Reagan Calls for Revamping U.S. Credit Program

President Reagan proposed legislation Thursday to revamp the government’s credit program by promptly selling off loans and changing the accounting system to accurately show how much they cost taxpayers.

In a message to Congress, Reagan noted that the federal government is the nation’s largest financial middleman. As of last year, $252 billion in government loans and $450 billion in guaranteed loans were outstanding.

Government credit customers include homeowners, farmers, students, small businesses, exporters, utilities, shipbuilders and state, local and foreign governments.

“Despite the vast size of federal credit, and its obvious importance to the economy, the present budgetary treatment of federal credit programs does not show the real cost of these programs,” Reagan said. “The result is the misallocation of resources and ineffective budgetary control.”

The bill would change the way credit transactions are handled in the budget by charging federal agencies for the amount of subsidies inherent in credit programs. It defines subsidies as savings borrowers enjoy in obtaining loans or loan guarantees from the government rather than private lenders.

In addition, the measure proposes that loans handled by the government be sold promptly and competitively to private lenders, with no government guarantee of repayment.