stipulated price on or before a specified date.”“The general ideal behind options-pricing
methods is that assets with the same payoffs must have the same price; otherwise, investors 73
would have the opportunity to earn a risk-free profit by buying low and selling high.” An
options-pricing method is likely to be more accurate than the ADR method but only when the 74
necessary data and model are available. Options-pricing models are seldom used to value credit 75
provided to individuals; instead the use of the ADR method is usually appropriate. Option-
pricing methods are usually better than ADR methods in valuing credit provided to commercial

69 This change would require new legislation because the FCRA specifies that the subsidy cost of federal credit is the
cost to the taxpayer rather than the market value to the recipient.
70 Congressional Budget Office, Estimating the Value of Subsidies for Federal Loans and Loan Guarantees, Aug. 2004,
p. 4.
71 Ibid., p. 7.
72 Robert C. Radcliffe, Investment: Concepts, Analysis, and Strategy (Glenview, Ill.: Scott, Foresman and Company,
1982), p. 348.
73 Congressional Budget Office, Estimating the Value of Subsidies for Federal Loans and Loan Guarantees, p. 8.
74 Ibid.
75 Ibid.





enterprises.76 The best method to use varies for other credit programs such as “loan assistance to 77
sovereign states, municipalities, and special-purpose enterprises.”
As an example of the process, CBO applied a type of options pricing—the binomial pricing
method—to calculate the risk-adjusted cost of extending federal loan guarantees to Chrysler in
1980 and to America West Airlines (AWA) in 2002. CBO computed that the market-value loss of
the Chrysler loan guarantee was $239.0 million instead of the Treasury-rate loss of $107.6 78
million. CBO also found that the calculated market-value loss was $26.3 million for the AWA 79
loan guarantee instead of a gain of $47.4 million using Treasury interest rates.

76 Ibid.
77 Ibid., p. 9.
78 Ibid., pp. 12-19.
79 Ibid.






Table A-1. Federal Credit Data, FY2007: Estimated Future Cost of Outstanding
Federal Credit Programs
(in billions of dollars)
Estimated
Program Outstanding 2007 Future Costs of 2007
Outstandinga
Direct Loans:b
Federal Student Loans 124 15
Farm Service Agency (excl. CCC), Rural Dev., Rural Housing 44 10
Rural Utilities Service and Rural Telephone Bank 40 1
Housing and Urban Development 10 3
P.L. 110-480 8 4
Disaster Assistance 10 2
Export-Import Bank 6 2
Agency for International Development 6 2
Commodity Credit Corporation 1 ................
VA Mortgage 1 -1
Other Direct Loan Programs 11 5
Total Direct Loans 260 44
Guaranteed Loans:b
Federal Student Loans 363 51
FHA-Mutual Mortgage Insurance Fund 322 7
VA Mortgage 232 4
FHA General/Special Risk Insurance Fund 108 ................
Small Business 72 2
Export-Import Bank 39 1
Farm Service Agency (excl. CCC), Rural Dev., Rural Housing 32 ...............
International Assistance 22 2
Maritime Administration 3 ................
Commodity Credit Corporation 3 ................
Maritime Administration 3 ................
Government National Mortgage Association (GNMA)c ................ d
Other Guaranteed Loan Programs 6 2





Estimated
Program Outstanding 2007 Future Costs of 2007
Outstandinga
Total Guaranteed Loans 1,202 69
Total Federal Credit 1,461 113
Source: Adapted by CRS from U.S. Executive Office of the President, Office of Management and Budget,
Analytical Perspectives, Budget of the United States Government, Fiscal Year 2009 (Washington: GPO, 2008), pp. 93-
94.
Notes: Detail may not add to total due to rounding.
a. Direct loan future costs are the financing account allowance for subsidy cost and the liquidating account
allowance for estimated uncollectible principal and interest. Loan guarantee future costs are estimated
liabilities for loan guarantees.
b. Excludes loans and guarantees by deposit insurance agencies and programs not included under credit
reform, such as CCC commodity price supports. Defaulted guaranteed loans which become loans
receivable are accounted for as direct loans.
c. Certain SBA data are excluded from the totals because they are secondary guarantees on SBA’s own
guaranteed loans. GNMA data are excluded from the totals because they are secondary guaranteed by FHA,
VA, and RHS.
d. Less than $500 million.







