Federal Credit and Insurance Programs

The government's credit and insurance programs fall into four categories: (1) direct loans of federal funds to borrowers; (2) privately held loans guaranteed by the government; (3) government-sponsored enterprise loans; and (4) commitments for insurance programs, such as those covering bank deposits and pension benefits. GAO testified that the government's overall exposure from these programs has mushroomed from roughly $438 billion 25 years ago to more than $6.2 trillion today. In the last five years alone, the exposure has almost doubled. Losses from these programs have been high and may rise even higher in the future. In addition to economic factors, problems with administration and financial management have impaired the government's ability to minimize and control losses. Congress has taken important steps in passing the Credit Reform Act, the Chief Financial Officers Act, and other legislation aimed at credit and insurance programs. The Office of Management and Budget has indicated its support of improved financial management in government and of bringing the accounting and budgeting processes closer together. If the effort is sustained, the federal government's credit and insurance programs can be brought under control and losses minimized. However, this will require strong congressional support augmented by additional actions GAO highlights in this testimony.