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112th Congress 
 2d Session             HOUSE OF REPRESENTATIVES          Rept. 112-380
                                                                 Part 1
_______________________________________________________________________

             BUDGET AND ACCOUNTING TRANSPARENCY ACT OF 2012

                               __________

                              R E P O R T

                                 of the

                        COMMITTEE ON THE BUDGET

                        HOUSE OF REPRESENTATIVES

                              to accompany

                               H.R. 3581

                             together with

                             MINORITY VIEWS




January 31, 2012.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed

                                _____

                  U.S. GOVERNMENT PRINTING OFFICE

19-006                    WASHINGTON : 2012
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Office Internet: bookstore.gpo.gov Phone: toll free (866) 512-1800; DC 
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                        COMMITTEE ON THE BUDGET

                     PAUL RYAN, Wisconsin, Chairman
SCOTT GARRETT, New Jersey            CHRIS VAN HOLLEN, Maryland,
MICHAEL K. SIMPSON, Idaho              Ranking Minority Member
JOHN CAMPBELL, California            ALLYSON Y. SCHWARTZ, Pennsylvania
KEN CALVERT, California              MARCY KAPTUR, Ohio
W. TODD AKIN, Missouri               LLOYD DOGGETT, Texas
TOM COLE, Oklahoma                   EARL BLUMENAUER, Oregon
TOM PRICE, Georgia                   BETTY McCOLLUM, Minnesota
TOM McCLINTOCK, California           JOHN A. YARMUTH, Kentucky
JASON CHAFFETZ, Utah                 BILL PASCRELL, Jr., New Jersey
MARLIN A. STUTZMAN, Indiana          MICHAEL M. HONDA, California
JAMES LANKFORD, Oklahoma             TIM RYAN, Ohio
DIANE BLACK, Tennessee               DEBBIE WASSERMAN SCHULTZ, Florida
REID J. RIBBLE, Wisconsin            GWEN MOORE, Wisconsin
BILL FLORES, Texas                   KATHY CASTOR, Florida
MICK MULVANEY, South Carolina        HEATH SHULER, North Carolina
TIM HUELSKAMP, Kansas                PAUL TONKO, New York
TODD C. YOUNG, Indiana               KAREN BASS, California
JUSTIN AMASH, Michigan
TODD ROKITA, Indiana
FRANK C. GUINTA, New Hampshire
ROB WOODALL, Georgia

                           Professional Staff

                     Austin Smythe, Staff Director
                Thomas S. Kahn, Minority Staff Director











                            C O N T E N T S

                                                                   Page
Budget and Accounting Transparency Act of 2011...................     1
    Introduction.................................................     7
    Summary of Proposed Changes..................................     8
    Legislative History..........................................    11
    Hearings.....................................................    14
    Section by Section...........................................    15
    Votes of the Committee.......................................    19
    Committee Oversight Findings.................................    21
    Budget Act Compliance........................................    21
    Performance Goals and Objectives.............................    24
    Constitutional Authority Statement...........................    24
    Committee Cost Estimate......................................    24
    Advisory Committee Statement.................................    25
    Applicability to the Legislative Branch......................    25
    Federal Mandates Statement...................................    25
    Advisory on Earmarks.........................................    25
    Changes in Existing Law Made by the Bill, as Reported........    25
    Views of Committee Members...................................    40
112th Congress                                            Rept. 112-380
                        HOUSE OF REPRESENTATIVES
 2d Session                                                      Part 1

======================================================================



 
             BUDGET AND ACCOUNTING TRANSPARENCY ACT OF 2012

                                _______
                                

January 31, 2012.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed

                                _______
                                

Mr. Ryan of Wisconsin, from the Committee on the Budget, submitted the 
                               following

                              R E P O R T

                             together with

                             MINORITY VIEWS

                        [To accompany H.R. 3581]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on the Budget, to whom was referred the bill 
(H.R. 3581) to amend the Balanced Budget and Emergency Deficit 
Control Act of 1985 to increase transparency in Federal 
budgeting, and for other purposes, having considered the same, 
report favorably thereon with an amendment and recommend that 
the bill as amended do pass.
    The amendment is as follows:
  Strike all after the enacting clause and insert the 
following:

SECTION 1. SHORT TITLE.

  This Act may be cited as the ``Budget and Accounting Transparency Act 
of 2012''.

                     TITLE I--FAIR VALUE ESTIMATES

SEC. 101. CREDIT REFORM.

  (a) In General.--Title V of the Congressional Budget Act of 1974 is 
amended to read as follows:

                         ``TITLE V--FAIR VALUE

``SEC. 501. PURPOSES.

  ``The purposes of this title are to--
          ``(1) measure more accurately the costs of Federal credit 
        programs by accounting for them on a fair value basis;
          ``(2) place the cost of credit programs on a budgetary basis 
        equivalent to other Federal spending;
          ``(3) encourage the delivery of benefits in the form most 
        appropriate to the needs of beneficiaries; and
          ``(4) improve the allocation of resources among Federal 
        programs.

``SEC. 502. DEFINITIONS.

  ``For purposes of this title:
          ``(1) The term `direct loan' means a disbursement of funds by 
        the Government to a non-Federal borrower under a contract that 
        requires the repayment of such funds with or without interest. 
        The term includes the purchase of, or participation in, a loan 
        made by another lender and financing arrangements that defer 
        payment for more than 90 days, including the sale of a 
        Government asset on credit terms. The term does not include the 
        acquisition of a federally guaranteed loan in satisfaction of 
        default claims or the price support loans of the Commodity 
        Credit Corporation.
          ``(2) The term `direct loan obligation' means a binding 
        agreement by a Federal agency to make a direct loan when 
        specified conditions are fulfilled by the borrower.
          ``(3) The term `loan guarantee' means any guarantee, 
        insurance, or other pledge with respect to the payment of all 
        or a part of the principal or interest on any debt obligation 
        of a non-Federal borrower to a non-Federal lender, but does not 
        include the insurance of deposits, shares, or other 
        withdrawable accounts in financial institutions.
          ``(4) The term `loan guarantee commitment' means a binding 
        agreement by a Federal agency to make a loan guarantee when 
        specified conditions are fulfilled by the borrower, the lender, 
        or any other party to the guarantee agreement.
          ``(5)(A) The term `cost' means the sum of the Treasury 
        discounting component and the risk component of a direct loan 
        or loan guarantee, or a modification thereof.
          ``(B) The Treasury discounting component shall be the 
        estimated long-term cost to the Government of a direct loan or 
        loan guarantee, or modification thereof, calculated on a net 
        present value basis, excluding administrative costs and any 
        incidental effects on governmental receipts or outlays.
          ``(C) The risk component shall be an amount equal to the 
        difference between--
                  ``(i) the estimated long-term cost to the Government 
                of a direct loan or loan guarantee, or modification 
                thereof, estimated on a fair value basis, applying the 
                guidelines set forth by the Financial Accounting 
                Standards Board in Financial Accounting Standards #157, 
                or a successor thereto, excluding administrative costs 
                and any incidental effects on governmental receipts or 
                outlays; and
                  ``(ii) the Treasury discounting component of such 
                direct loan or loan guarantee, or modification thereof.
          ``(D) The Treasury discounting component of a direct loan 
        shall be the net present value, at the time when the direct 
        loan is disbursed, of the following estimated cash flows:
                  ``(i) Loan disbursements.
                  ``(ii) Repayments of principal.
                  ``(iii) Essential preservation expenses, payments of 
                interest and other payments by or to the Government 
                over the life of the loan after adjusting for estimated 
                defaults, prepayments, fees, penalties, and other 
                recoveries, including the effects of changes in loan 
                terms resulting from the exercise by the borrower of an 
                option included in the loan contract.
          ``(E) The Treasury discounting component of a loan guarantee 
        shall be the net present value, at the time when the guaranteed 
        loan is disbursed, of the following estimated cash flows:
                  ``(i) Payments by the Government to cover defaults 
                and delinquencies, interest subsidies, essential 
                preservation expenses, or other payments.
                  ``(ii) Payments to the Government including 
                origination and other fees, penalties, and recoveries, 
                including the effects of changes in loan terms 
                resulting from the exercise by the guaranteed lender of 
                an option included in the loan guarantee contract, or 
                by the borrower of an option included in the guaranteed 
                loan contract.
          ``(F) The cost of a modification is the sum of--
                  ``(i) the difference between the current estimate of 
                the Treasury discounting component of the remaining 
                cash flows under the terms of a direct loan or loan 
                guarantee and the current estimate of the Treasury 
                discounting component of the remaining cash flows under 
                the terms of the contract, as modified; and
                  ``(ii) the difference between the current estimate of 
                the risk component of the remaining cash flows under 
                the terms of a direct loan or loan guarantee and the 
                current estimate of the risk component of the remaining 
                cash flows under the terms of the contract as modified.
          ``(G) In estimating Treasury discounting components, the 
        discount rate shall be the average interest rate on marketable 
        Treasury securities of similar duration to the cash flows of 
        the direct loan or loan guarantee for which the estimate is 
        being made.
          ``(H) When funds are obligated for a direct loan or loan 
        guarantee, the estimated cost shall be based on the current 
        assumptions, adjusted to incorporate the terms of the loan 
        contract, for the fiscal year in which the funds are obligated.
          ``(6) The term `program account' means the budget account 
        into which an appropriation to cover the cost of a direct loan 
        or loan guarantee program is made and from which such cost is 
        disbursed to the financing account.
          ``(7) The term `financing account' means the nonbudget 
        account or 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 
        Government resulting from direct loan obligations or loan 
        guarantee commitments made on or after October 1, 1991.
          ``(8) The term `liquidating account' means the budget account 
        that includes all cash flows to and from the Government 
        resulting from direct loan obligations or loan guarantee 
        commitments made prior to October 1, 1991. These accounts shall 
        be shown in the budget on a cash basis.
          ``(9) The term `modification' means any Government action 
        that alters the estimated cost of an outstanding direct loan 
        (or direct loan obligation) or an outstanding loan guarantee 
        (or loan guarantee commitment) from the current estimate of 
        cash flows. This includes the sale of loan assets, with or 
        without recourse, and the purchase of guaranteed loans (or 
        direct loan obligations) or loan guarantees (or loan guarantee 
        commitments) such as a change in collection procedures.
          ``(10) The term `current' has the same meaning as in section 
        250(c)(9) of the Balanced Budget and Emergency Deficit Control 
        Act of 1985.
          ``(11) The term `Director' means the Director of the Office 
        of Management and Budget.
          ``(12) The term `administrative costs' means costs related to 
        program management activities, but does not include essential 
        preservation expenses.
          ``(13) The term `essential preservation expenses' means 
        servicing and other costs that are essential to preserve the 
        value of loan assets or collateral.

``SEC. 503. OMB AND CBO ANALYSIS, COORDINATION, AND REVIEW.

  ``(a) In General.--For the executive branch, the Director shall be 
responsible for coordinating the estimates required by this title. The 
Director shall consult with the agencies that administer direct loan or 
loan guarantee programs.
  ``(b) Delegation.--The Director may delegate to agencies authority to 
make estimates of costs. The delegation of authority shall be based 
upon written guidelines, regulations, or criteria consistent with the 
definitions in this title.
  ``(c) Coordination With the Congressional Budget Office.--In 
developing estimation guidelines, regulations, or criteria to be used 
by Federal agencies, the Director shall consult with the Director of 
the Congressional Budget Office.
  ``(d) Improving Cost Estimates.--The Director and the Director of the 
Congressional Budget Office shall coordinate the development of more 
accurate data on historical performance and prospective risk of direct 
loan and loan guarantee programs. They shall annually review the 
performance of outstanding direct loans and loan guarantees to improve 
estimates of costs. The Office of Management and Budget and the 
Congressional Budget Office shall have access to all agency data that 
may facilitate the development and improvement of estimates of costs.
  ``(e) Historical Credit Programs Costs.--The Director shall review, 
to the extent possible, historical data and develop the best possible 
estimates of adjustments that would convert aggregate historical budget 
data to credit reform accounting.

``SEC. 504. BUDGETARY TREATMENT.

  ``(a) President's Budget.--Beginning with fiscal year 1992, the 
President's budget shall reflect the Treasury discounting component of 
direct loan and loan guarantee programs. Beginning with fiscal year 
2015, the President's budget shall reflect the costs of direct loan and 
loan guarantee programs. The budget shall also include the planned 
level of new direct loan obligations or loan guarantee commitments 
associated with each appropriations request.
  ``(b) Appropriations Required.--Notwithstanding any other provision 
of law, new direct loan obligations may be incurred and new loan 
guarantee commitments may be made for fiscal year 1992 and thereafter 
only to the extent that--
          ``(1) new budget authority to cover their costs is provided 
        in advance in an appropriation Act;
          ``(2) a limitation on the use of funds otherwise available 
        for the cost of a direct loan or loan guarantee program has 
        been provided in advance in an appropriation Act; or
          ``(3) authority is otherwise provided in appropriation Acts.
  ``(c) Exemption for Direct Spending Programs.--Subsections (b) and 
(e) shall not apply to--
          ``(1) any 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);
          ``(2) the credit programs of the Commodity Credit Corporation 
        existing on the date of enactment of this title; or
          ``(3) any direct loan (or direct loan obligation) or loan 
        guarantee (or loan guarantee commitment) made by the Federal 
        National Mortgage Association or the Federal Home Loan Mortgage 
        Corporation.
  ``(d) Budget Accounting.--
          ``(1) The authority to incur new direct loan obligations, 
        make new loan guarantee commitments, or modify outstanding 
        direct loans (or direct loan obligations) or loan guarantees 
        (or loan guarantee commitments) shall constitute new budget 
        authority in an amount equal to the cost of the direct loan or 
        loan guarantee in the fiscal year in which definite authority 
        becomes available or indefinite authority is used. Such budget 
        authority shall constitute an obligation of the program account 
        to pay to the financing account.
          ``(2) The outlays resulting from new budget authority for the 
        cost of direct loans or loan guarantees described in paragraph 
        (1) shall be paid from the program account into the financing 
        account and recorded in the fiscal year in which the direct 
        loan or the guaranteed loan is disbursed or its costs altered.
          ``(3) All collections and payments of the financing accounts 
        shall be a means of financing.
  ``(e) Modifications.--An outstanding direct loan (or direct loan 
obligation) or loan guarantee (or loan guarantee commitment) shall not 
be modified in a manner that increases its costs unless budget 
authority for the additional cost has been provided in advance in an 
appropriation Act.
  ``(f) Reestimates.--When the estimated cost for a group of direct 
loans or loan guarantees for a given program made in a single fiscal 
year is re-estimated in a subsequent year, the difference between the 
reestimated cost and the previous cost estimate shall be displayed as a 
distinct and separately identified subaccount in the program account as 
a change in program costs and a change in net interest. There is hereby 
provided permanent indefinite authority for these re-estimates.
  ``(g) Administrative Expenses.--All funding for an agency's 
administrative costs associated with a direct loan or loan guarantee 
program shall be displayed as distinct and separately identified 
subaccounts within the same budget account as the program's cost.

