Summary: GAO has been concerned with various aspects of federal credit programs. During the past 5 years, its analysis has expanded from the specific aspects of the credit assistance program to the approach. Much of the growth in direct loans and loan guarantees in recent years has occurred in nontraditional areas. One of the major problems with this type of loan guarantee is that it is not possible to judge reliably, in advance, what the ultimate costs of such programs will be. Like other subsidy programs, credit assistance programs should be evaluated in terms of their cost effectiveness and the extent to which they achieve program objectives. Specifically, concerns about federal credit assistance in the past and the forseeable future center on the following issues: (1) costs and benefits of credit assistance programs; (2) impacts on financial markets and the economy; (3) the appropriate use of loan guarantees; and (4) budget treatment of federal credit assistance activities. While the executive branch and Congress are moving to set statutory limits on loan program obligations, in total and for individual programs, there is no action to record these limits on direct loans as the relevant new budget authority amounts. Therefore, the limitations do not appear in the budget totals. It is believed that the limitations should be treated as the controlling new budget authority amounts to put the loan programs on a more comparable basis with other programs and facilitate congressional budget control. Proposed legislation which would establish congressional budget process procedures for setting targets and ceilings on loans and guarantees stops short of requiring that the limitations be treated as the budget authority amounts. GAO prefers that such a treatment be required. In the overall control of federal credit assistance activity, an accurate reflection of the aggregate outlays and commitments from federal credit assistance programs in the budget is important as the basis for policy decisions. However, it is equally important to find a means of ensuring that federal credit programs compete on the same basis as other direct expenditure programs so decisions on the allocations of national resources will be made in a more balanced framework.
