The Budgetary Treatment of the Proposed Resolution Funding Corporation

T-AFMD-89-8: Published: May 19, 1989. Publicly Released: May 19, 1989.

Additional Materials:

Contact:

Office of Public Affairs
(202) 512-4800
youngc1@gao.gov

GAO discussed whether the financing to resolve the current crisis in the savings and loan industry should be on- or off-budget. GAO found that: (1) H.R. 1278 would establish an off-budget, government-sponsored enterprise (GSE), the Resolution Funding Corporation (REFCORP), to raise funds for a new on-budget federal corporation, the Resolution Trust Corporation (RTC); (2) REFCORP would borrow $50 million through sales of 30-year bonds, then transfer the borrowed money to RTC by purchasing its capital certificates; (3) the legislation would require the savings and loan (S&L) industry to provide about $5 billion to $6 billion to REFCORP by purchasing its common stock; (4) REFCORP would use this money to purchase 30-year Treasury bonds, which would provide the $50 billion needed to pay off its debt principal; (5) classifying REFCORP as an off-budget GSE would make it easier for the government to meet its deficit reduction targets, since the money the government would receive would be treated as a federal collection rather than a federal borrowing; (6) concerns over the high interest costs REFCORP would pay and the possibility that REFCORP features would more closely resemble a federal agency, prompted a proposal to fund the resolution actions through Treasury; and (7) an on-budget, Treasury-financed approach would increase the budget deficit, since GSE collections would not offset the resolution outlays. GAO believes that Congress may wish to: (1) raise deficit targets to accommodate any extra governmental spending to resolve the S&L industry crisis; and (2) consider the added costs and implications for budget discipline of establishing an off-budget GSE.

Jul 21, 2016

Jun 23, 2016

May 12, 2016

Apr 14, 2016

Mar 4, 2016

Oct 30, 2015

Sep 9, 2015

Aug 17, 2015

Jul 9, 2015

Apr 27, 2015

Looking for more? Browse all our products here