``SEC. 505. AUTHORIZATIONS.

  ``(a) Authorization for Financing Accounts.--In order to implement 
the accounting required by this title, the President is authorized to 
establish such non-budgetary accounts as may be appropriate.
  ``(b) Treasury Transactions With the Financing Accounts.--
          ``(1) In general.--The Secretary of the Treasury shall borrow 
        from, receive from, lend to, or pay to the financing accounts 
        such amounts as may be appropriate. The Secretary of the 
        Treasury may prescribe forms and denominations, maturities, and 
        terms and conditions for the transactions described in the 
        preceding sentence, except that the rate of interest charged by 
        the Secretary on lending to financing accounts (including 
        amounts treated as lending to financing accounts by the Federal 
        Financing Bank (hereinafter in this subsection referred to as 
        the `Bank') pursuant to section 405(b)) and the rate of 
        interest paid to financing accounts on uninvested balances in 
        financing accounts shall be the same as the rate determined 
        pursuant to section 502(5)(G).
          ``(2) Loans.--For guaranteed loans financed by the Bank and 
        treated as direct loans by a Federal agency pursuant to section 
        406(b)(1), any fee or interest surcharge (the amount by which 
        the interest rate charged exceeds the rate determined pursuant 
        to section 502(5)(G) that the Bank charges to a private 
        borrower pursuant to section 6(c) of the Federal Financing Bank 
        Act of 1973 shall be considered a cash flow to the Government 
        for the purposes of determining the cost of the direct loan 
        pursuant to section 502(5). All such amounts shall be credited 
        to the appropriate financing account.
          ``(3) Reimbursement.--The Bank is authorized to require 
        reimbursement from a Federal agency to cover the administrative 
        expenses of the Bank that are attributable to the direct loans 
        financed for that agency. All such payments by an agency shall 
        be considered administrative expenses subject to section 
        504(g). This subsection shall apply to transactions related to 
        direct loan obligations or loan guarantee commitments made on 
        or after October 1, 1991.
          ``(4) Authority.--The authorities provided in this subsection 
        shall not be construed to supersede or override the authority 
        of the head of a Federal agency to administer and operate a 
        direct loan or loan guarantee program.
          ``(5) Title 31.--All of the transactions provided in the 
        subsection shall be subject to the provisions of subchapter II 
        of chapter 15 of title 31, United States Code.
          ``(6) Treatment of cash balances.--Cash balances of the 
        financing accounts in excess of current requirements shall be 
        maintained in a form of uninvested funds and the Secretary of 
        the Treasury shall pay interest on these funds. The Secretary 
        of the Treasury shall charge (or pay if the amount is negative) 
        financing accounts an amount equal to the risk component for a 
        direct loan or loan guarantee, or modification thereof. Such 
        amount received by the Secretary of the Treasury shall be a 
        means of financing and shall not be considered a cash flow of 
        the Government for the purposes of section 502(5).
  ``(c) Authorization for Liquidating Accounts.--(1) Amounts in 
liquidating accounts shall be available only for payments resulting 
from direct loan obligations or loan guarantee commitments made prior 
to October 1, 1991, for--
          ``(A) interest payments and principal repayments to the 
        Treasury or the Federal Financing Bank for amounts borrowed;
          ``(B) disbursements of loans;
          ``(C) default and other guarantee claim payments;
          ``(D) interest supplement payments;
          ``(E) payments for the costs of foreclosing, managing, and 
        selling collateral that are capitalized or routinely deducted 
        from the proceeds of sales;
          ``(F) payments to financing accounts when required for 
        modifications;
          ``(G) administrative costs and essential preservation 
        expenses, if--
                  ``(i) amounts credited to the liquidating account 
                would have been available for administrative costs and 
                essential preservation expenses under a provision of 
                law in effect prior to October 1, 1991; and
                  ``(ii) no direct loan obligation or loan guarantee 
                commitment has been made, or any modification of a 
                direct loan or loan guarantee has been made, since 
                September 30, 1991; or
          ``(H) such other payments as are necessary for the 
        liquidation of such direct loan obligations and loan guarantee 
        commitments.
  ``(2) Amounts credited to liquidating accounts in any year shall be 
available only for payments required in that year. Any unobligated 
balances in liquidating accounts at the end of a fiscal year shall be 
transferred to miscellaneous receipts as soon as practicable after the 
end of the fiscal year.
  ``(3) If funds in liquidating accounts are insufficient to satisfy 
obligations and commitments of such accounts, there is hereby provided 
permanent, indefinite authority to make any payments required to be 
made on such obligations and commitments.
  ``(d) Reinsurance.--Nothing in this title shall be construed as 
authorizing or requiring the purchase of insurance or reinsurance on a 
direct loan or loan guarantee from private insurers. If any such 
reinsurance for a direct loan or loan guarantee is authorized, the cost 
of such insurance and any recoveries to the Government shall be 
included in the calculation of the cost.
  ``(e) Eligibility and Assistance.--Nothing in this title shall be 
construed to change the authority or the responsibility of a Federal 
agency to determine the terms and conditions of eligibility for, or the 
amount of assistance provided by a direct loan or a loan guarantee.

``SEC. 506. TREATMENT OF DEPOSIT INSURANCE AND AGENCIES AND OTHER 
                    INSURANCE PROGRAMS.

  ``This title shall not apply to the credit or insurance activities of 
the Federal Deposit Insurance Corporation, National Credit Union 
Administration, Resolution Trust Corporation, Pension Benefit Guaranty 
Corporation, National Flood Insurance, National Insurance Development 
Fund, Crop Insurance, or Tennessee Valley Authority.

``SEC. 507. EFFECT ON OTHER LAWS.

  ``(a) Effect on Other Laws.--This title shall supersede, modify, or 
repeal any provision of law enacted prior to the date of enactment of 
this title to the extent such provision is inconsistent with this 
title. Nothing in this title shall be construed to establish a credit 
limitation on any Federal loan or loan guarantee program.
  ``(b) Crediting of Collections.--Collections resulting from direct 
loans obligated or loan guarantees committed prior to October 1, 1991, 
shall be credited to the liquidating accounts of Federal agencies. 
Amounts so credited shall be available, to the same extent that they 
were available prior to the date of enactment of this title, to 
liquidate obligations arising from such direct loans obligated or loan 
guarantees committed prior to October 1, 1991, including repayment of 
any obligations held by the Secretary of the Treasury or the Federal 
Financing Bank. The unobligated balances of such accounts that are in 
excess of current needs shall be transferred to the general fund of the 
Treasury. Such transfers shall be made from time to time but, at least 
once each year.''.
  (b) Conforming Amendment.--The table of contents set forth in section 
1(b) of the Congressional Budget and Impoundment Control Act of 1974 is 
amended by striking the items relating to title V and inserting the 
following:

                         ``TITLE V--FAIR VALUE

``Sec. 501. Purposes.
``Sec. 502. Definitions.
``Sec. 503. OMB and CBO analysis, coordination, and review.
``Sec. 504. Budgetary treatment.
``Sec. 505. Authorizations.
``Sec. 506. Treatment of deposit insurance and agencies and other 
insurance programs.
``Sec. 507. Effect on other laws.''.

SEC. 102. EFFECTIVE DATE.

  The amendment made by section 101 shall take effect beginning with 
fiscal year 2014.

SEC. 103. BUDGETARY ADJUSTMENT.

  (a) In General.--Section 251(b)(1) of the Balanced Budget and 
Emergency Deficit Control Act of 1985 is amended by adding at the end 
the following new sentence: ``A change in discretionary spending solely 
as a result of the amendment to title V of the Congressional Budget Act 
of 1974 made by the Budget and Accounting Transparency Act of 2012 
shall be treated as a change of concept under this paragraph.''.
  (b) Report.--Before adjusting the discretionary caps pursuant to the 
authority provided in subsection (a), the Office of Management and 
Budget shall report to the Committees on the Budget of the House of 
Representatives and the Senate on the amount of that adjustment, the 
methodology used in determining the size of that adjustment, and a 
program-by-program itemization of the components of that adjustment.
  (c) Schedule.--The Office of Management and Budget shall not make an 
adjustment pursuant to the authority provided in subsection (a) sooner 
than 60 days after providing the report required in subsection (b).

                     TITLE II--BUDGETARY TREATMENT

SEC. 201. CBO AND OMB STUDIES RESPECTING BUDGETING FOR COSTS OF FEDERAL 
                    INSURANCE PROGRAMS.

  Not later than one year after the date of enactment of this Act, the 
Directors of the Congressional Budget Office and of the Office of 
Management and Budget shall each prepare a study and make 
recommendations to the Committees on the Budget of the House of 
Representatives and the Senate as to the feasability of applying fair 
value concepts to budgeting for the costs of Federal insurance 
programs.

SEC. 202. ON-BUDGET STATUS OF FANNIE MAE AND FREDDIE MAC.

  Notwithstanding any other provision of law, the receipts and 
disbursements, including the administrative expenses, of the Federal 
National Mortgage Association and the Federal Home Loan Mortgage 
Corporation shall be counted as new budget authority, outlays, 
receipts, or deficit or surplus for purposes of--
          (1) the budget of the United States Government as submitted 
        by the President;
          (2) the congressional budget; and
          (3) the Balanced Budget and Emergency Deficit Control Act of 
        1985.

SEC. 203. EFFECTIVE DATE.

  Section 202 shall not apply with respect to an enterprise (as such 
term is defined in section 1303 of the Federal Housing Enterprises 
Financial Safety and Soundness Act of 1992 (12 U.S.C. 4502)) after the 
date that all of the following have occurred:
          (1) The conservatorship for such enterprise under section 
        1367 of such Act (12 U.S.C. 4617) has been terminated.
          (2) The Director of the Federal Housing Finance Agency has 
        certified in writing that such enterprise has repaid to the 
        Federal Government the maximum amount consistent with 
        minimizing total cost to the Federal Government of the 
        financial assistance provided to the enterprise by the Federal 
        Government pursuant to the amendments made by section 1117 of 
        the Housing and Economic Recovery Act of 2008 (Public Law 110-
        289; 122 Stat. 2683) or otherwise.
          (3) The charter for the enterprise has been revoked, 
        annulled, or terminated and the authorizing statute (as such 
        term is defined in such section 1303) with respect to the 
        enterprise has been repealed.

                 TITLE III--BUDGET REVIEW AND ANALYSIS

SEC. 301. CBO AND OMB REVIEW AND RECOMMENDATIONS RESPECTING RECEIPTS 
                    AND COLLECTIONS.

  Not later than one year after the date of enactment of this Act, the 
Director of the Office of Management and Budget shall prepare a study 
of the history of offsetting collections against expenditures and the 
amount of receipts collected annually, the historical application of 
the budgetary terms ``revenue'', ``offsetting collections'', and 
``offsetting receipts'', and review the application of those terms and 
make recommendations to the Committees on the Budget of the House of 
Representatives and the Senate of whether such usage should be 
continued or modified. The Director of the Congressional Budget Office 
shall review the history and recommendations prepared by the Director 
of the Office of Management and Budget and shall submit comments and 
recommendations to such Committees.

SEC. 302. AGENCY BUDGET JUSTIFICATIONS.

  Section 1108 of title 31, United States Code, is amended by inserting 
at the end the following new subsection:
  ``(h)(1) Whenever any agency prepares and submits written budget 
justification materials for any committee of the House of 
Representatives or the Senate, such agency shall post such budget 
justification on the same day of such submission on the `open' page of 
the public website of the agency, and the Office of Management and 
Budget shall post such budget justification in a centralized location 
on its website, in the format developed under paragraph (2).
  ``(2) The Office of Management and Budget, in consultation with the 
Congressional Budget Office and the Government Accountability Office, 
shall develop and notify each agency of the format in which to post a 
budget justification under paragraph (1). Such format shall be designed 
to ensure that posted budget justifications for all agencies--
          ``(A) are searchable, sortable, and downloadable by the 
        public;
          ``(B) are consistent with generally accepted standards and 
        practices for machine-discoverability;
          ``(C) are organized uniformly, in a logical manner that makes 
        clear the contents of a budget justification and relationships 
        between data elements within the budget justification and among 
        similar documents; and
          ``(D) use uniform identifiers, including for agencies, 
        bureaus, programs, and projects.''.

