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and I am suggesting that some review of what happens under the regulations would be useful in the long run.
Senator TRIBLE. You are recommending vigilance on the part of the Congress?
Mr. HAVENS. I am, sir.
Senator TRIBLE. Senator Proxmire?
Senator PROXMIRE. Thank you very much, Mr. Havens, for a good statement. I am delighted you support this effort on our part. Thank you, sir.
Mr. HAVENS. Thank you.
Senator TRIBLE. Mr. Havens, we thank you for your testimony today.
[The complete statement follows:]
Thank you for the opportunity to testify before your
Committee on the budget treatment of the Federal Financing Bank (FFB) and specifically on S. 1679.
This bill would require that the receipts and disbursements of the FFB be included in the Federal budget and charged to the program agency.
We support this objective. It will increase the visibility of the Government's credit activities and will make the budget reflect more accurately the activities of the Government.
If the provisions of S. 1679 had been in effect during fiscal year 1982, net budget outlay totals of some 15 agencies would have gone up about $14 billion. In our view, the loss of visibility was an undesirable side-effect of the way FFB was created. Nevertheless, the original objective of having an FFB--to achieve better coordination of the Government's borrowing activities--is still valid and should be preserved. We believe that S. 1679 is an appropriate solution to the problem.
Our views on this bill' are based on work we have done concerning Federal credit programs over a period of several years. In the interest of brevity I will not elaborate on this work, but I have attached a list of relevant reports, hearing statements and bill comments.
In addition we are currently
conducting a review of FFB's impact on credit and debt management
We would be happy to discuss our work further with you or your staff, if that would be helpful.
Provisions of S. 1679
The major provisions of S. 1679 would
--Require that all transactions of the FFB be included in the unified budget totals of the responsible Federal agencies, with amounts disbursed by the FFB being treated as a means of financing the responsible Federal agency;
--Require the Director of the Office of Management and Budget (OMB) to issue regulations to carry out the above provision; and
--Require that an obligation of a type which was, during the period from October 1, 1981 to September 30, 1984, issued, sold, or guaranteed and financed through the FFB be offered for sale in
the future first to the FFB before going to the private market,
with regulatory authority vested in the Secretary of the
We favor including FFB transactions in the unified budget totals and charging those agencies which provide guarantees to repay the FFB funds. However, we believe that certain changes are needed to accomplish the desired result. As presently written in S. 1679, loan guarantee amounts financed by the FFB shall not exceed amounts of budget authority provided to a Federal agency for such purposes. However, the statutory definition of budget authority, as stated in section 3(a)(2) of the Congressional Budget Act of 1974, specifically excludes loan guarantee amounts from budget authority. Attached to my statement is a suggested revision which we believe would resolve this statutory conflict.
We also suggest that the legislative history of the bill make it clear that "means of financing" refers to agency borrowing from the FFB which affects the agency balance sheet by increasing cash and increasing liabilities. It is not intended to be treated as an offset to outlays and budget authority totals. Treating FFB transactions as borrowing will require an increase in agency budget totals because borrowing must be authorized through the budget process and is scored as budget authority.
And finally, the last major provision would provide that if agencies used the FFB between October 1, 1981, and September 30, 1984, then in the future they must also utilize the FFB. We agree with the objective of this provision, to assure that
agencies continue to use the FFB, where appropriate. We note, however, that the provision could be interpreted as being applicable only to agencies which used the FFB during a particular · period. We suggest that the legislative history make it clear that the provision is applicable, for example, to a new agency (created after 1984) if the agency issued, sold, or guaranteed obligations of a type currently financed by the FFB.
We also note that the regulatory powers vested in the executive branch are quite strong. We suggest that you monitor the implementation of the bill to assure consistency with
With the changes we have suggested we would recommend enactment of this bill.
Mr. Chairman, this concludes my prepared statement. I would be pleased to try to answer any questions.