ABSTRACT
This chapter examines federal credit and insurance programs and describes current issues that have shaped, and may continue to shape, how these programs are budgeted and operate. Even though some of this economic activity might have taken place without federal assistance, the fact is that federal credit and insurance programs are deeply embedded in the US economy. Congressional Budget Office's (CBO) explained in an analysis of federal credit programs: Conceptually, the issue centered on best to calculate the cost of a credit program as a single amount that recognized accrued flows over the entire life of the loan or loan guarantee, well onto the future. The result was the Federal Credit Reform Act of 1990 (FCRA). The cash-based treatment of these programs distorts choice on several dimensions, the General Accounting Office (GAO) reported in congressional testimony. GAO has recommended that federal insurance programs be based on a risk-assumed cost, which would budget insurance programs on a net present value basis.