                              Introduction

    Transparency and sound accounting are the bedrocks of 
efficient and effective budgeting. The ``Budget and Accounting 
Transparency Act of 2012'' (H.R. 3581) was introduced by 
Representative Scott Garrett (R-NJ-5) on December 7, 2011. The 
bill increases the transparency of Federal budgeting by 
bringing off-budget entities on-budget, reforms the accounting 
methodology used for Federal credit programs to reflect best 
practices from the private sector, and requires agencies to 
promptly make public the budget justification materials they 
submit to Congress in support of their requests for public 
funds.
    It also commissions two studies in furtherance of the 
Budget Committees' ongoing review of potential improvements to 
the congressional budget process.

                      Summary of Proposed Changes


Fair Value Accounting

    Beginning with fiscal year 2014, the bill reforms the 
budgetary treatment of Federal credit programs to provide a 
more accurate and comprehensive reporting of the cost these 
programs pose to taxpayers.
    The Federal Credit Reform Act of 1990 (FCRA) reformed the 
budgetary treatment of Federal direct loans and loan guarantees 
to account for the cost of these programs on an accrual basis. 
Under the 1990 bill, the cost of these programs is developed by 
producing a net present value of cash flows using a discount 
rate based on the Federal Government's borrowing costs. Over 
time, CBO has concluded that the Treasury discount rate does 
not fully capture the cost of credit programs:
    ``Fair-value estimates differ from estimates produced using 
the FCRA methodology in an important way: By incorporating a 
market-based risk premium, fair value estimates recognize that 
the financial risk that the government assumes when issuing 
credit guarantees is more costly to taxpayers than FCRA-based 
estimates suggest.''\1\
---------------------------------------------------------------------------
    \1\Letter from CBO Director Douglas W. Elmendorf to Paul Ryan, 
Chairman of the Committee on the Budget, House of Representatives, May 
18, 2011. http://www.cbo.gov/ftpdocs/120xx/doc12054/05-18-
FHA_Letter.pdf
---------------------------------------------------------------------------
    In addition to CBO's conclusion that fair value accounting 
provides a comprehensive measure of the Federal Government's 
financial risk, other entities have recommended this reform. 
For example, a panel representing former CBO Directors, OMB 
Directors, and other budget experts recommended moving to a 
fair value accounting after concluding:
    ``Two decades of experience with accrual treatment of 
Federal credit has demonstrated that current valuation rules 
understate the subsidies that government provides through 
direct and guaranteed loans and other activities that shift 
risk to taxpayers. To correct this understatement, the budget 
should use fair-market values in calculating costs for 
financial guarantees, insurance, direct loans, loan guarantees, 
and programs that invest in risky financial assets. Fair value 
accounting would make clear that the Federal Government cannot 
invest in risky assets more cheaply nor earn a higher rate of 
return than do private firms or individuals. Ultimately, 
taxpayers bear all the costs of investing, and this fact should 
be explicitly reflected in the budget. Accounting for financial 
guarantees, insurance, direct loans, and loan guarantees on an 
accrual basis is the first step in measuring the cost of these 
activities in a timely manner. But the cost measure must also 
include risk. Without that component, the budget understates 
the cost of these programs.''\2\
---------------------------------------------------------------------------
    \2\A Peterson-Pew Commission Report on Budget Reform, ``Getting 
Back in the Black,'' Nov. 2010, p. 29. http://budgetreform.org/sites/
default/files/Getting_Back_in_the_Black.pdf
---------------------------------------------------------------------------
    The bill corrects this current flaw by amending FCRA to 
ensure the full exposure to the taxpayer is recorded in the 
budget by providing that fair value estimates be used in 
calculating the cost of Federal credit programs. It also 
provides for a one-time adjustment to the statutory caps on 
discretionary spending contained in the Balanced Budget and 
Emergency Deficit Control Act of 1985 (P.L. 99-177) to ensure 
the caps are held harmless for this accounting change.

Accounting for Fannie Mae and Freddie Mac

    The bill requires that the receipts and disbursements of 
the Federal National Mortgage Association (Fannie Mae) and the 
Federal Home Loan Mortgage Corporation (Freddie Mac) be counted 
as new budget authority, outlays, receipts, deficits or 
surpluses for purposes of the President's budget request, the 
congressional budget resolution, and the Balanced Budget and 
Emergency Deficit Control Act of 1985.
    While the Congressional Budget Office (CBO) and Congress 
have already adopted this approach the Administration has not. 
Section 202 rectifies this disparity by bringing Fannie Mae and 
Freddie Mac (the GSEs) on-budget consistent with CBO's current 
practice.
    On September 6, 2008, using the authority provided under 
the Housing and Economic Recovery Act of 2008 (P.L. 110-289), 
the Federal Housing Finance Agency (FHFA) placed Fannie Mae and 
Freddie Mac into conservatorships. The purpose of the 
conservatorships is to ``stabilize [the] troubled institutions 
with the objective of maintaining normal business operations 
and restoring financial safety and soundness.''\3\ At the same 
time, the Department of the Treasury entered into agreements 
with the GSEs known as Senior Preferred Stock Purchase 
Agreements (PSPA). The PSPAs are legally binding agreements by 
which Treasury is obligated to provide sufficient capital to 
keep the net worth of Fannie Mae and Freddie Mac from falling 
below zero.
---------------------------------------------------------------------------
    \3\``Federal Housing Finance Agency--Office of Conservatorship 
Operations'' http://www.fhfa.gov/Default.aspx?Page=344, accessed 
January 20, 2012.
---------------------------------------------------------------------------
    Given the conservatorship and the Treasury's commitment to 
maintain a positive net value for the GSEs, their agency debt 
now has a certain public character. Consistent with other 
``agency debt'' it is the expectation of the Committee that OMB 
will include the GSEs' agency debt in its Analytical 
Perspectives volume together with other agency debt issued by 
entities such as the Tennessee Valley Authority. Under the 
terms of the PSPA, the GSEs are required to reduce the size of 
their investment portfolios until they reach $250 billion. 
Because the primary purpose of the agency debt issued by the 
GSEs is to finance this portfolio, it is expected that their 
debt issuances will decline with the size of the investment 
portfolio. The bill does not establish a statutory cap on the 
issuance of agency debt by the GSEs nor does it include such 
debt issuances in the Federal debt ceiling.
    Finally, section 203 allows for the removal of the GSEs 
from the federal budget if three conditions are satisfied. 
These conditions are designed to ensure that the GSEs become 
fully private entities with no explicit or implicit guarantee 
from the Federal Government.
    First, the conservatorship of the entity must be 
terminated.
    Second, the Director of the FHFA must have certified that 
the GSE has repaid as much of the funds received from the 
federal government consistent with minimizing the total losses 
to the Federal Government. This condition recognizes that the 
Federal Government may not receive full repayment. It should, 
though, ensure the federal government recovers the full 
remaining value of these enterprises if they are privatized.
    Third, the charter of the enterprise and authorizing 
statute must have been repealed.

Transparency in Agency Budget Requests

    The bill requires Federal agencies to publish their budget 
justification materials on their official websites on the same 
day those materials are provided to Congress. OMB currently 
requires agencies to post these materials to their websites 
within two weeks of transmittal to Congress.\4\ As under 
current practice, materials should not be released if the 
materials are properly classified in order to protect the 
national security.
---------------------------------------------------------------------------
    \4\OMB Circular A-11, Sec. 22.6.
---------------------------------------------------------------------------

Studies in Support of Future Reform

    The legislation commissions two studies on areas of the 
budget process that may warrant reform in future legislation. 
These studies will support the Budget Committees in fulfillment 
of their ongoing responsibility under Sec. 703 of the 
Congressional Budget Act to ``study on a continuing basis 
proposals designed to improve and facilitate methods of 
congressional budgetmaking.''
    First, the Directors of the CBO and OMB are directed in 
section 201 to independently conduct studies and provide 
recommendations to the Budget Committees on the feasibility of 
applying fair value concepts (or some similar accrual 
methodology) to budgeting for the costs of Federal insurance 
programs, such as pension insurance and political risk 
insurance. These programs are currently budgeted for on a cash-
flow basis meaning that a program's cost is the net cash spent 
in a fiscal year. Income is recorded in the budget when 
received, and expenses are recorded when paid, regardless of 
when the income is earned or the expense incurred.
    The Directors of the CBO and OMB are directed to report 
back to the Budget Committees within one year of enactment of 
this bill on the feasibility of addressing this shortcoming in 
the current budgeting methodology for Federal insurance 
programs through a move to a fair value-based accrual budgeting 
system.
    Second, the Director of OMB is directed (sec. 301) to 
prepare a study on the historical use of various terms relating 
to the collection of monies by the Federal Government. The 
Director of CBO is required to review the OMB report and 
provide recommendations to Congress.
    The budget displays revenues (primarily tax collections) 
and outlays (primarily disbursements of cash). The proper 
characterization of revenues and spending is important both for 
the purposes of Congress' carrying out its power of purse, but 
also provides important information to the public regarding the 
amount of money collected from the private sector and how this 
money is spent.
    The 1967 President's Commission on Budget Concepts 
continues to provide the foundation for determining the 
treatment of transactions in the Federal budget. Generally, 
Federal collections resulting from the exercise of the Federal 
Government's sovereign power are classified as revenues (or 
``receipts''). Those collections resulting from business-like 
activity performed by the Federal Government are recorded as 
negative spending (or ``offsetting collections''). Over the 
years, however, these terms have become jumbled as programs 
have evolved and as statutes have dictated the budgetary 
treatment of Federal collections. Increasingly, collections 
that result from the government's sovereign power are being 
classified as offsetting collections (negative spending). The 
study should review the theoretical bases of these terms, the 
evolution of the classification of collections, the current 
classification of Federal collections, and provide 
recommendations on the future application of such terms.

                          Legislative History


Fair Value Accounting

    The Omnibus Budget Reconciliation Act of 1990 (P.L. 101-
508) added the Federal Credit Reform Act of 1990 (FCRA) as 
Title V of the Congressional Budget and Impoundment Control Act 
of 1974 (Congressional Budget Act). FCRA changed how the 
unified budget reports the cost of Federal credit activities. 
Prior to fiscal year 1992, the unified budget measured the cost 
of Federal credit on a cash-flow basis. This methodology did 
not accurately portray the true cost of a loan or loan 
guarantee when the obligation is incurred.
    Under cash-flow budgeting, disbursements of a direct loan 
are recorded upfront as outlays at the time of disbursement, 
while repayments are recorded over the life of the loan. By 
contrast, an economically equivalent loan guarantee would show 
no upfront cost and might even show an upfront savings because 
of origination fees paid by the loan guarantee recipient. Cash-
flow accounting thus favored loan guarantees over direct loans 
even though both could be structured to pose an equivalent 
financial risk to the Federal Government.
    Cash-flow accounting also failed to accurately capture the 
full costs of credit programs generally and increased the 
difficulty of comparing the costs of credit programs and non-
credit programs thus distorting fiscal decision-making. The 
economically accurate budgetary measure of the costs of 
supplying Federal credit is the net present value of the 
subsidies to credit recipients measured at the time the credit 
is advanced, re-estimated over the life of the credit 
extension. FCRA was enacted in order to achieve this more 
economically appropriate budgetary treatment.
    FCRA, however, understates the true cost to the Federal 
Government because it discounts the cash flows over the life of 
a loan or loan guarantee using interest rates on Treasury 
securities. This is essentially the risk-free rate of interest.
    The loans and loan guarantees issued by the Federal 
Government are not free of risk. To the contrary, the extension 
of Federal credit to the private sector entails the assumption 
by the Federal Government of market risk. Market risk is in 
addition to the risk that a credit beneficiary may default, 
because of individual circumstances. Market risk also known as 
systematic risk, arises from the correlation between broader 
market and economic conditions and the probability of any 
particular credit program performing as predicted. In order to 
capture the cost to the Federal Government of this risk, fair 
value is a better approach. The principal difference between 
the FCRA approach and a fair value approach is the discount 
rate used to calculate the present value of the future costs of 
the extension of credit by the Federal Government. As CBO has 
testified, ``The fair-value approach produces estimates of the 
value of assets and liabilities that either correspond to or 
approximate market prices.''\5\
    In 2008, Congress enacted the ``Emergency Economic 
Stabilization Act of 2008'' (EESA) (Public Law 110--343). EESA 
authorized the Federal Government to purchase troubled 
mortgage-related assets, under the Troubled Assets Relief 
Program (TARP) of that bill. Congress recognized that recording 
these transactions on a cash basis would over-state their 
actual cost, but recording them under FCRA would not fully 
account for their costs. As a result the EESA provides that the 
activities under TARP would be recorded in the Federal budget 
under the Federal Credit Reform Act of 1990 modified to use a 
risk-adjusted discount rate.
---------------------------------------------------------------------------
    \5\Statement of Deborah Lucas, Assistant Director for Financial 
Analysis, ``The Budgetary Cost of Fannie Mae and Freddie Mac and 
Options for the Future Federal Role in the Secondary Mortgage Market,'' 
June 2, 2011, p. 3.
---------------------------------------------------------------------------
    In the President's fiscal year 2010 budget, the 
administration proposed there be no budget impact recorded from 
U.S. contributions to the International Monetary Fund (IMF). 
The Budget Committees rejected this proposal, but recognized 
that the current budgetary treatment of recording budget 
authority with zero impact on spending and deficits was flawed. 
After reviewing the issue, the Budget Committees concluded that 
FCRA adjusted for market risk was the best measure of recording 
the impact of contributions to the IMF on the budget.
    The Supplemental Appropriations Act of 2009 (P.L. 111-32) 
included a provision incorporating fair value accounting 
standards to adequately account for market risk for the 
purposes of transactions dealing with the IMF.\6\ That measure 
included the following language modifying the application of 
current law Federal Credit Reform Act accounting:
---------------------------------------------------------------------------
    \6\Supplemental Appropriations Act, 2009 (H.R. 2346), Public Law 
111-32, June 24, 2009. In addition, additional information on the 
budgetary treatment of the IMF can be found at: Congressional Budget 
Office, ``Budget Implications of U.S. Contributions to the 
International Monetary Fund,'' Director's Blog, May 19, 2009. http://
cboblog.cbo.gov/?p=270

          [F]or purposes of section 502(5) of the Federal 
        Credit Reform Act of 1990, the discount rate in section 
        502(5)(E) shall be adjusted for market risks: Provided 
        further, That section 504(b) of the Federal Credit 
        Reform Act of 1990 (2 U.S.C. 661c(b)) shall not apply.