(1) For a proposed direct loan program, CBO is required to estimate the subsidy cost. If
legislation is passed that includes this new loan program, OMB becomes responsible for
estimating the subsidy cost. If a direct loan program L has been enacted into law, agency A
establishes a credit program account and a nonbudget financing account.
(2) OMB (or agency A using OMB guidelines) estimates that the net present value of the cost of
credit subsidies equals (in this example) 20% of loans disbursed under program L operated by
agency A.
(3) If program L is a discretionary loan program, an appropriations bill for the fiscal year is 80
passed by Congress and signed into law by the President. This bill includes an appropriation of
(in this example) $100 million for the subsidy budget authority of program L. Within agency A,
this $100 million is appropriated to the credit program account for program L. Furthermore, this
appropriations bill must include an estimate of the dollar amount of new direct loan obligations
supportable by the subsidy budget authority appropriated to agency A for program L. For
example, if program L has an estimated subsidy rate of 20%, the dollar amount of new direct loan
obligations supportable would be $500 million.
(4) Agency A signs a contract to loan $10 million to a borrower under the auspices of program L.
The estimated subsidy cost of this loan is $2 million (20% of $10 million).
(5) The borrower meets the terms and conditions of the loan contract. Agency A pays $2 million
from its credit program account for L into its financing account for L. The financing account for
program L borrows $8 million (unsubsidized portion of the loan) from the U.S. Treasury. At the
same time that these budgetary transfers occur within agency A, the loan of $10 million is
disbursed from the financing account for program L to the borrower. The subsidy payment of $2
million that goes into the financing account is scored as an outlay for agency A and for the federal
budget. The $8 million borrowed from the Treasury is a non-budget means of financing, and
consequently, does not affect the budget deficit, outlays, or revenues. But this $8 million, if the
budget is in deficit, does increase the national debt.
(6) Agency A services the loan. Cash flows between the public and the non-budget financing
account for fees, interest, defaults, etc., do not affect the budget deficit, outlays, or revenues. But
the net cash flows of the financing account do affect the national debt.
(7) Repayments of principal and payments of interest are paid by the borrower into the financing
account for program L. The financing account uses these monies to pay the interest and repay the
principal on the $8 million borrowed from the Treasury.

80 If program L is a mandatory loan program, an automatic appropriation of budget authority would occur for whatever
amount of credit is needed to meet the estimated demand for services by beneficiaries.







(1) For a proposed loan guarantee program, CBO would be required to estimate the subsidy cost.
If legislation is passed that includes this new loan guarantee program, OMB becomes responsible
for estimating the subsidy cost. If a loan guarantee program G has been enacted into law, agency
A establishes a credit program account and a financing account.
(2) OMB (or agency A using OMB guidelines) estimates that the net present value of the cost of
credit subsidies equals (in this example) 10% of loans guaranteed under program G operated by
agency A.
(3) If program G is a discretionary loan guarantee program, an appropriations bill for the fiscal 81
year is passed by Congress and signed into law by the President. This bill includes an
appropriation (in this example) of $60 million for the subsidy budget authority for program G.
Within agency A, this $60 million is placed in the credit program account for program G.
Furthermore, this appropriations bill must include an estimate of the dollar amount of guaranteed
loan commitments supportable by the subsidy budget authority appropriated to agency A for
program G. For example, if program G has an estimated subsidy rate of 10%, the dollar amount of
new guaranteed loan commitments supportable would be $600 million.
(4) Agency A signs a contract to guarantee a loan of $15 million to the borrower. The estimated
subsidy cost of this guarantee is $1.5 million (10% of $15 million). The loan guarantee fee (if
any) is paid by the borrower to the financing account for program G at the time the loan guarantee
is obligated.
(5) After the borrower (lender, or other party to the agreement) meets the terms and conditions of
the loan guarantee contract, the borrower obtains the loan from the lender in the private sector.
Agency A pays $1.5 million from its credit program account for G into its financing account for
G. At the same time that this budgetary transfer occurs within agency A, the agency provides the
guarantee in order for the borrower to obtain the loan from the private lender. The subsidy
payment of $1.5 million that goes into the financing account is scored as an outlay for agency A
and for the federal budget. The borrower must pay to the lender interest on the principal and
repay the principal.
(6) Agency A services the loan guarantee. The cash flows between the public and the non-budget
financing account do not affect the budget deficit, outlays, or revenues. But the net cash flow
from the financing account affects the national debt.
(7) The subsidy amount and any loan guarantee fee earn interest, which is paid by the Treasury. If
the borrower defaults on all or part of the guaranteed loan then the financing account is
responsible for covering the cost of compensating the lender.

81 If program G is a mandatory loan guarantee program, an automatic appropriation of budget authority would occur for
whatever amount of credit needed to meet the estimated demand for services by beneficiaries.






Table D-1. Direct Loan Data, FY2009: Estimated 2009 Subsidy Rates, Budget
Authority, and Loan Levels for Proposed Direct Loans
(in millions of dollars and percent)
Subsidy Subsidy Budget Loan
Agency and Program Rate Authority Levels
% $ $
Agriculture:
Agriculture Credit Insurance Fund Program Account 9.37 88 944
Farm Storage Facility Loans Program Account 6.11 9 153
Rural Community Advancement Program ........... ........... ..........
Rural Electrification and Telecommunications Loans -2.05 -98 4,790
Distance Learning, Telemedicine, and Broadband Program 3.90 12 298
Rural Water and Waste Disposal Program Account 3.77 48 1,269
Rural Community Facilities Program Account 5.72 17 302
Rural Housing Assistance Grants ........... ........... ..........
Farm Labor Program Account ........... ........... ..........
Multifamily Housing Revitalization Program Account ........... ........... ..........
Rural Housing Insurance Fund Program Account 12.93 6 38
Rural Development Loan Fund Program Account 41.85 14 34
Rural Economic Development Loans Program Account ........... ........... ..........
Commerce:
Fisheries Finance Program Account -12.78 -1 8
Defense—Military:
Defense Family Housing Improvement Fund 43.50 47 107
Education:
College Housing and Academic Facilities Loans 16.31 10 61
TEACH Grant Program Account 13.05 14 105
Loans for Short-Term Training Program Account -0.27 ........... 46
Federal Direct Student Loan Program Account 1.13 250 21,048
Homeland Security:
Disaster Assistance Direct Loan Program Account 1.04 ........... 25
Housing and Urban Development:
FHA-Mutual Mortgage Insurance Program Account ........... ........... 50
State:
Repatriation Loans Program Account 59.77 1 1





