Agricultural Loan Guarantees:

National Advisory Council's Critical Views on Loans to Iraq Withheld

GGD-94-24: Published: Oct 27, 1993. Publicly Released: Dec 14, 1993.

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Pursuant to a congressional request, GAO reviewed the process that the National Advisory Council on International Monetary and Financial Policies (NAC) used to approve over $6 billion in Department of Agriculture (USDA) loans and agricultural export credit guarantee programs to Iraq, focusing on the: (1) major issues debated in NAC regarding USDA agricultural loan and credit guarantee proposals for Iraq; (2) mechanism NAC used to determine its position on USDA proposals; (3) way the NAC voting and approval process affected the outcome of NAC positions; and (4) changing role and responsibilities of NAC since 1945.

GAO found that: (1) the NAC debate on USDA agricultural credit guarantees to Iraq has focused on USDA market development goals in Iraq, U.S. foreign policy toward Iraq, and Iraq's creditworthiness; (2) NAC support for USDA market development objectives has outweighed certain NAC members' concerns about Iraq's creditworthiness; (3) NAC approvals are determined by a majority vote of its seven members; (4) NAC members with primary responsibility for monetary and financial matters make up the minority in NAC; (5) the NAC approval process and the final NAC letter of approval did not reveal the concerns of certain members; and (6) the role and responsibilities of NAC have diminished since the enactment of the Bretton Woods Agreements Act.

Recommendations for Executive Action

  1. Status: Closed - Not Implemented

    Comments: This recommendation is made to an assistant to the President, rather than any agency, who is exempt from a required response.

    Recommendation: The Assistant to the President for Economic Policy, as head of staff of the National Economic Council, should evaluate the usefulness of the NAC interagency review process and generally assess the need for NAC. Other existing mechanisms available to the administration, such as the National Economic Council, may effectively address the issues that NAC currently reviews.

    Agency Affected: National Economic Council: Assistant to the President for Economic Policy

  2. Status: Closed - Implemented

    Comments: Treasury appears to have set aside GAO's recommendation by declaring that if NAC agencies are concerned about how well their views are represented, they themselves will point this out to the Treasury. This appears to be a nonresponse to GAO's recommendation, particularly because the report points out that NAC agencies' more critical views were being withheld.

    Recommendation: If NAC is to remain an interagency review body, the Secretary of the Treasury, in the capacity as chair, should develop a method for conveying NAC views that includes the full range of concerns raised by the members.

    Agency Affected: Department of the Treasury

 

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