Government-Sponsored Enterprises

    Fannie Mae and Freddie Mac are government-sponsored 
enterprises (GSEs) that were chartered by Congress to 
facilitate the availability of financing for home mortgages. 
Fannie Mae was first established as a government agency in 1938 
as part of the New Deal. In 1968 it was removed from the 
Federal budget and recreated as a government-sponsored 
enterprise and became a publicly traded company. Though there 
was widely assumed to be an ``implicit'' Federal guarantee of 
Fannie Mae's and Freddie Mac's debt, their securities are 
denied an explicit guarantee.
    They carry out the function of financing home mortgages by 
purchasing home loans from mortgage originators and packaging 
those loans into mortgage-backed securities, which are then 
sold on to private sector investors with a guarantee from 
Fannie Mae or Freddie Mac against losses from any defaults on 
the underlying mortgages. Fannie Mae and Freddie Mac also keep 
a portion of these MBS in their own investment portfolio, which 
they finance through the issuance of debt securities, widely 
known as ``agency debt.'' This agency debt is required by 
statute to include a disclaimer that such obligations together 
with the interest thereon are not guaranteed by the United 
States and do not constitute a debt obligation of the United 
States.\7\
---------------------------------------------------------------------------
    \7\See 12 U.S.C. 1721 and 12 U.S.C. 1455.
---------------------------------------------------------------------------
    On September 6, 2008, using the authority provided under 
the Housing and Economic Recovery Act of 2008 (P.L. 110-289), 
the Federal Housing Finance Agency (FHFA) placed Fannie Mae and 
Freddie Mac into conservatorships. The purpose of the 
conservatorships is to ``stabilize [the] troubled institutions 
with the objective of maintaining normal business operations 
and restoring financial safety and soundness.''\8\ At the same 
time, the Department of the Treasury entered into agreements 
with the GSEs known as Senior Preferred Stock Purchase 
Agreements (PSPA). The PSPAs are legally binding agreements by 
which Treasury is obligated to provide sufficient capital to 
keep the net worth of Fannie Mae and Freddie Mac from falling 
below zero. In return, the government received senior preferred 
stock and warrants making the Treasury the effective owner of 
the GSEs. The Committee received testimony in June 2011 from 
the Congressional Budget Office stating that:
---------------------------------------------------------------------------
    \8\``Federal Housing Finance Agency--Office of Conservatorship 
Operations'' http://www.fhfa.gov/Default.aspx?Page=344, accessed 
January 20, 2012.

          Between November 2008 and the end of March 2011, the 
        government provided about $154 billion in capital to 
        Fannie Mae and Freddie Mac and received more than $24 
        billion in dividends on its preferred stock, resulting 
        in net payments to the GSEs of $130 billion. CBO 
        expects additional net cash payments from the 
        government over the next several years.
          In CBO's judgment, the Federal conservatorship of 
        Fannie Mae and Freddie Mac and their resulting 
        ownership and control by the Treasury make the two 
        entities effectively part of the government and imply 
        that their operations should be reflected in the 
        Federal budget.\9\
---------------------------------------------------------------------------
    \9\Statement of Deborah Lucas, Assistant Director for Financial 
Analysis, ``The Budgetary Cost of Fannie Mae and Freddie Mac and 
Options for the Future Federal Role in the Secondary Mortgage Market,'' 
June 2, 2011, p. 2.

    After consultation with the Budget Committees, CBO began to 
include the operations of Fannie Mae and Freddie Mac in its 
baseline budget projections and chose to use fair value 
methodology for estimating. By contrast the Obama 
Administration has continued to regard these entities as non-
governmental for budgetary purposes and records in the budget 
only the cash transfers between the Treasury and the GSEs. This 
treatment understates the costs of these entities to the 
Federal Government. As CBO testified: ``That approach can 
postpone for many years the recognition of the costs of new 
obligations. Subsidized mortgage guarantees may even show gains 
for the government in the short term because fees are collected 
up front but losses are realized over time as defaults 
occur.''\10\
---------------------------------------------------------------------------
    \10\Ibid.
---------------------------------------------------------------------------

Studies Conducted by the OMB and CBO on Fair Value Concepts

    The bill calls on CBO and OMB to review other insurance 
programs to determine the possible application of fair value 
accounting to record their costs in a full and transparent 
manner.
    As this Committee noted in 1998:

          Cash budgeting provides incomplete and misleading 
        cost information for those programs because, for most 
        insurance contracts, premiums are paid long before 
        claims are made. Under current budget conventions, 
        legislation affecting Federal insurance programs often 
        is seen as providing savings even though it expands 
        insurance coverage and increases the likelihood that 
        the cost of claims over time will be higher than 
        expected in the absence of the legislation. Such 
        situations can occur when the legislation increases 
        premiums today; but claims due under the higher 
        coverage would not be paid until future fiscal years--
        often well beyond the budget window although over the 
        years there has been a growing trend in moving to 
        accrual budgeting for the contingent liabilities of the 
        Federal Government.\11\
---------------------------------------------------------------------------
    \11\House Report 106-198--Part 2--The Comprehensive Budget Process 
Reform Act of 1999, p. 58.

---------------------------------------------------------------------------
    In the same report, the Committee noted:

          Interest in budgeting for contingent liabilities 
        predates the congressional budget process. In August 
        1956, Congress enacted a bill that required agency 
        accounts to be maintained on an accrual basis `[a]s 
        soon as practicable * * *' (S. 3897, Ch. 814-Public Law 
        863). The issue of unfunded liabilities and accrual 
        budgeting was addressed in hearings of the Joint 
        Committee on Budget Control in 1973.

                                Hearings

    In 2011, the House Budget Committee held hearings on budget 
process reform and one of those hearings focused on the Federal 
Credit Reform Act and its application to housing programs.
    The hearing involving fair value, ``Fannie Mae, Freddie Mac 
and FHA: Taxpayer Exposure in the Housing Markets,'' was held 
on June 2, 2011, with Deborah J. Lucas (Congressional Budget 
Office), Alex J. Pollock (American Enterprise Institute) and 
Sarah Rosen Wartell (Center for American Progress and Center 
for American Progress Action Fund).
    The first budget process hearing, ``The Broken Budget 
Process: Perspectives From Former CBO Directors,'' was held on 
September 21, 2011, with former CBO Directors Rudolph Penner 
and Alice Rivlin testifying.
    The second budget process hearing, ``The Broken Budget 
Process: Perspectives From Budget Experts,'' was held on 
September 22, 2011, with Philip Joyce (University of Maryland), 
the Honorable Jim Nussle (Chairman of the Committee on the 
Budget, 2001 through 2007, United States House of 
Representatives) and the Honorable Phil Gramm (former United 
States Senator, 1985--2002) testifying.

                           Section by Section


SECTION 1. SHORT TITLE.

    This section establishes the short title of the bill as the 
``Budget and Accounting Transparency Act of 2012''.

                      TITLE--FAIR VALUE ESTIMATES

SECTION 101. CREDIT REFORM.

    This section amends the Congressional Budget and 
Impoundment Control Act of 1974 be striking the existing Title 
V and replacing it with the following new text:

                           SEC. 501. PURPOSES

    Sets forth the purposes of this title which are as follows: 
(1) measure more accurately the costs of Federal credit 
programs by accounting for them on a fair value basis, (2) 
place the cost of credit programs on a budgetary basis 
equivalent to other Federal spending, (3) encourage the 
delivery of benefits in the form most appropriate to the needs 
of beneficiaries, and (4) improve the allocation of resources 
among the Federal programs.

                         SEC. 502. DEFINITIONS

    This section defines the following terms used in this 
title: direct loan, direct loan obligation, loan guarantee, 
loan guarantee commitment, cost, program account, financing 
account, liquidating account, modification, current, Director, 
administrative costs, and essential preservation expenses.
    ``Cost'' is defined as the sum of (1) the Treasury 
discounting component and (2) the risk component of a direct 
loan or loan guarantee, or a modification thereof. The Treasury 
discounting component is the estimated long-term cost to the 
Government of a direct loan or loan guarantee, or modification 
thereof, calculated on a net present value basis discounted at 
the Treasury borrowing rate. The risk component is the amount 
equal to the difference between the estimated long-term cost to 
the Government of a direct loan or loan guarantee, or 
modification thereof, estimated on a fair value basis, applying 
the guidelines set forth by the Financial Accounting Standards 
Board in Financial Accounting Standards #157 and the Treasury 
discounting component of such a direct loan or loan guarantee, 
or modification thereof. Both components exclude administrative 
costs and any incidental effects on government receipts or 
outlays.

        SEC. 503. OMB AND CBO ANALYSIS, COORDINATION, AND REVIEW

    For the executive branch, the OMB Director is responsible 
for coordinating estimates and will consult with agencies that 
administer direct loans or loan guarantee programs.
    In developing estimation guidelines, regulations, or 
criteria to be used by Federal agencies, the OMB Director is 
required to consult with the Director of CBO and to coordinate 
the development of more accurate data on historical performance 
and prospective risk of direct loan and loan guarantee 
programs. The Directors of OMB and CBO are required to annually 
review the performance of outstanding direct loans and loan 
guarantees to improve estimates of costs.

                     SEC. 504. BUDGETARY TREATMENT

    Subsection (a) retains language from current law which 
requires that beginning with fiscal year 1992, the President's 
budget is to reflect the Treasury discounting component of 
direct loan and loan guarantee programs. The subsection 
establishes new text that, beginning with fiscal year 2015, the 
President's budget must reflect the costs of direct loan and 
loan guarantee programs and include the planned level of new 
direct loan obligations or loan guarantee commitments 
associated with each appropriations request.
    Subsection (b) requires that new budget authority be 
provided by appropriation in advance before new direct loans or 
loan guarantee commitments are incurred.
    Subsection (c) provides that direct loan or loan guarantee 
programs that constitute an entitlement, are made by Fannie Mae 
or Freddie Mac, and all existing credit programs of the 
Commodity Credit Corporation on the date of enactment of this 
title are exempt from the requirements of subsection (b), which 
requires the appropriation of new budget authority for direct 
loans and loan guarantees, and of subsection (e), which 
prohibits modifications of direct loans or loan guarantees in a 
manner that increases costs unless additional budget authority 
has been appropriated in advance.
    Subsection (d) provides that the authority to incur new 
direct loan obligation, make new loan guarantee commitments, or 
modify outstanding direct loans or loan guarantees constitute 
new budget authority in an amount equal to the cost of the 
direct loan or loan guarantee in the fiscal year in which 
definite authority becomes available or indefinite authority is 
used. That budget authority constitutes an obligation of the 
program account to pay to the financing account. The outlays 
from new budget authority for the cost of direct loans or loan 
guarantees are to be paid from the program account into the 
financing account and recorded in the fiscal year in which the 
direct loan or guaranteed loan is disbursed or its costs 
altered.
    Subsection (e) prohibits modifications of direct loans or 
loan guarantees in a manner that increases costs unless 
additional budget authority has been appropriated in advance.
    Subsection (f) provides that when the estimated cost for a 
group of direct loans or loan guarantees for a fiscal year is 
reestimated that the new cost will be displayed as a distinct 
and separately identified subaccount in the program account as 
a change in program costs and a change in net interest. 
Permanent indefinite authority for these re-estimates is 
provided in this subsection.
    Subsection (g) provides that all funding for an agency's 
administrative costs associated with a direct loan or loan 
guarantee program be displayed as distinct and separately 
identified subaccounts within the same budget account as the 
program's cost.

                        SEC. 505. AUTHORIZATIONS

    Subsection (a) authorizes the President to establish non-
budgetary accounts to implement the accounting required.
    Subsection (b) directs the Secretary of the Treasury to 
borrow, receive, lend, or pay to the financing accounts as 
appropriate.
    For guaranteed loans financed by the Federal Financing Bank 
and treated as direct loans by a Federal agency pursuant to 
section 406(b)(1), any fee or interest surcharge (exceeding the 
Treasury discounting component of the cost the Federal 
Financing Bank charges to private borrower under section 6(c) 
of the Federal Financing Bank Act of 1973 is considered a cash 
flow to the Government for the purposes of determining the cost 
of the direct loan pursuant to section 502(5). All those 
amounts are then credited to the appropriate financing account.
    The Federal Financing Bank is authorized to require 
reimbursement from a Federal agency to cover the administrative 
expenses of the Federal Financing Bank that are attributable to 
the direct loans financed for that agency. All these payments 
by an agency are considered administrative expenses (see 
section 504(g)) and apply to direct loan obligation 
transactions after October 1, 1991.
    All transactions under this subsection are subject to the 
provisions of subchapter II of chapter 15 of title 31, U.S. 
Code dealing with the apportionment of funds.
    The subsection requires that excess cash balances be 
maintained in a form of uninvested funds and the Secretary of 
the Treasury pay interest on these funds. The Secretary charges 
the financing accounts an amount equal to the risk component 
for a direct loan or loan guarantee, or modification thereof. 
This amount is a means of financing and not considered a cash 
flow of the Government for the purposes of section 502(7).
    It also provides that amounts in liquidating accounts shall 
be available only for payments resulting from direct loan 
obligations or loan guarantee commitments made prior to October 
1, 1991, for payments necessary for the liquidation of such 
direct loan obligations and loan guarantee commitments.
    It provides that amounts credited to liquidating accounts 
are available only for payments required in that year. After 
the fiscal year they are transferred to miscellaneous receipts.

