The Budget and Accounting Transparency Act of 2014 () is a bill that would modify the budgetary treatment of federal credit programs. The bill would require that the cost of direct loans or loan guarantees be recognized in the federal budget on a fair-value basis using guidelines set forth by the

Financial Accounting Standards Board The Financial Accounting Standards Board (FASB) is a private standard-setting body whose primary purpose is to establish and improve Generally Accepted Accounting Principles (GAAP) within the United States in the public's interest. The Securi ...

. The bill would also require the federal budget to reflect the net impact of programs administered by

Fannie Mae The Federal National Mortgage Association (FNMA), commonly known as Fannie Mae, is a United States government-sponsored enterprise (GSE) and, since 1968, a publicly traded company. Founded in 1938 during the Great Depression as part of the N ...

and

Freddie Mac The Federal Home Loan Mortgage Corporation (FHLMC), commonly known as Freddie Mac, is a publicly traded, government-sponsored enterprise (GSE), headquartered in Tysons Corner, Virginia. The changes made by the bill would mean that Fannie Mae and Freddie Mac were counted on the budget instead of considered separately and would mean that the debt of those two programs would be included in the national debt. These programs themselves would not be changed, but how they are accounted for in the

United States federal budget The United States budget comprises the spending and revenue In accounting, revenue is the total amount of income generated by the sale of goods and services related to the primary operations of the business. Commercial revenue may also b ...

would be. The goal of the bill is to improve the accuracy of how some programs are accounted for in the federal budget. The bill was introduced into the

United States House of Representatives The United States House of Representatives, often referred to as the House of Representatives, the U.S. House, or simply the House, is the Lower house, lower chamber of the United States Congress, with the United States Senate, Senate being ...

during the

113th United States Congress The 113th United States Congress was a meeting of the legislative branch of the United States federal government, from January 3, 2013, to January 3, 2015, during the fifth and sixth years of Presidency of Barack Obama, Barack Obama's presiden ...

Background

This bill was introduced at the same time as the

Pro-Growth Budgeting Act of 2013 (H.R. 1874; 113th Congress) The Pro-Growth Budgeting Act of 2013 () is a bill that would require the Congressional Budget Office to provide a macroeconomic impact analysis for bills that are estimated to have a large budgetary effect. The bill was introduced into the United ...

and the Baseline Reform Act of 2013 (H.R. 1871; 113th Congress) as a package of budget reform bills.

Federal takeover of Fannie Mae and Freddie Mac

The ''federal takeover of Fannie Mae and Freddie Mac'' refers to the placing into

conservatorship Under U.S. law, conservatorship is the appointment of a guardian or a protector by a judge to manage the financial affairs and/or daily life of another person due to old age or physical or mental limitations. A person under conservatorship is a " ...

government-sponsored enterprise A government-sponsored enterprise (GSE) is a type of financial services corporation created by the United States Congress. Their intended function is to enhance the flow of Credit (finance), credit to targeted sectors of the economy, to make tho ...

and

Freddie Mac The Federal Home Loan Mortgage Corporation (FHLMC), commonly known as Freddie Mac, is a publicly traded, government-sponsored enterprise (GSE), headquartered in Tysons Corner, Virginia.U.S. Treasury The Department of the Treasury (USDT) is the national treasury and finance department of the federal government of the United States, where it serves as an executive department. The department oversees the Bureau of Engraving and Printing and t ...

in September 2008. It was one of the financial events among many in the ongoing

subprime mortgage crisis The United States subprime mortgage crisis was a multinational financial crisis that occurred between 2007 and 2010 that contributed to the Financial crisis of 2007–2008, 2007–2008 global financial crisis. It was triggered by a large decline ...

. On September 6, 2008, the director of the

Federal Housing Finance Agency The Federal Housing Finance Agency (FHFA) is an independent federal agency in the United States created as the successor regulatory agency of the Federal Housing Finance Board (FHFB), the Office of Federal Housing Enterprise Oversight (OFHEO), an ...

(FHFA),

James B. Lockhart III James B. Lockhart III (born 1946) is an American U.S. Navy officer, business executive, and, since September 2009, Vice Chairman of WL Ross & Co. LLC, which manages $9 billion of private equity investments, a hedge fund and a Mortgage Recovery Fun ...

, announced his decision to place two

Government-sponsored enterprise A government-sponsored enterprise (GSE) is a type of financial services corporation created by the United States Congress. Their intended function is to enhance the flow of Credit (finance), credit to targeted sectors of the economy, to make tho ...

s (GSEs),

(Federal National Mortgage Association) and

Freddie Mac The Federal Home Loan Mortgage Corporation (FHLMC), commonly known as Freddie Mac, is a publicly traded, government-sponsored enterprise (GSE), headquartered in Tysons Corner, Virginia.Henry Paulson Henry Merritt Paulson Jr. (born March 28, 1946) is an American banker and financier who served as the 74th United States Secretary of the Treasury from 2006 to 2009. Prior to his role in the Department of the Treasury, Paulson was the Chairman a ...

