Federal Government Credit Activities and How They Relate to Loan Sales

T-AFMD-88-2: Published: Nov 10, 1987. Publicly Released: Nov 10, 1987.

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GAO discussed the federal government's plan to privatize its credit programs through the sale of its loan assets to generate budgetary receipts. GAO found that: (1) the proposed sale would not reduce the budget deficit, because it would simply shift revenues from future years to the year of sale; (2) the federal government would benefit more from future loan repayments than from the estimated proceeds of the sale of loan assets; and (3) measurement of federal loan subsidy costs through loan sales would not indicate the true cost the government incurred in making the loans. GAO believes that: (1) there is a need for proper documentation on borrowers, improved agency accounting systems, and updated records on loan delinquency and defaults; and (2) independent audits of loan sales would ensure objective evaluations of the sale results and improve accountability of future loan sales.

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