Federal Credit Programs: Comparing Fair Value and the Federal Credit Reform Act (FCRA) [September 14, 2015] [open pdf - 845KB]
"The U.S. government uses direct loans and loan guarantees in a range of policy areas. More than 100 direct federal loans and private financial institution loans guaranteed by the government, known as federal credit programs, are available to individuals and firms. The credit programs support a wide range of economic activities, including home ownership, education, small business, farming, energy, infrastructure investment, and exports. At the end of fiscal year (FY) 2014, outstanding federal credit totaled $3.3 trillion, with direct loans at $1.0 trillion and loan guarantees at $2.3 trillion. For budget formulation, the costs or profits of these government programs are estimated as prescribed by the Federal Credit Reform Act of 1990 (FCRA; P.L. 101-508). As measured by FCRA, some of these credit programs generate a profit while others incur costs to the government. The costs of these credit programs are commonly referred to as 'subsidy costs'. When these programs generate a profit, they are considered 'negative subsidy costs'. In recent years, Congress has debated the best way to measure subsidy costs. The debate has revolved around whether the subsidy costs should be measured as prescribed by FCRA or by what is referred to as the 'fair-value method'. Subsidy costs estimates under FCRA adjust the cash outflows and inflows for the various risks a loan portfolio might face. These cash flows are also discounted using Treasury interest rates for estimating subsidy costs. […] Legislation has been introduced in the 114th Congress (S. 399 and H.R. 119) that would change the method of calculating subsidy costs to the fair-value method."
CRS Report for Congress, R44193