Federal Credit and Insurance Programs:

Actions That Could Minimize a Growing Risk

T-AFMD-92-1: Published: Oct 24, 1991. Publicly Released: Oct 24, 1991.

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GAO discussed the government's credit and insurance programs, focusing on: (1) growth and risk of loss to the government; (2) underlying causes of the increasing losses; and (3) actions taken and actions that could be taken to minimize government losses. GAO noted that: (1) the government's exposure to loss from its credit and insurance programs has grown from about $438 billion 25 years ago to over $6.2 trillion today, with most of the increase coming from growth in existing programs; (2) direct and guaranteed loans increased from $667 billion to $851 billion between fiscal year (FY) 1985 and FY 1990; (3) although agencies have acted to improve the financial management of federal loan programs, progress has been slow; (4) the current recession, the decline in real estate values, administrative and financial management weaknesses, and regulatory failures all contributed to credit and insurance program losses; (5) the increase of the government's insurance commitments from $2.8 trillion at the end of FY 1985 to $4.5 trillion at the end of FY 1990 can be attributed mostly to increased deposits in financial institutions and amounts of pensions insured; and (6) such banking legislative proposals as tying prompt regulatory action to specific unsafe banking practices, the enforcement of annual, full-scope, on-site bank exams, improved accounting standards and internal controls, strengthened bank audit committees, funding the Bank Insurance Fund to permit resolution activity, and annual independent audits would help minimize deposit insurance losses to the government.

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