, stated that placing the two GSEs into conservatorship was a decision he fully supported, and that he advised "that conservatorship was the only form in which I would commit taxpayer money to the GSEs." He further said that "I attribute the need for today's action primarily to the inherent conflict and flawed business model embedded in the GSE structure, and to the ongoing housing correction." That same day,

Federal Reserve Bank A Federal Reserve Bank is a regional bank of the Federal Reserve System, the central banking system of the United States. There are twelve in total, one for each of the twelve Federal Reserve Districts that were created by the Federal Reserve A ...

chairman

Ben Bernanke Ben Shalom Bernanke ( ; born December 13, 1953) is an American economist who served as the 14th chairman of the Federal Reserve from 2006 to 2014. After leaving the Fed, he was appointed a distinguished fellow at the Brookings Institution. Durin ...

stated his support: "I strongly endorse both the decision by FHFA Director Lockhart to place Fannie Mae and Freddie Mac into conservatorship and the actions taken by Treasury Secretary Paulson to ensure the financial soundness of those two companies." The combined GSE losses of US$14.9 billion and market concerns about their ability to raise capital and debt threatened to disrupt the U.S. housing financial market. The Treasury committed to invest as much as US$200 billion in preferred stock and extend credit through 2009 to keep the GSEs solvent and operating. The two GSEs have outstanding more than US$5 trillion in

mortgage-backed securities A mortgage-backed security (MBS) is a type of asset-backed security (an 'instrument') which is secured by a mortgage or collection of mortgages. The mortgages are aggregated and sold to a group of individuals (a government agency or investment ba ...

(MBS) and debt; the debt portion alone is $1.6 trillion. The conservatorship action has been described as "one of the most sweeping government interventions in private financial markets in decades," and one that "could turn into the biggest and costliest government bailout ever of private companies".

Provisions of the bill

''This summary is based largely on the summary provided by the

Congressional Research Service The Congressional Research Service (CRS) is a public policy research institute of the United States Congress. Operating within the Library of Congress, it works primarily and directly for members of Congress and their committees and staff on a c ...

, a

public domain The public domain (PD) consists of all the creative work A creative work is a manifestation of creative effort including fine artwork (sculpture, paintings, drawing, sketching, performance art), dance, writing (literature), filmmaking, ...

source.'' The Budget and Accounting Transparency Act of 2014 would amend the Federal Credit Reform Act of 1990 (FCRA) (title V of the

Congressional Budget Act of 1974 The Congressional Budget and Impoundment Control Act of 1974 (, , ) is a United States federal law that governs the role of the Congress in the United States budget process. The Congressional budget process Titles I through IX of the law are also ...

BA to revise the budgetary treatment of federal direct loans and loan guarantees to account for them on a fair value basis (currently, a FCRA accrual basis). The bill would require the President's budget from FY1992 on to reflect the Treasury discounting component of direct loan and loan guarantee programs. Defines the "Treasury discounting component" as the estimated long-term cost to the federal government of a direct loan or loan guarantee (or modification) calculated on a net present value basis, excluding administrative costs and any incidental effects on governmental receipts or outlays. The bill would revise other requirements for the President's budget, beginning with FY2015, including conditions for new direct loans or loan guarantee commitments. Requires new budget authority for such loans or loan guarantee commitments to be provided in advance in an appropriation Act. The bill would exempt a direct loan or loan guarantee program that constitutes an entitlement (such as the guaranteed student loan program or the veteran's home loan guaranty program), all existing credit programs of the

Commodity Credit Corporation The Commodity Credit Corporation (CCC) is a wholly owned United States government corporation that was created in 1933 to "stabilize, support, and protect farm income and prices" (federally chartered by the CCC Charter Act of 1948 (P.L. 80-806) ...

(CCC), or any direct loan or loan guarantee made by the

Federal National Mortgage Association The Federal National Mortgage Association (FNMA), commonly known as Fannie Mae, is a United States government-sponsored enterprise (GSE) and, since 1968, a publicly traded company. Founded in 1938 during the Great Depression as part of the N ...

