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Mr. STAATS. It would certainly give the subsidy more visibility. Congress would have to act positively, and the agency would have to justify it. The principle is really no different from that applied today on space in Government buildings. Each agency now has to come to Congress to pay the rent on the space that they occupy, whereas previously all that was under the General Services Administration. So what is suggested here is very similar in principle to that which is in existence today on use by agencies of the space that they occupy.

Senator TRIBLE. It's a handy analogy. It would not have occurred to me, I must confess.

Mr. STAATS. It's a good analogy.

Senator TRIBLE. It is, indeed.

Gentlemen, I appreciate your testimony today, and your testimony brings to a close a good day of hearings, morning and afternoon. You have underscored, I believe, that this legislation represents an important first step toward a more rational process. There are further steps that ought to be taken, and to that end I hope that this committee can work with you in pursuing the initiatives you have outlined.

Mr. STAATS. Thank you.

Senator TRIBLE. Thank you very much. The meeting is adjourned.

[Whereupon, at 3:20 p.m., the meeting was adjourned.]

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This letter is submitted in connection with the Committee hearings held on September 19, 1983, to consider S 1679, the "Honest Budgeting Act of 1983." The Mortgage Bankers Association of America (MBA) respectfully requests that this letter be included in the hearing record.

MBA is a nationwide organization devoted exclusively to the field of mortgage and real estate finance. MBA's membership is comprised of mortgage originators, mortgage investors, and a variety of industry-related firms. Mortgage banking firms, which make up the largest portion of the total membership, engage directly in originating, financing, selling, and servicing real estate investment portfolios.

The "Honest Budgeting Act of 1983" would amend the Federal Financing Bank Act of 1973 to require that programs financed through the Bank be included in the Federal budget. The bill also would require that certain types of Federal obligations be offered for sale to the Bank in the future. It is regarding this latter requirement that MBA wishes to comment.

According to Section 3 of S 1679, the obligations that must be offered to the Bank would be future obligations that are of the same "type" as those obligations that have been financed through the Bank in the past. As we understand S 1679, and as we understand the intent of its sponsor, Senator Trible, the purpose of the provision in S 1679 is to preserve the jurisdiction of the Bank, after it is subject to the Budget, rather than to expand it. But the language of S 1679 does not define "type." The characteristics that are to be considered in determining future securities that must be included in the Federal Financing Bank are left to the Secretary of Treasury to define.

MBA believes it is important that Congress establish the fine line between preserving the Bank's place in the pattern of Federal financing and Federal credit on the one hand, and expanding the role of the Bank, perhaps inadvertently, to cover programs of Federal credit use that are not appropriate for the Federal Financing Bank on the other. We are concerned particularly that the mortgage-backed security program of the Government

National Mortgage Association (GNMA-MBS) not be strangled by a requirement that it work through the Federal Financing Bank.

GNMA was established in 1968, and its mortgage-backed security program was initiated soon after to introduce alternative sources of capital investment into the mortgage markets. Lenders, who originate mortgages, increasingly have sold these loans through the "secondary" market to permanent investors, rather than holding the mortgages themselves as long-term portfolio investments. This allows lenders in credit short areas to place their loans in the long-term capital markets, so that the lenders can reinvest their limited capital in additional local mortgages. Mortgage finance now depends upon accessibility to an efficient nationwide secondary market. The GNMA MBS program has helped to foster the secondary market and mobilize money on a nationwide basis, while providing the necessary assurance for investment in mortgages.

The GNMA MBS program is not Federal financing in the guise of guaranties. There are no net Federal dollars spent under the GNMA MBS program. The FHA and VA loans that serve as collateral utilize private funds. And, the guaranty fees collected by GNMA have provided the Government with a net return, after covering losses and administrative costs. The volume of securities issued and the prices obtained by the issuers efficiently reflect the rise and fall of demand in the real estate finance market, as homebuyers express their needs and abilities to purchase homes. Timing and immediate access to the capital market are crucially important for GNMA securities issues, and the Federal Financing Bank would severely inhibit this much-needed flexibility.

The continued high success of the GNMA MBS program rests upon the program being market oriented and responsive to the demands of the mortgage credit market. Restricting the GNMA MBS to the Federal Financing Bank route to the capital markets would cripple, if not destroy the program.

MBA appreciates this opportunity to comment on S 1679, and would be pleased to furnish additional information if needed.

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this opportunity to submit comments on S.1679, the Honest Budgeting Act of 1983. NAM represents over 13,000 member companies who employ over 75% of the nation's industrial workforce. NAM also has an affiliation with 158,000 businesses through its Associations Council and the National Industrial Council.

The National Association of Manufacturers commends this Committee for its efforts to require that programs financed through the Federal Financing Bank (FFB) be included in the unified federal budget. As you are well aware, the current

FY 1984 budget projections actually understate the federal deficit by as much as $16 billion due to spending which has been placed in a separate category and deemed "off-budget". As the majority of the off-budget spending is attributable to the of the Federal Financing Bank, bringing FFB activities on-budget budget resolutions provide a more concise and comprehensible financial statement


of federal spending.

would ensure that

NAM has long endorsed bringing all federal spending into the unified budget. On January 29, 1981, Alexander Trowbridge, President of NAM, stated in testimony before the House Budget Committee that, " loans by the federal agencies must be brought under control by the Congress...It is time to bring all federal spending transactions under one roof. Nothing is gained by placing some spending out of sight. That's like putting your credit card bills out of sight when it is actually your credit card that should be put away. Congress should consolidate all of its spending and borrowing responsibilities so that they can be reviewed and a true fiscal picture can be developed."

As recently as April 29 of this year, Arthur House, Vice President of Government and Industry Relations for CIGNA Corporation, reiterated NAM's position regarding a unified budget. He stated, "We continue to believe that all federal spending and revenues should be included in unified budget.

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