Federal Loan Guarantee Programs

Congress asked GAO to devise a plan whereby Congress could effectively bring under control Federal load guarantee programs. GAO found the following information may be helpful as mechanisms for congressional control.

One approach would be to count the authority to guarantee loans as budget authority and treat it as being the same as authority to make a grant or authority to purchase goods and services. Apart from the fact that this would require amending the Congressional Budget Act, it involves serious conceptual problems. The costs associated with guarantee programs are not same as those of, say a grant program. Treating them in identical fashion would seriously distort the budget totals.

A second approach would be to continue the present budget treatment, but require that loan guarantee authority be provided only in specific amounts enacted by the Congress. A possible variant of this would be to require the use of loan guarantee authority be made subject to approval in annual appropriation acts. As a tentative conclusion, GAO believes that this approach should be explored.

A third approach would be to treat the subsidy element (not the full amount of the guarantee) as being budget authority. Whether or not this approach is practicable is not yet clear. GAO believes that this review of this area will help resolve the question. If this approach is feasible, GAO believes that it is the preferable approach for congressional control of loan guarantee programs.