(Fannie Mae) or the

Federal Home Loan Mortgage Corporation The Federal Home Loan Mortgage Corporation (FHLMC), commonly known as Freddie Mac, is a publicly traded, government-sponsored enterprise (GSE), headquartered in Tysons Corner, Virginia.government-sponsored enterprise A government-sponsored enterprise (GSE) is a type of financial services corporation created by the United States Congress. Their intended function is to enhance the flow of Credit (finance), credit to targeted sectors of the economy, to make tho ...

s or GSEs) from: (1) the above requirement, and (2) the prohibition against modification of an outstanding direct loan or loan guarantee in a manner that increases its costs unless budget authority for the additional cost has been provided in advance in an appropriation Act. The bill would repeal the general

authorization Authorization or authorisation (see spelling differences) is the function of specifying access rights/privileges to resources, which is related to general information security and computer security, and to access control in particular. More for ...

of appropriations to federal agencies for the cost associated with such direct loan obligations or loan guarantee commitments. The bill would revise requirements for Treasury transactions with financing accounts (nonbudget accounts associated with each program account which holds balances, receives the cost payment from the program account, and also includes all other cash flows to and from the federal government resulting from direct loan obligations or loan guarantee commitments made on or after October 1, 1991). The bill would limit the availability of amounts in liquidating accounts to specified payments resulting from direct loan obligations or loan guarantee commitments made before October 1, 1991. The bill would amend the

Balanced Budget and Emergency Deficit Control Act of 1985 In telecommunications and professional audio, a balanced line or balanced signal pair is a circuit consisting of two conductors of the same type, both of which have equal impedances along their lengths and equal impedances to ground and to other ci ...

(Gramm-Rudman-Hollings Act) to treat a change in discretionary spending solely as a result of the amendment to title V of the CBA made by this Act as a change of concept (requiring adjustments to discretionary spending limits). The bill would require the

Office of Management and Budget The Office of Management and Budget (OMB) is the largest office within the Executive Office of the President of the United States (EOP). OMB's most prominent function is to produce the president's budget, but it also examines agency programs, pol ...

(OMB), before adjusting such discretionary spending limits, to report to the congressional budget committees on the amount of that adjustment and other specified related matters. The bill would require each of the Directors of the

Congressional Budget Office The Congressional Budget Office (CBO) is a federal agency within the legislative branch of the United States government that provides budget and economic information to Congress. Inspired by California's Legislative Analyst's Office that manages ...

(CBO) and of the Office of Management and Budget (OMB) to study and make recommendations to the congressional budget committees on the feasibility of applying fair value concepts to budgeting for the costs of federal insurance programs. The bill would require the receipts and disbursements, including the administrative expenses, of the GSEs to be counted as new budget authority, outlays, receipts, or deficit or surplus for purposes of: (1) the President's budget, (2) the congressional budget, and (3) the Gramm-Rudman-Hollings Act. The bill would terminate mandatory on-budget status treatment for a GSE after all of the following occurs: (1) its conservatorship has been terminated; (2) the Director of the

(FHFA) has certified in writing that the GSE has repaid to the federal government the maximum amount consistent with minimizing the total federal cost of the financial assistance provided to the GSE; and (3) its charter has been revoked, annulled, or terminated and its authorizing statute has been repealed. The bill would require OMB to: (1) study the history of offsetting collections against expenditures and the amount of receipts collected annually, especially the historical application of the budgetary terms "revenue," "offsetting collections," and "offsetting receipts"; and (2) review the application of those terms and make recommendations to the congressional budget committees on whether such usage should be continued or modified. The bill would require any federal agency, whenever it prepares and submits written budget justification materials for any congressional committee, to post them on the same day as its submission on the "open" page of its public website. The bill would require OMB to: (1) post the budget justification in a centralized location on its website in an OMB developed format, and (2) notify each federal agency of the format in which to post it.

Congressional Budget Office report

''This summary is based largely on the summary provided by the

, as ordered reported by the House Committee on the Budget on February 11, 2014. This is a

source.'' H.R. 1872 would modify the budgetary treatment of federal credit programs. Specifically, the bill would amend the Federal Credit Reform Act of 1990 (FCRA) to require that, beginning in fiscal year 2017, the cost of direct loans or loan guarantees be recognized in the federal budget on a fair-value basis using guidelines set forth by the

. A fair-value approach to accounting for the cost of federal loans and loan guarantees would produce estimates of costs that either correspond to or approximate the value of those loans or guarantees to buyers in the private market. The bill also would require that the

Government Accountability Office The U.S. Government Accountability Office (GAO) is a legislative branch government agency that provides auditing, evaluative, and investigative services for the United States Congress. It is the supreme audit institution of the federal govern ...