       SEC. 506. TREATMENT OF DEPOSIT INSURANCE AND AGENCIES AND
                        OTHER INSURANCE PROGRAMS

    This section provides that this title does not apply to the 
credit or insurance activities of the Federal Deposit Insurance 
Corporation, National Credit Union Administration, Resolution 
Trust Corporation, Pension Benefit Guaranty Corporation, 
National Flood Insurance, National Insurance Development Fund, 
Crop Insurance, or the Tennessee Valley Authority.

                     SEC. 507. EFFECT ON OTHER LAWS

    This section provides that nothing in Title I is to be 
construed to establish a credit limitation on any Federal loan 
or loan guarantee program. Collections resulting from direct 
loans obligated or loan guarantees committed prior to October 
1, 1991, are credited to the liquidating accounts of Federal 
agencies.

SECTION 102. EFFECTIVE DATE.

    This section provides that the amendment in Sec. 101 will 
take effect beginning with fiscal year 2014.

SECTION 103. BUDGETARY ADJUSTMENT.

    This section makes clear the move from accounting for loans 
and loan guarantees on a Federal Credit Reform basis to a fair 
value basis constitutes a change in concept for purposes of 
section 251(b)(1) of the Balanced Budget and Emergency Deficit 
Control Act of 1985. This will result in the Director of OMB 
adjusting the caps on discretionary spending in section 251(c) 
of that Act to account for the change in accounting method.
    Before adjusting the discretionary caps, OMB is required to 
report to the House and Senate Budget Committees the amount of 
the prospective adjustment, the methodology used in determining 
its size, and provide a program-by-program itemization of the 
components of the adjustment. OMB is prohibited from making an 
adjustment sooner than 60 after providing the report.

                     Title II--Budgetary Treatment


SECTION 201. CBO AND OMB STUDIES RESPECTING BUDGETING FOR COSTS OF 
                    FEDERAL INSURANCE PROGRAMS.

    This section requires CBO and OMB to prepare a study and 
make recommendations to the House and Senate Budget Committees 
as to the feasibility of applying fair value concepts to 
budgeting for the costs of Federal insurance programs. The 
report is due within one year of the enactment of this bill.

SECTION 202. ON-BUDGET STATUS OF FANNIE MAE AND FREDDIE MAC.

    This section requires the receipts and disbursements, 
including the administrative expenses, of the Federal National 
Mortgage Association (Fannie Mae) and the Federal Home Loan 
Mortgage Corporation (Freddie Mac) be counted as new budget 
authority, outlays, receipts, deficit or surplus for the 
purposes of the President's budget submission; the 
congressional budget; and the Balanced Budget and Emergency 
Deficit Control Act of 1985.

SECTION 203. EFFECTIVE DATE.

    This section allows for the removal of Fannie Mae and 
Freddie Mac from the Federal budget once three conditions are 
met: (1) the conservatorship for the enterprise has been 
terminated; (2) its regulator has certified that the enterprise 
has repaid as much aid to the Federal Government as is 
consistent with minimizing the total cost to the Federal 
Government of the conservatorship; and (3) the charter for the 
enterprise has been revoked and the authorizing statue with 
respect to the enterprise has been repealed.

                 Title III--Budget Review and Analysis


SECTION 301. CBO AND OMB REVIEW AND RECOMMENDATIONS RESPECTING RECEIPTS 
                    AND COLLECTIONS.

    This section requires OMB to prepare a study of the history 
of offsetting collections against expenditures and the amount 
of receipts collected annually, the historical application of 
the budgetary terms ``revenue'', ``offsetting collections'' and 
``offsetting receipts'', and review the application of those 
terms. CBO is required to review the OMB study. Both CBO and 
OMB are then to each make recommendations to the House and 
Senate Budget Committees as to whether such usage should be 
continued or modified. The report is due within one year of the 
enactment of the bill.

SECTION 302. AGENCY BUDGET JUSTIFICATIONS.

    This section amends section 1108 of title 31, U.S. Code, by 
inserting at the end a requirement that agencies make available 
on their public websites all budget justification materials 
provided to Congress on the same day as the justifications are 
submitted to Congress. The materials must be searchable, 
sortable, and downloadable. The bill establishes a process for 
developing common standards for the public presentation of this 
information.

                         Votes of the Committee

    Clause 3(b) of rule XIII of the Rules of the House of 
Representatives requires each committee report to accompany any 
bill or resolution of a public character to include the total 
number of votes cast for and against each roll call vote, on a 
motion to report and any amendments offered to the measure or 
matter, together with the names of those voting for and 
against.
    Listed below are the actions taken by the Committee on the 
Budget of the House of Representatives on the Budget and 
Accounting Transparency Act of 2012.
    On January 24, 2012, the committee met in open session, a 
quorum being present.
    Chairman Ryan asked unanimous consent to be authorized, 
consistent with clause 4 of rule XVI of the Rules of the House 
of Representatives, to declare a recess at any time during the 
committee meeting.
    There was no objection to the unanimous consent request.
    Chairman Ryan asked unanimous consent to dispense with the 
first reading of the bill and the bill be considered as read 
and open to amendment at any point.
    There was no objection to the unanimous consent request.
    The committee adopted and ordered reported favorably the 
Budget and Accounting Transparency Act of 2012.
    The committee took the following votes:

Amendment in the Nature of a Substitute Offered by Mr. Garrett

    1. The amendment was offered in the nature of a substitute 
to H.R. 3578 and was made in order as original text. The 
amendment reforms the way certain costs are calculated by the 
Federal Government and requires additional costs incurred by 
the Federal Government to be included in the budget. The 
amendment requires fair value accounting for Federal credit 
programs by the Federal Government, incorporating not only the 
borrowing costs of the Federal Government, but also the cost of 
the market risk the Federal Government is incurring by issuing 
a loan or loan guarantee.
    This amendment also requires the CBO and OMB to conduct one 
study on extending the fair value methodology to Federal 
insurance programs, and another on the budgetary terms related 
to money collected by the Federal Government. The government-
sponsored enterprises, Fannie Mae and Freddie Mac are brought 
on-budget. Lastly the bill requires that agencies make public 
the budgetary justification materials prepared.
    The amendment was agreed to by voice vote.

Amendment Offered by Mr. Amash

    2. The amendment to the amendment in the nature of a 
substitute requires all agency budget justifications to be 
available the same day as provided on the internet organized in 
a searchable, sortable, and downloadable format.
    The amendment was agreed to by voice vote.
    3. Mr. Garrett made a motion that the committee report the 
bill as amended and that the bill do pass.
    The motion was agreed to by a roll call vote of 21 ayes and 
10 noes.

                                H.R. 3581
------------------------------------------------------------------------
 Name &                      Answer    Name &                    Answer
 State     Aye       No     Present     State     Aye     No     Present
------------------------------------------------------------------------
RYAN        X                         VAN                  X
 (WI)                                  HOLLEN
 (Chair                                (MD)
 man)                                  (Rankin
                                       g)
------------------------------------------------------------------------
GARRETT     X                         SCHWARTZ
 (NJ)                                  (PA)
------------------------------------------------------------------------
SIMPSON     X                         KAPTUR
 (ID)                                  (OH)
------------------------------------------------------------------------
CAMPBEL     X                         DOGGETT              X
 L (CA)                                (TX)
------------------------------------------------------------------------
CALVERT     X                         BLUMENAU             X
 (CA)                                  ER (OR)
------------------------------------------------------------------------
AKIN        X                         McCOLLUM             X
 (MO)                                  (MN)
------------------------------------------------------------------------
COLE                                  YARMUTH              X
 (OK)                                  (KY)
------------------------------------------------------------------------
PRICE       X                         PASCRELL             X
 (GA)                                  (NJ)
------------------------------------------------------------------------
McCLINT     X                         HONDA
 OCK                                   (CA)
 (CA)
------------------------------------------------------------------------
CHAFFET     X                         RYAN                 X
 Z (UT)                                (OH)
------------------------------------------------------------------------
STUTZMA     X                         WASSERMA             X
 N (IN)                                N
                                       SCHULTZ
                                       (FL)
------------------------------------------------------------------------
LANKFOR     X                         MOORE                X
 D (OK)                                (WI)
------------------------------------------------------------------------
BLACK       X                         CASTOR               X
 (TN)                                  (FL)
------------------------------------------------------------------------
RIBBLE      X                         SHULER
 (WI)                                  (NC)
------------------------------------------------------------------------
FLORES      X                         TONKO
 (TX)                                  (NY)
------------------------------------------------------------------------
MULVANE     X                         BASS
 Y (SC)                                (CA)
------------------------------------------------------------------------
HUELSKA     X                         ........
 MP
 (KS)
------------------------------------------------------------------------
YOUNG       X                         ........
 (IN)
------------------------------------------------------------------------
AMASH       X                         ........
 (MI)
------------------------------------------------------------------------
ROKITA      X                         ........
 (IN)
------------------------------------------------------------------------
GUINTA      X                         ........
 (NH)
------------------------------------------------------------------------
WOODALL     X
 (GA)
------------------------------------------------------------------------

    Mr. Honda, Mr. Tonko, and Ms. Bass requested that the 
record reflect they would have voted no on the roll-call vote.
    Mr. Garrett made a motion that, pursuant to clause 1 of 
rule XXII of the Rules of the House of Representatives, the 
Chairman be authorized to offer such motions as may be 
necessary in the House to go to conference with the Senate, and 
staff be authorized to make any necessary technical and 
conforming changes to the bill.
    The motion was agreed to without objection.

                      Committee Oversight Findings

    Pursuant to clause 3(c)(1) of rule XIII of the Rules of the 
House of Representatives, the Committee on the Budget's 
oversight findings and recommendations are reflected in the 
body of this report.

                         Budget Act Compliance

    The provisions of clause 3(c)(2) of rule XIII of the Rules 
of the House of Representatives and section 308(a)(1) of the 
Congressional Budget Act of 1974 (relating to estimates of new 
budget authority, new spending authority, new credit authority, 
or increased or decreased revenues or tax expenditures) are not 
considered applicable. The estimate and comparison required to 
be prepared by the Director of the Congressional Budget Office 
under clause 3(c)(3) of rule XIII of the Rules of the House of 
Representatives and sections 402 and 423 of the Congressional 
Budget Act of 1974 submitted to the committee prior to the 
filing of this report are as follows:

                                     U.S. Congress,
                               Congressional Budget Office,
                                  Washington, DC, January 30, 2012.
Hon. Paul Ryan, Chairman,
Committee on the Budget, U.S. House of Representatives, Washington, DC 
        20515.
    Dear Mr. Chairman: The Congressional Budget Office has prepared the 
enclosed cost estimate for H.R. 3581, the Budget and Accounting 
Transparency Act of 2012.
    If you wish further details on this estimate, we will be pleased to 
provide them. The CBO staff contact is Chad Chirico, who can be reached 
at 226-2820.
            Sincerely,
                                      Douglas W. Elmendorf,
                                                          Director.

Enclosure:
    cc: Hon. Chris Van Hollen, Ranking Member.
               congressional budget office cost estimate
                            january 30, 2012

       H.R. 3581: Budget and Accounting Transparency Act of 2012

As ordered reported by the House Committee on the Budget on January 24, 
                                  2012

                                summary
    H.R. 3581 would modify the budgetary treatment of federal credit 
programs. The bill would amend the Federal Credit Reform Act of 1990 
(FCRA) to require that, beginning in 2014, 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. 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 these loans or guarantees to 
buyers in the private market.
    The bill also would require that the federal budget reflect the net 
impact of programs administered by Fannie Mae and Freddie Mac; federal 
agencies post budget justifications on public Web sites on the same day 
they are submitted to the Congress; and the Office of Management and 
Budget (OMB) and the Congressional Budget Office (CBO) prepare studies 
on the costs of federal insurance programs and the historical 
application of the budgetary terms revenue, offsetting collections, and 
offsetting receipts.
    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 2012, the total deficit for the year would be about $55 
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. 3581 
for Congressional budget enforcement procedures.
    CBO estimates that measuring the cost of federal credit programs on 
a fair-value basis as prescribed under H.R. 3581 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, CBO estimates such costs would 
total $14 million over the 2012-2017 period. Pay-as-you-go procedures 
do not apply to this legislation because it would not affect direct 
spending or revenues.
    H.R. 3581 contains no intergovernmental or private-sector mandates 
as defined in the Unfunded Mandates Reform Act (UMRA) and would impose 
no costs on state, local, or tribal governments.
                estimated cost to the federal government
    The estimated budgetary impact of H.R. 3581 is shown in the 
following table. The costs of this legislation fall within all budget 
functions that include administrative costs associated with federal 
credit programs.