Subsidy Subsidy Budget Loan
Agency and Program Rate Authority Levels
% $ $
Transportation:
Federal-Aid Highways 10.00 100 998
Railroad Rehabilitation and Improvement Program ........... ........... 600
Treasury:
Community Development Financial Institutions Fund 37.88 1 2
Veterans Affairs:
Housing Program Account -0.16 ........... 328
Native American Veteran Housing Loan -10.07 -1 13
General Operating Expenses 1.93 ........... 3
International Assistance Programs:
Debt Restructuring ........... 34 ...........
Overseas Private Investment Corporation 2.34 11 450
Small Business Administration:
Disaster Loans Program Account 14.92 158 1,061
Business Loans Program Account ........... ........... 25
Export-Import Bank of the United States:
Export-Import Bank loans Program Account 33.01 17 50
Total N/A 737 32,809
Source: Adapted by CRS from U.S. Executive Office of the President. Office of Management and Budget,
Analytical Perspectives, Budget of the United States Government, Fiscal Year 2009 (Washington: GPO, 2008), p. 97.
Notes: Additional information on credit subsidy rates is contained in the Federal Credit Supplement to the budget
for 2009.
N/A = Not applicable.






Table E-1. Loan Guarantee Data, FY2009: Estimated 2009 Subsidy Rates, Budget
Authority, and Loan Levels for Proposed Loan Guarantees
(in millions of dollars and percent)
Subsidy Subsidy Budget Loan
Agency and Program RateAuthority Levels
% $ $
Agriculture:
Agriculture Credit Insurance Fund 2.61 65 2,497
Commodity Credit Corporation Export Loans 0.96 26 2,675
Rural Community Advancement Program ........... ........... ..........
Rural Water and Waste Disposal Program Account -0.82 -1 75
Rural Community Facilities Program Account 3.08 6 210
Rural Housing Insurance Fund Program Account 0.30 16 5,149
Rural Business Program Account 4.35 30 700
Renewable Energy Program Account ........... ........... ..........
Education:
Loans for Short-Term Training Program Account 1.02 3 316
Federal Family Education Loan Program Account 2.21 2,407 109,117
Energy:
Title 17 Innovative Technology Loan Guarantee Program ........... ........... 2,220
Health and Human Services:
Health Resources and Services ........... ........... ..........
Housing and Urban Development:
Indian Housing Loan Guarantee Fund 2.52 11 420
Native Hawaiian Housing Loan Guarantee 2.52 1 41
Native American Housing Block Grant 12.34 2 17
Community Development Loan Guarantees ........... ........... ..........
FHA-Mutual Mortgage Insurance -0.49 -749 151,280
FHA-General and Special Risk -2.20 -143 6,530
Interior:
Indian Guaranteed Loan Program Account 7.73 7 85
Transportation:
Minority Business Resource Center Program 1.86 ........... 18
Federal-Aid Highways 10.00 20 200
Railroad Rehabilitation and Improvement Program ........... ........... 100





Subsidy Subsidy Budget Loan
Agency and Program RateAuthority Levels
% $ $
Maritime Guaranteed Loan (Title XI) ........... ........... ..........
Veterans Affairs:
Housing Program Account -0.66 -236 35,817
International Assistance Programs:
Loan Guarantees to Israel Program Account ........... ........... 700
Development Credit Authority Program Account 3.05 15 475
Overseas Private Investment Corporation -0.84 -11 1,400
Small Business Administration:
Business Loans Program Account -0.01 -5 28,000
Export-Import Bank of the United States:
Export-Import Bank Loans Program Account -1.79 -248 13,807
Total N/A 1,216 361,849
Addendum: Secondary Guaranteed Loan
Commitments
GNMA:
Guarantees of Mortgage-backed Securities Loan Guarantee -0.21 -163 77,400
Program Account
SBA:
Secondary Market Guarantee Program ........... ........... 12,000
Total, secondary guaranteed loan commitments N/A -163 89,400
Source: Adapted by CRS from U.S. Executive Office of the President. Office of Management and Budget.
Analytical Perspectives, Budget of the United States Government, Fiscal Year 2009 (Washington: GPO, 2008), p. 98.
Notes: Additional information on credit subsidy rates is contained in the Federal Credit Supplement.
N/A = Not applicable.
James M. Bickley
Specialist in Public Finance
jbickley@crs.loc.gov, 7-7794