(GAO) produce annual reports on the progress that federal agencies make in its implementation; the federal budget reflect the net impact of programs administered by

and

Freddie Mac The Federal Home Loan Mortgage Corporation (FHLMC), commonly known as Freddie Mac, is a publicly traded, government-sponsored enterprise (GSE), headquartered in Tysons Corner, Virginia. The proposed changes to the budgetary treatment of federal credit programs would increase the estimated costs of such programs compared to measures used under current law. (This legislation would not change the terms of such credit programs, but would change what is recorded in the budget as the cost of credit assistance.) CBO estimates that if fair-value procedures were used to estimate the cost of new credit activity in 2014, the total deficit for the year would be about $50 billion greater than the deficit as measured under current estimating procedures. Because that increased cost would stem from a change in concepts and definitions used to prepare federal budget documents rather than a change in agencies’ legal authority to operate credit programs, it would not be an additional cost attributed to H.R. 1872 for Congressional budget enforcement procedures. The CBO estimates that measuring the cost of federal credit programs on a fair-value basis as prescribed under H.R. 1872 would increase agencies’ administrative costs to operate such programs. In addition, the requirements to post budget justifications on the Internet and produce studies would require additional resources. Assuming appropriation of the necessary amounts, the CBO estimates such costs would total $16 million over the 2014-2019 period.

Pay-as-you-go Pay as you go or PAYG may refer to: Finance * Pay-as-you-go tax, or pay-as-you-earn tax * Pay-as-you-go pension plan * PAYGO, the practice in the US of financing expenditures with current funds rather than borrowing * PAUG, a structured financia ...

procedures do not apply to this legislation because no additional direct spending would be attributable to H.R. 1872 since it would not change credit programs. The legislation would not affect revenues. H.R. 1872 contains no intergovernmental or private-sector mandates as defined in the

Unfunded Mandates Reform Act The Unfunded Mandates Reform Act of 1995 (UMRA''(pdf)https://www.govinfo.gov/content/pkg/USCODE-1995-title2/html/USCODE-1995-title2-chap25.htm (text)] restricts the federal government of the United States, federal imposition of unfunded mandates on ...

(UMRA) and would impose no costs on state, local, or tribal governments.

Procedural history

The Budget and Accounting Transparency Act of 2014 was introduced into the

on May 8, 2013 by Scott Garrett, Rep. Scott Garrett (R, NJ-5). The bill was referred to the

United States House Committee on the Budget The United States House Committee on the Budget, commonly known as the House Budget Committee, is a standing committee of the United States House of Representatives. Its responsibilities include legislative oversight of the federal budget process, ...

and the

United States House Committee on Oversight and Government Reform The Committee on Oversight and Reform is the main investigative committee of the United States House of Representatives. The committee's broad jurisdiction and legislative authority make it one of the most influential and powerful panels in the ...

. It was reported (amended) alongsid
House Report 113-381 part 1
on March 18, 2014.

Debate and discussion

Republicans argued that the bill would improve Congress' ability to balance the federal budget. When this and two other budget reform bills were introduced, House Budget Committee Chairman

Paul Ryan Paul Davis Ryan (born January 29, 1970) is an American former politician who served as the List of Speakers of the United States House of Representatives, 54th speaker of the United States House of Representatives from 2015 to 2019. A member o ...

said that "these reforms are an important step toward restoring fiscal discipline in Washington," arguing that "by improving the budget process, we can get a better handle on our spending problem." Romina Boccia of the right-wing organization

The Heritage Foundation The Heritage Foundation (abbreviated to Heritage) is an American conservative think tank based in Washington, D.C. that is primarily geared toward public policy. The foundation took a leading role in the conservative movement during the presiden ...

wrote a report in favor of the legislation, arguing that "improper accounting in the budget for the downside risks that the GSEs (

) pose for American taxpayers is creating the illusion that the GSEs are a free lunch for Washington." Boccia argued that because the GSEs were "off-budget", it changed the incentives and distorted the federal budget, hiding "the real cost to taxpayers from federal control of Fannie and Freddie." The distortion is due to the federal government counting as income the profits, but not counting the debt of Fannie and Freddie as national debt. In contrast, Richard Kogan of the

Center on Budget and Policy Priorities The Center on Budget and Policy Priorities (CBPP) is a progressive American think tank that analyzes the impact of federal and state government budget policies. A 501(c)(3) nonprofit organization, the Center's stated mission is to "conduct resear ...

argues that the bill would make "federal loan and loan guarantee programs look more expensive to the federal government than they really are." Kogan expresses his concern that due to the apparently increased costs of various programs, policymakers may react by raising taxes and cutting programs. Kogan cites numbers from the CBO saying that 44 of the 100 programs that would be counted differently actually make money (through fees and interest), but 33 of them would look like they cost the government money under the bill's new counting requirements.

References

External links

Library of Congress - Thomas H.R. 1872beta.congress.gov H.R. 1872GovTrack.us H.R. 1872OpenCongress.org H.R. 1872
{{DEFAULTSORT:Budget and Accounting Transparency Act of 2014 Proposed legislation of the 113th United States Congress