                                    [By fiscal year, in millions of dollars]
----------------------------------------------------------------------------------------------------------------
                                                              2012   2013   2014   2015   2016   2017  2012-2017
----------------------------------------------------------------------------------------------------------------
                                  CHANGES IN SPENDING SUBJECT TO APPROPRIATION
Estimated Authorization Level..............................      1      5      5      1      1      1         14
Estimated Outlays..........................................      1      5      5      1      1      1         14
----------------------------------------------------------------------------------------------------------------

                           basis of estimate
    Agencies would face various administrative challenges to develop 
and execute new requirements that would be imposed by a change in 
budgetary treatment for credit programs. CBO estimates that the 
procedures prescribed by the bill would require federal agencies that 
administer credit programs to update their accounting and budget 
preparation systems, procure advisory services, and hire additional 
staff with expertise in financial asset valuation. In addition, the 
bill's requirement that all agencies post uniform, searchable, and 
sortable budget justifications and that OMB and CBO produce two studies 
would increase administrative costs. Based on information about the 
cost of carrying out similar activities and information from some 
federal agencies that operate major credit programs, CBO estimates that 
implementing H.R. 3581 would cost $14 million over the next five years, 
assuming appropriation of the necessary amounts.
   comparison of alternative budgetary treatments of credit programs
    The federal government provides credit assistance in the form of 
direct loans and guaranteed loans. Most of that assistance is offered 
through a few large programs; together, the Federal Housing 
Administration's (FHA's) mortgage guarantee programs and the Department 
of Education's student loan programs account for about 60 percent of 
outstanding federally backed credit.\1\ Other major credit programs 
include the Department of Veterans Affairs' mortgage guarantee 
programs, the Department of Agriculture's credit programs for rural 
utilities, and the Small Business Administration's loan and loan 
guarantee programs. More than 150 smaller credit programs currently 
provide assistance for a variety of other activities including 
international trade and investments in new energy technologies.
---------------------------------------------------------------------------
    \1\The term federally backed credit is used to encompass all 
federal loan and loan guarantee programs. For this cost estimate, these 
programs do not include the credit assistance provided by Fannie Mae or 
Freddie Mac, or the Troubled Asset Relief Program.
---------------------------------------------------------------------------
    H.R. 3581 would amend FCRA to modify procedures for calculating the 
budgetary cost of federally backed credit programs. As discussed below, 
such changes would increase the estimated cost of such programs for 
budget purposes, thereby increasing the estimates of future deficits.
FCRA Procedures
    FCRA specifies that the budgetary cost of federally backed credit 
programs are calculated and recorded on an accrual basis--unlike most 
items in the federal budget, which are shown on a cash basis. The main 
distinction between cash and accrual accounting is that, whereas under 
cash accounting expenditures are recorded in the years when cash 
payments are made, on an accrual basis the estimated lifetime cost of a 
direct loan or loan guarantee is recognized in the year when the loan 
is approved.
    Under FCRA, the budgetary impact--or subsidy cost--of a direct loan 
or loan guarantee is calculated as the net present value of expected 
cash flows over the life of the loan. For a direct loan, net cash flows 
include payments of principal, interest, and any fees paid by the 
borrower less any amounts lost due to borrower default. For a loan 
guarantee, fees collected from the borrower and guarantor, and payments 
made to make the guarantor whole if the borrower defaults would be 
included in the cash flows. The net present value is estimated by 
discounting the expected cash flows to the time of loan disbursement. 
FCRA specifies that discounting calculations use the interest rates on 
Treasury securities with maturities comparable to the terms of loans. 
For example, cash flows projected in the year following disbursement 
are discounted using the rate for one-year Treasury securities; those 
five years out are discounted using a five-year rate; and so on.
Cost of Credit Programs Under FCRA
    Over the 2000-2007 period, the face value of loans made or 
guaranteed by the federal government (known as the aggregate volume of 
credit activity) averaged $310 billion and estimated subsidy costs 
under FCRA averaged $6.4 billion annually--for a net, average subsidy 
rate of 2 percent of aggregate loan volume. In contrast, the aggregate 
subsidy rate for programs covered by FCRA was negative in each fiscal 
year over the 2008-2011 period; that is, the government's lending 
activities generated an accounting profit which reduced measures of 
budget deficits in those years. That swing from positive to negative 
FCRA subsidies stemmed primarily from legislative and programmatic 
changes to student loans and FHA mortgage insurance. For 2011, CBO 
estimates that programs covered by FCRA reduced the deficit by $22 
billion.
Fair-Value Procedures
    H.R. 3581 would require that subsidy estimates for federal credit 
programs be calculated on a fair-value basis. The Financial Accounting 
Standards Board defines the fair value of a loan as the price that 
would be received if it were sold in a competitive market. Similarly, 
the fair value of a loan guarantee is the price that would have to be 
paid to induce a market participant to assume the guarantee commitment.
    In practice, differences between FCRA estimates and fair-value 
estimates stem from differences in the effective discount rates used to 
calculate the present value of future cash flows. While FCRA requires 
that subsidy calculations use Treasury rates to discount future cash 
flows, fair-value estimates employ rates that also incorporate a 
premium for market risk. Private investors require additional 
compensation for market risk because investments exposed to such risk 
are more likely to have low returns when the economy as a whole is weak 
and resources are scarce and highly valued. By incorporating a market-
based risk premium, fair-value estimates would recognize that the 
government's assumption of financial risk involves costs that exceed 
the average amount of losses that would be expected from defaults.
Cost of Credit Programs Under H.R. 3581
    A consequence of switching to fair-value accounting is that the 
estimated budgetary cost of credit programs would appear higher than 
under FCRA. CBO has provided detailed supplementary information to the 
Congress about the fair-value cost of certain federal credit and 
insurance programs and how they compare to FCRA estimates.\2\ To 
illustrate the change in measures of future deficits under the bill, 
CBO has also analyzed the cost of federal credit programs in 2012 on 
both a FCRA and fair-value basis.
---------------------------------------------------------------------------
    \2\Costs and Policy Options for Federal Student Loan Programs 
(March 2010), http://www.cbo.gov/ftpdocs/110xx/doc11043/03-25-
StudentLoans.pdf. Accounting for FHA's Single-Family Mortgage Insurance 
Program on a Fair value Basis (May 18, 2011), http://www.cbo.gov/
ftpdocs/120xx/doc12054/05-18-FHA_Letter.pdf. Federal Loan Guarantees 
for the Construction of Nuclear Power Plants (August 2011), http://
www.cbo.gov/ftpdocs/122xx/doc12238/08-03-NuclearLoans.pdf.
---------------------------------------------------------------------------
    CBO estimates that if fair-value procedures were used to estimate 
the cost of credit programs in 2012, the total deficit would be about 
$55 billion greater than the deficit as measured using current 
estimating procedures. That increase would be split between the 
mandatory and discretionary portions of the budget:
     On a FCRA basis, CBO estimates net subsidies for mandatory 
credit programs would reduce the federal deficit by about $30 billion 
in 2012. On a fair-value basis, the cost of those same programs would 
be roughly $35 billion greater. Starting in 2014, the budget would 
record increased budget authority and outlays for those programs; 
however, because those programs are mandatory, fully funding them on a 
fair-value basis under H.R. 3581 would require no further Congressional 
action.\3\ The estimated cost of legislative proposals for new 
mandatory credit programs or changes to existing programs (such as 
student loans) would be higher using fair-value procedures than they 
would be on a FCRA basis.
---------------------------------------------------------------------------
    \3\Mandatory spending refers to budget authority that is provided 
in laws other than appropriation acts and the outlays that result from 
such budget authority.
---------------------------------------------------------------------------
     Net receipts from discretionary credit programs reduced 
the estimated cost of appropriations in 2012 by about $4 billion on a 
FCRA basis. On a fair-value basis, CBO estimates that those same 
programs would require additional appropriations of about $20 billion. 
To account for the increased need for future appropriations to cover 
higher subsidy costs when measured on a fair-value basis, H.R. 3581 
would allow the caps on discretionary appropriations set forth in the 
Budget Control Act of 2011 to be adjusted upward.
    The Administration currently records transactions related to the 
Treasury's conservatorship of Fannie Mae and Freddie Mac on a cash 
basis in the federal budget. CBO estimates that the net impact of the 
activities of those entities would cost an average of about $3 billion 
per year on a fair-value basis over the next 10 years.
                      pay-as-you-go considerations
    None.
              intergovernmental and private-sector impact
    H.R. 3581 contains no intergovernmental or private-sector mandates 
as defined in UMRA and would impose no costs on state, local or tribal 
governments.
                          estimate prepared by
    Federal Costs: Chad Chirico.
    Impact on State, Local, and Tribal Governments: Elizabeth Cove 
Delisle.
    Impact on the Private Sector: Paige Piper/Bach.
                          estimate approved by
    Peter H. Fontaine, Assistant Director for Budget Analysis.

                    Performance Goals and Objectives

    With respect to the requirement of clause 3(c)(4) of rule 
XIII of the Rules of the House of Representatives, the 
performance goals and objectives of this legislation are to 
increase the transparency of Federal budgeting by bringing off-
budget entities on-budget, reform the accounting methodology 
used for Federal credit programs to reflect best practices from 
the private sector, and require agencies to promptly make 
public the budget justification materials they submit to 
Congress in support of their requests for public funds.

                   Constitutional Authority Statement

    Pursuant to clause 7 of rule XII of the Rules of the House 
of Representatives, the committee finds the constitutional 
authority for this legislation in Article I, section 9, clause 
7.

                        Committee Cost Estimate

    Pursuant to clause 3(c)(3) of rule XIII of the Rules of the 
House of Representatives, the committee report incorporates the 
cost estimate prepared by the Director of the Congressional 
Budget Office pursuant to sections 402 and 423 of the 
Congressional Budget Act of 1974.

                      Advisory Committee Statement

    No advisory committee within the meaning of section 5(b) of 
the Federal Advisory Committee Act was created by this 
legislation.

                Applicability to the Legislative Branch

    The committee finds that the legislation does not relate to 
the terms and conditions of employment or access to public 
services or accommodations within the meaning of section 
102(b)(3) of the Congressional Accountability Act (Public Law 
104-1).

                       Federal Mandates Statement

    The committee adopts the estimate of Federal mandates 
prepared by the Director of the Congressional Budget Office 
pursuant to section 423 of the Unfunded Mandates Reform Act 
(Public Law 104-4).

                          Advisory on Earmarks

    In accordance with clause 9 of rule XXI of the Rules of the 
House of Representatives, H.R. 3581 does not contain any 
congressional earmarks, limited tax benefits, or limited tariff 
benefits as defined in clause 9(e), 9(f), or 9(g) of rule XXI 
of the Rules of the House of Representatives.

         Changes in Existing Law Made by the Bill, as Reported

    In compliance with clause 3(e) of rule XIII of the Rules of 
the House of Representatives, changes in existing law made by 
the bill, as reported, are shown as follows (existing law 
proposed to be omitted is enclosed in black brackets, new 
matter is printed in italic, existing law in which no change is 
proposed is shown in roman):

        CONGRESSIONAL BUDGET AND IMPOUNDMENT CONTROL ACT OF 1974


                    SHORT TITLES; TABLE OF CONTENTS

    Section 1. (a) Short Titles.--This Act may be cited as the 
``Congressional Budget and Impoundment Control Act of 1974''. 
Titles I through IX may be cited as the ``Congressional Budget 
Act of 1974''. Parts A and B of title X may be cited as the 
``Impoundment Control Act of 1974''. Part C of title X may be 
cited as the ``Line Item Veto Act of 1996''.
    (b) Table of Contents.--

Sec. 1. Short titles; table of contents.
     * * * * * * *

                         [TITLE V--CREDIT REFORM

[Sec. 500. Short title.
[Sec. 501. Purposes.
[Sec. 502. Definitions.
[Sec. 503. OMB and CBO analysis, coordination, and review.
[Sec. 504. Budgetary treatment.
[Sec. 505. Authorizations.
[Sec. 506. Treatment of deposit insurance and agencies and other 
          insurance programs.
[Sec. 507. Effect on other laws.]

                           TITLE V--FAIR VALUE

Sec. 501. Purposes.
Sec. 502. Definitions.
Sec. 503. OMB and CBO analysis, coordination, and review.
Sec. 504. Budgetary treatment.
Sec. 505. Authorizations.
Sec. 506. Treatment of deposit insurance and agencies and other 
          insurance programs.
Sec. 507. Effect on other laws.

           *       *       *       *       *       *       *


                        [TITLE V--CREDIT REFORM

[SEC. 500. SHORT TITLE.

    [This title may be cited as the ``Federal Credit Reform Act 
of 1990''.

[SEC. 501. PURPOSES.

     [The purposes of this title are to--
            [(1) measure more accurately the costs of Federal 
        credit programs;
            [(2) place the cost of credit programs on a 
        budgetary basis equivalent to other Federal spending;
            [(3) encourage the delivery of benefits in the form 
        most appropriate to the needs of beneficiaries; and
            [(4) improve the allocation of resources among 
        credit programs and between credit and other spending 
        programs.

[SEC. 502. DEFINITIONS.

