The federal government provides credit assistance to individuals and businesses in the form of direct loans and through guarantees of loans made by private financial institutions. In a report requested by the Chairman and Ranking Member of the Senate Budget Committee, CBO provides an illustrative analysis of the federal government’s costs for those credit programs following two approaches:
Lawmakers have considered changing federal budgetary accounting to require a fair-value approach. Costs for all credit programs would be higher under that approach because it accounts more fully than FCRA procedures do for the cost of the risk the government takes on when issuing loans or loan guarantees. CBO’s analysis indicates that:
The lending levels and costs described are illustrative—in particular, they differ from those underlying CBO’s baseline estimates or its analysis of the President’s budget—but they provide a good basis for comparing the overall budgetary impact of the two ways of accounting for the costs of credit programs.
This report was prepared by Wendy Kiska, Rebecca Rockey, and Mitch Remy of CBO’s Financial Analysis Division.