     [For purposes of this title--
            [(1) The term ``direct loan'' means a disbursement 
        of funds by the Government to a non-Federal borrower 
        under a contract that requires the repayment of such 
        funds with or without interest. The term includes the 
        purchase of, or participation in, a loan made by 
        another lender and financing arrangements that defer 
        payment for more than 90 days, including the sale of a 
        government asset on credit terms. The term does not 
        include the acquisition of a federally guaranteed loan 
        in satisfaction of default claims or the price support 
        loans of the Commodity Credit Corporation.
            [(2) The term ``direct loan obligation'' means a 
        binding agreement by a Federal agency to make a direct 
        loan when specified conditions are fulfilled by the 
        borrower.
            [(3) The term ``loan guarantee'' means any 
        guarantee, insurance, or other pledge with respect to 
        the payment of all or a part of the principal or 
        interest on any debt obligation of a non-Federal 
        borrower to a non-Federal lender, but does not include 
        the insurance of deposits, shares, or other 
        withdrawable accounts in financial institutions.
            [(4) The term ``loan guarantee commitment'' means a 
        binding agreement by a Federal agency to make a loan 
        guarantee when specified conditions are fulfilled by 
        the borrower, the lender, or any other party to the 
        guarantee agreement.
            [(5)(A) The term ``cost'' means the estimated long-
        term cost to the Government of a direct loan or loan 
        guarantee or modification thereof, calculated on a net 
        present value basis, excluding administrative costs and 
        any incidental effects on governmental receipts or 
        outlays.
            [(B) The cost of a direct loan shall be the net 
        present value, at the time when the direct loan is 
        disbursed, of the following estimated cash flows:
                    [(i) loan disbursements;
                    [(ii) repayments of principal; and
                    [(iii) payments of interest and other 
                payments by or to the Government over the life 
                of the loan after adjusting for estimated 
                defaults, prepayments, fees, penalties, and 
                other recoveries;
        including the effects of changes in loan terms 
        resulting from the exercise by the borrower of an 
        option included in the loan contract.
            [(C) The cost of a loan guarantee shall be the net 
        present value, at the time when the guaranteed loan is 
        disbursed, of the following estimated cash flows:
                    [(i) payments by the Government to cover 
                defaults and delinquencies, interest subsidies, 
                or other payments; and
                    [(ii) payments to the Government including 
                origination and other fees, penalties and 
                recoveries;
        including the effects of changes in loan terms 
        resulting from the exercise by the guaranteed lender of 
        an option included in the loan guarantee contract, or 
        by the borrower of an option included in the guaranteed 
        loan contract.
            [(D) The cost of a modification is the difference 
        between the current estimate of the net present value 
        of the remaining cash flows under the terms of a direct 
        loan or loan guarantee contract, and the current 
        estimate of the net present value of the remaining cash 
        flows under the terms of the contract, as modified.
            [(E) In estimating net present values, the discount 
        rate shall be the average interest rate on marketable 
        Treasury securities of similar maturity to the cash 
        flows of the direct loan or loan guarantee for which 
        the estimate is being made.
            [(F) When funds are obligated for a direct loan or 
        loan guarantee, the estimated cost shall be based on 
        the current assumptions, adjusted to incorporate the 
        terms of the loan contract, for the fiscal year in 
        which the funds are obligated.
            [(6) The term ``credit program account'' means the 
        budget account into which an appropriation to cover the 
        cost of a direct loan or loan guarantee program is made 
        and from which such cost is disbursed to the financing 
        account.
            [(7) The term ``financing account'' means the non-
        budget account or accounts associated with each credit 
        program account which holds balances, receives the cost 
        payment from the credit program account, and also 
        includes all other cash flows to and from the 
        Government resulting from direct loan obligations or 
        loan guarantee commitments made on or after October 1, 
        1991.
            [(8) The term ``liquidating account'' means the 
        budget account that includes all cash flows to and from 
        the Government resulting from direct loan obligations 
        or loan guarantee commitments made prior to October 1, 
        1991. These accounts shall be shown in the budget on a 
        cash basis.
            [(9) The term ``modification'' means any Government 
        action that alters the estimated cost of an outstanding 
        direct loan (or direct loan obligation) or an 
        outstanding loan guarantee (or loan guarantee 
        commitment) from the current estimate of cash flows. 
        This includes the sale of loan assets, with or without 
        recourse, and the purchase of guaranteed loans. This 
        also includes any action resulting from new 
        legislation, or from the exercise of administrative 
        discretion under existing law, that directly or 
        indirectly alters the estimated cost of outstanding 
        direct loans (or direct loan obligations) or loan 
        guarantees (or loan guarantee commitments) such as a 
        change in collection procedures.
            [(10) The term ``current'' has the same meaning as 
        in section 250(c)(9) of the Balanced Budget and 
        Emergency Deficit Control Act of 1985.
            [(11) The term ``Director'' means the Director of 
        the Office of Management and Budget.

[SEC. 503. OMB AND CBO ANALYSIS, COORDINATION, AND REVIEW.

    [(a) In General.--For the executive branch, the Director 
shall be responsible for coordinating the estimates required by 
this title. The Director shall consult with the agencies that 
administer direct loan or loan guarantee programs.
    [(b) Delegation.--The Director may delegate to agencies 
authority to make estimates of costs. The delegation of 
authority shall be based upon written guidelines, regulations, 
or criteria consistent with the definitions in this title.
    [(c) Coordination With the Congressional Budget Office.--In 
developing estimation guidelines, regulations, or criteria to 
be used by Federal agencies, the Director shall consult with 
the Director of the Congressional Budget Office.
    [(d) Improving Cost Estimates.--The Director and the 
Director of the Congressional Budget Office shall coordinate 
the development of more accurate data on historical performance 
of direct loan and loan guarantee programs. They shall annually 
review the performance of outstanding direct loans and loan 
guarantees to improve estimates of costs. The Office of 
Management and Budget and the Congressional Budget Office shall 
have access to all agency data that may facilitate the 
development and improvement of estimates of costs.
    [(e) Historical Credit Program Costs.--The Director shall 
review, to the extent possible, historical data and develop the 
best possible estimates of adjustments that would convert 
aggregate historical budget data to credit reform accounting.
    [(f) Administrative Costs.--The Director and the Director 
of the Congressional Budget Office shall each analyze and 
report to Congress on differences in long-term administrative 
costs for credit programs versus grant programs by January 31, 
1992. Their reports shall recommend to Congress any changes, if 
necessary, in the treatment of administrative costs under 
credit reform accounting.

[SEC. 504. BUDGETARY TREATMENT.

    [(a) President's Budget.--Beginning with fiscal year 1992, 
the President's budget shall reflect the costs of direct loan 
and loan guarantee programs. The budget shall also include the 
planned level of new direct loan obligations or loan guarantee 
commitments associated with each appropriations request.
    [(b) Appropriations Required.--Notwithstanding any other 
provision of law, new direct loan obligations may be incurred 
and new loan guarantee commitments may be made for fiscal year 
1992 and thereafter only to the extent that--
            [(1) new budget authority to cover their costs is 
        provided in advance in an appropriations Act;
            [(2) a limitation on the use of funds otherwise 
        available for the cost of a direct loan or loan 
        guarantee program has been provided in advance in an 
        appropriations Act; or
            [(3) authority is otherwise provided in 
        appropriation Acts.
    [(c) Exemption for Mandatory Programs.--Subsections (b) and 
(e) shall not apply to a direct loan or loan guarantee program 
that--
            [(1) constitutes an entitlement (such as the 
        guaranteed student loan program or the veterans' home 
        loan guaranty program); or
            [(2) all existing credit programs of the Commodity 
        Credit Corporation on the date of enactment of this 
        title.
    [(d) Budget Accounting.--
            [(1) The authority to incur new direct loan 
        obligations, make new loan guarantee commitments, or 
        modify outstanding direct loans (or direct loan 
        obligations) or loan guarantees (or loan guarantee 
        commitments) shall constitute new budget authority in 
        an amount equal to the cost of the direct loan or loan 
        guarantee in the fiscal year in which definite 
        authority becomes available or indefinite authority is 
        used. Such budget authority shall constitute an 
        obligation of the credit program account to pay to the 
        financing account.
            [(2) The outlays resulting from new budget 
        authority for the cost of direct loans or loan 
        guarantees described in paragraph (1) shall be paid 
        from the credit program account into the financing 
        account and recorded in the fiscal year in which the 
        direct loan or the guaranteed loan is disbursed or its 
        costs altered.
            [(3) All collections and payments of the financing 
        accounts shall be a means of financing.
    [(e) Modifications.--An outstanding direct loan (or direct 
loan obligation) or loan guarantee (or loan guarantee 
commitment) shall not be modified in a manner that increases 
its costs unless budget authority for the additional cost has 
been provided in advance in an appropriations Act.
    [(f) Reestimates.--When the estimated cost for a group of 
direct loans or loan guarantees for a given credit program made 
in a single fiscal year is reestimated in a subsequent year, 
the difference between the reestimated cost and the previous 
cost estimate shall be displayed as a distinct and separately 
identified subaccount in the credit program account as a change 
in program costs and a change in net interest. There is hereby 
provided permanent indefinite authority for these reestimates.
    [(g) Administrative Expenses.--All funding for an agency's 
administration of a direct loan or loan guarantee program shall 
be displayed as distinct and separately identified subaccounts 
within the same budget account as the program's cost.

[SEC. 505. AUTHORIZATIONS.

    [(a) Authorization of Appropriations for Costs.--There are 
authorized to be appropriated to each Federal agency authorized 
to make direct loan obligations or loan guarantee commitments, 
such sums as may be necessary to pay the cost associated with 
such direct loan obligations or loan guarantee commitments.
    [(b) Authorization for Financing Accounts.--In order to 
implement the accounting required by this title, the President 
is authorized to establish such non-budgetary accounts as may 
be appropriate.
    [(c) Treasury Transactions With the Financing Accounts.--
The Secretary of the Treasury shall borrow from, receive from, 
lend to, or pay to the financing accounts such amounts as may 
be appropriate. The Secretary of the Treasury may prescribe 
forms and denominations, maturities, and terms and conditions 
for the transactions described above, except that the rate of 
interest charged by the Secretary on lending to financing 
accounts (including amounts treated as lending to financing 
accounts by the Federal Financing Bank (hereinafter in this 
subsection referred to as the ``Bank'') pursuant to section 
406(b)) and the rate of interest paid to financing accounts on 
uninvested balances in financing accounts shall be the same as 
the rate determined pursuant to section 502(5)(E). For 
guaranteed loans financed by the Bank and treated as direct 
loans by a Federal agency pursuant to section 406(b), any fee 
or interest surcharge (the amount by which the interest rate 
charged exceeds the rate determined pursuant to section 
502(5)(E)) that the Bank charges to a private borrower pursuant 
to section 6(c) of the Federal Financing Bank Act of 1973 shall 
be considered a cash flow to the Government for the purposes of 
determining the cost of the direct loan pursuant to section 
502(5). All such amounts shall be credited to the appropriate 
financing account. The Bank is authorized to require 
reimbursement from a Federal agency to cover the administrative 
expenses of the Bank that are attributable to the direct loans 
financed for that agency. All such payments by an agency shall 
be considered administrative expenses subject to section 
504(g). This subsection shall apply to transactions related to 
direct loan obligations or loan guarantee commitments made on 
or after October 1, 1991. The authorities described above shall 
not be construed to supersede or override the authority of the 
head of a Federal agency to administer and operate a direct 
loan or loan guarantee program. All of the transactions 
provided in this subsection shall be subject to the provisions 
of subchapter II of chapter 15 of title 31, United States Code. 
Cash balances of the financing accounts in excess of current 
requirements shall be maintained in a form of uninvested funds 
and the Secretary of the Treasury shall pay interest on these 
funds.
    [(d) Authorization for Liquidating Accounts.--(1) Amounts 
in liquidating accounts shall be available only for payments 
resulting from direct loan obligations or loan guarantee 
commitments made prior to October 1, 1991, for--
            [(A) interest payments and principal repayments to 
        the Treasury or the Federal Financing Bank for amounts 
        borrowed;
            [(B) disbursements of loans;
            [(C) default and other guarantee claim payments;
            [(D) interest supplement payments;
            [(E) payments for the costs of foreclosing, 
        managing, and selling collateral that are capitalized 
        or routinely deducted from the proceeds of sales;
            [(F) payments to financing accounts when required 
        for modifications;
            [(G) administrative expenses, if--
                    [(i) amounts credited to the liquidating 
                account would have been available for 
                administrative expenses under a provision of 
                law in effect prior to October 1, 1991; and
                    [(ii) no direct loan obligation or loan 
                guarantee commitment has been made, or any 
                modification of a direct loan or loan guarantee 
                has been made, since September 30, 1991; or
            [(H) such other payments as are necessary for the 
        liquidation of such direct loan obligations and loan 
        guarantee commitments.
    [(2) Amounts credited to liquidating accounts in any year 
shall be available only for payments required in that year. Any 
unobligated balances in liquidating accounts at the end of a 
fiscal year shall be transferred to miscellaneous receipts as 
soon as practicable after the end of the fiscal year.
    [(3) If funds in liquidating accounts are insufficient to 
satisfy obligations and commitments of such accounts, there is 
hereby provided permanent, indefinite authority to make any 
payments required to be made on such obligations and 
commitments.
    [(e) Authorization of Appropriations for Implementation 
Expenses.--There are authorized to be appropriated to existing 
accounts such sums as may be necessary for salaries and 
expenses to carry out the responsibilities under this title.
    [(f) Reinsurance.--Nothing in this title shall be construed 
as authorizing or requiring the purchase of insurance or 
reinsurance on a direct loan or loan guarantee from private 
insurers. If any such reinsurance for a direct loan or loan 
guarantee is authorized, the cost of such insurance and any 
recoveries to the Government shall be included in the 
calculation of the cost.
    [(g) Eligibility and Assistance.--Nothing in this title 
shall be construed to change the authority or the 
responsibility of a Federal agency to determine the terms and 
conditions of eligibility for, or the amount of assistance 
provided by a direct loan or a loan guarantee.

[SEC. 506. TREATMENT OF DEPOSIT INSURANCE AND AGENCIES AND OTHER 
                    INSURANCE PROGRAMS.

    [(a) In General.--This title shall not apply to the credit 
or insurance activities of the Federal Deposit Insurance 
Corporation, National Credit Union Administration, Resolution 
Trust Corporation, Pension Benefit Guaranty Corporation, 
National Flood Insurance, National Insurance Development Fund, 
Crop Insurance, or Tennessee Valley Authority.
    [(b) Study.--The Director and the Director of the 
Congressional Budget Office shall each study whether the 
accounting for Federal deposit insurance programs should be on 
a cash basis on the same basis as loan guarantees, or on a 
different basis. Each Director shall report findings and 
recommendations to the President and the Congress on or before 
May 31, 1991.
    [(c) Access to Data.--For the purposes of subsection (b), 
the Office of Management and Budget and the Congressional 
Budget Office shall have access to all agency data that may 
facilitate these studies.

[SEC. 507. EFFECT ON OTHER LAWS.

    [(a) Effect on Other Laws.--This title shall supersede, 
modify, or repeal any provision of law enacted prior to the 
date of enactment of this title to the extent such provision is 
inconsistent with this title. Nothing in this title shall be 
construed to establish a credit limitation on any Federal loan 
or loan guarantee program.
    [(b) Crediting of Collections.--Collections resulting from 
direct loans obligated or loan guarantees committed prior to 
October 1, 1991, shall be credited to the liquidating accounts 
of Federal agencies. Amounts so credited shall be available, to 
the same extent that they were available prior to the date of 
enactment of this title, to liquidate obligations arising from 
such direct loans obligated or loan guarantees committed prior 
to October 1, 1991, including repayment of any obligations held 
by the Secretary of the Treasury or the Federal Financing Bank. 
The unobligated balances of such accounts that are in excess of 
current needs shall be transferred to the general fund of the 
Treasury. Such transfers shall be made from time to time but, 
at least once each year.]

                          TITLE V--FAIR VALUE

SEC. 501. PURPOSES.

    The purposes of this title are to--
            (1) measure more accurately the costs of Federal 
        credit programs by accounting for them on a fair value 
        basis;
            (2) place the cost of credit programs on a 
        budgetary basis equivalent to other Federal spending;
            (3) encourage the delivery of benefits in the form 
        most appropriate to the needs of beneficiaries; and
            (4) improve the allocation of resources among 
        Federal programs.

SEC. 502. DEFINITIONS.

    For purposes of this title:
            (1) The term ``direct loan'' means a disbursement 
        of funds by the Government to a non-Federal borrower 
        under a contract that requires the repayment of such 
        funds with or without interest. The term includes the 
        purchase of, or participation in, a loan made by 
        another lender and financing arrangements that defer 
        payment for more than 90 days, including the sale of a 
        Government asset on credit terms. The term does not 
        include the acquisition of a federally guaranteed loan 
        in satisfaction of default claims or the price support 
        loans of the Commodity Credit Corporation.
            (2) The term ``direct loan obligation'' means a 
        binding agreement by a Federal agency to make a direct 
        loan when specified conditions are fulfilled by the 
        borrower.
            (3) The term ``loan guarantee'' means any 
        guarantee, insurance, or other pledge with respect to 
        the payment of all or a part of the principal or 
        interest on any debt obligation of a non-Federal 
        borrower to a non-Federal lender, but does not include 
        the insurance of deposits, shares, or other 
        withdrawable accounts in financial institutions.
            (4) The term ``loan guarantee commitment'' means a 
        binding agreement by a Federal agency to make a loan 
        guarantee when specified conditions are fulfilled by 
        the borrower, the lender, or any other party to the 
        guarantee agreement.
            (5)(A) The term ``cost'' means the sum of the 
        Treasury discounting component and the risk component 
        of a direct loan or loan guarantee, or a modification 
        thereof.
            (B) The Treasury discounting component shall be the 
        estimated long-term cost to the Government of a direct 
        loan or loan guarantee, or modification thereof, 
        calculated on a net present value basis, excluding 
        administrative costs and any incidental effects on 
        governmental receipts or outlays.
            (C) The risk component shall be an amount equal to 
        the difference between--
                    (i) the estimated long-term cost to the 
                Government of a direct loan or loan guarantee, 
                or modification thereof, estimated on a fair 
                value basis, applying the guidelines set forth 
                by the Financial Accounting Standards Board in 
                Financial Accounting Standards #157, or a 
                successor thereto, excluding administrative 
                costs and any incidental effects on 
                governmental receipts or outlays; and
                    (ii) the Treasury discounting component of 
                such direct loan or loan guarantee, or 
                modification thereof.
            (D) The Treasury discounting component of a direct 
        loan shall be the net present value, at the time when 
        the direct loan is disbursed, of the following 
        estimated cash flows:
                    (i) Loan disbursements.
                    (ii) Repayments of principal.
                    (iii) Essential preservation expenses, 
                payments of interest and other payments by or 
                to the Government over the life of the loan 
                after adjusting for estimated defaults, 
                prepayments, fees, penalties, and other 
                recoveries, including the effects of changes in 
                loan terms resulting from the exercise by the 
                borrower of an option included in the loan 
                contract.
            (E) The Treasury discounting component of a loan 
        guarantee shall be the net present value, at the time 
        when the guaranteed loan is disbursed, of the following 
        estimated cash flows:
                    (i) Payments by the Government to cover 
                defaults and delinquencies, interest subsidies, 
                essential preservation expenses, or other 
                payments.
                    (ii) Payments to the Government including 
                origination and other fees, penalties, and 
                recoveries, including the effects of changes in 
                loan terms resulting from the exercise by the 
                guaranteed lender of an option included in the 
                loan guarantee contract, or by the borrower of 
                an option included in the guaranteed loan 
                contract.
            (F) The cost of a modification is the sum of--
                    (i) the difference between the current 
                estimate of the Treasury discounting component 
                of the remaining cash flows under the terms of 
                a direct loan or loan guarantee and the current 
                estimate of the Treasury discounting component 
                of the remaining cash flows under the terms of 
                the contract, as modified; and
                    (ii) the difference between the current 
                estimate of the risk component of the remaining 
                cash flows under the terms of a direct loan or 
                loan guarantee and the current estimate of the 
                risk component of the remaining cash flows 
                under the terms of the contract as modified.
            (G) In estimating Treasury discounting components, 
        the discount rate shall be the average interest rate on 
        marketable Treasury securities of similar duration to 
        the cash flows of the direct loan or loan guarantee for 
        which the estimate is being made.
            (H) When funds are obligated for a direct loan or 
        loan guarantee, the estimated cost shall be based on 
        the current assumptions, adjusted to incorporate the 
        terms of the loan contract, for the fiscal year in 
        which the funds are obligated.
            (6) The term ``program account'' means the budget 
        account into which an appropriation to cover the cost 
        of a direct loan or loan guarantee program is made and 
        from which such cost is disbursed to the financing 
        account.
            (7) The term ``financing account'' means the 
        nonbudget account or 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 Government resulting 
        from direct loan obligations or loan guarantee 
        commitments made on or after October 1, 1991.
            (8) The term ``liquidating account'' means the 
        budget account that includes all cash flows to and from 
        the Government resulting from direct loan obligations 
        or loan guarantee commitments made prior to October 1, 
        1991. These accounts shall be shown in the budget on a 
        cash basis.
            (9) The term ``modification'' means any Government 
        action that alters the estimated cost of an outstanding 
        direct loan (or direct loan obligation) or an 
        outstanding loan guarantee (or loan guarantee 
        commitment) from the current estimate of cash flows. 
        This includes the sale of loan assets, with or without 
        recourse, and the purchase of guaranteed loans (or 
        direct loan obligations) or loan guarantees (or loan 
        guarantee commitments) such as a change in collection 
        procedures.
            (10) The term ``current'' has the same meaning as 
        in section 250(c)(9) of the Balanced Budget and 
        Emergency Deficit Control Act of 1985.
            (11) The term ``Director'' means the Director of 
        the Office of Management and Budget.
            (12) The term ``administrative costs'' means costs 
        related to program management activities, but does not 
        include essential preservation expenses.
            (13) The term ``essential preservation expenses'' 
        means servicing and other costs that are essential to 
        preserve the value of loan assets or collateral.

SEC. 503. OMB AND CBO ANALYSIS, COORDINATION, AND REVIEW.

    (a) In General.--For the executive branch, the Director 
shall be responsible for coordinating the estimates required by 
this title. The Director shall consult with the agencies that 
administer direct loan or loan guarantee programs.
    (b) Delegation.--The Director may delegate to agencies 
authority to make estimates of costs. The delegation of 
authority shall be based upon written guidelines, regulations, 
or criteria consistent with the definitions in this title.
    (c) Coordination With the Congressional Budget Office.--In 
developing estimation guidelines, regulations, or criteria to 
be used by Federal agencies, the Director shall consult with 
the Director of the Congressional Budget Office.
    (d) Improving Cost Estimates.--The Director and the 
Director of the Congressional Budget Office shall coordinate 
the development of more accurate data on historical performance 
and prospective risk of direct loan and loan guarantee 
programs. They shall annually review the performance of 
outstanding direct loans and loan guarantees to improve 
estimates of costs. The Office of Management and Budget and the 
Congressional Budget Office shall have access to all agency 
data that may facilitate the development and improvement of 
estimates of costs.
    (e) Historical Credit Programs Costs.--The Director shall 
review, to the extent possible, historical data and develop the 
best possible estimates of adjustments that would convert 
aggregate historical budget data to credit reform accounting.

SEC. 504. BUDGETARY TREATMENT.

    (a) President's Budget.--Beginning with fiscal year 1992, 
the President's budget shall reflect the Treasury discounting 
component of direct loan and loan guarantee programs. Beginning 
with fiscal year 2015, the President's budget shall reflect the 
costs of direct loan and loan guarantee programs. The budget 
shall also include the planned level of new direct loan 
obligations or loan guarantee commitments associated with each 
appropriations request.
    (b) Appropriations Required.--Notwithstanding any other 
provision of law, new direct loan obligations may be incurred 
and new loan guarantee commitments may be made for fiscal year 
1992 and thereafter only to the extent that--
            (1) new budget authority to cover their costs is 
        provided in advance in an appropriation Act;
            (2) a limitation on the use of funds otherwise 
        available for the cost of a direct loan or loan 
        guarantee program has been provided in advance in an 
        appropriation Act; or
            (3) authority is otherwise provided in 
        appropriation Acts.
    (c) Exemption for Direct Spending Programs.--Subsections 
(b) and (e) shall not apply to--
            (1) any 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);
            (2) the credit programs of the Commodity Credit 
        Corporation existing on the date of enactment of this 
        title; or
            (3) any direct loan (or direct loan obligation) or 
        loan guarantee (or loan guarantee commitment) made by 
        the Federal National Mortgage Association or the 
        Federal Home Loan Mortgage Corporation.
    (d) Budget Accounting.--
            (1) The authority to incur new direct loan 
        obligations, make new loan guarantee commitments, or 
        modify outstanding direct loans (or direct loan 
        obligations) or loan guarantees (or loan guarantee 
        commitments) shall constitute new budget authority in 
        an amount equal to the cost of the direct loan or loan 
        guarantee in the fiscal year in which definite 
        authority becomes available or indefinite authority is 
        used. Such budget authority shall constitute an 
        obligation of the program account to pay to the 
        financing account.
            (2) The outlays resulting from new budget authority 
        for the cost of direct loans or loan guarantees 
        described in paragraph (1) shall be paid from the 
        program account into the financing account and recorded 
        in the fiscal year in which the direct loan or the 
        guaranteed loan is disbursed or its costs altered.
            (3) All collections and payments of the financing 
        accounts shall be a means of financing.
    (e) Modifications.--An outstanding direct loan (or direct 
loan obligation) or loan guarantee (or loan guarantee 
commitment) shall not be modified in a manner that increases 
its costs unless budget authority for the additional cost has 
been provided in advance in an appropriation Act.
    (f) Reestimates.--When the estimated cost for a group of 
direct loans or loan guarantees for a given program made in a 
single fiscal year is re-estimated in a subsequent year, the 
difference between the reestimated cost and the previous cost 
estimate shall be displayed as a distinct and separately 
identified subaccount in the program account as a change in 
program costs and a change in net interest. There is hereby 
provided permanent indefinite authority for these re-estimates.
    (g) Administrative Expenses.--All funding for an agency's 
administrative costs associated with a direct loan or loan 
guarantee program shall be displayed as distinct and separately 
identified subaccounts within the same budget account as the 
program's cost.

SEC. 505. AUTHORIZATIONS.

    (a) Authorization for Financing Accounts.--In order to 
implement the accounting required by this title, the President 
is authorized to establish such non-budgetary accounts as may 
be appropriate.
    (b) Treasury Transactions With the Financing Accounts.--
            (1) In general.--The Secretary of the Treasury 
        shall borrow from, receive from, lend to, or pay to the 
        financing accounts such amounts as may be appropriate. 
        The Secretary of the Treasury may prescribe forms and 
        denominations, maturities, and terms and conditions for 
        the transactions described in the preceding sentence, 
        except that the rate of interest charged by the 
        Secretary on lending to financing accounts (including 
        amounts treated as lending to financing accounts by the 
        Federal Financing Bank (hereinafter in this subsection 
        referred to as the ``Bank'') pursuant to section 
        405(b)) and the rate of interest paid to financing 
        accounts on uninvested balances in financing accounts 
        shall be the same as the rate determined pursuant to 
        section 502(5)(G).
            (2) Loans.--For guaranteed loans financed by the 
        Bank and treated as direct loans by a Federal agency 
        pursuant to section 406(b)(1), any fee or interest 
        surcharge (the amount by which the interest rate 
        charged exceeds the rate determined pursuant to section 
        502(5)(G) that the Bank charges to a private borrower 
        pursuant to section 6(c) of the Federal Financing Bank 
        Act of 1973 shall be considered a cash flow to the 
        Government for the purposes of determining the cost of 
        the direct loan pursuant to section 502(5). All such 
        amounts shall be credited to the appropriate financing 
        account.
            (3) Reimbursement.--The Bank is authorized to 
        require reimbursement from a Federal agency to cover 
        the administrative expenses of the Bank that are 
        attributable to the direct loans financed for that 
        agency. All such payments by an agency shall be 
        considered administrative expenses subject to section 
        504(g). This subsection shall apply to transactions 
        related to direct loan obligations or loan guarantee 
        commitments made on or after October 1, 1991.
            (4) Authority.--The authorities provided in this 
        subsection shall not be construed to supersede or 
        override the authority of the head of a Federal agency 
        to administer and operate a direct loan or loan 
        guarantee program.
            (5) Title 31.--All of the transactions provided in 
        the subsection shall be subject to the provisions of 
        subchapter II of chapter 15 of title 31, United States 
        Code.
            (6) Treatment of cash balances.--Cash balances of 
        the financing accounts in excess of current 
        requirements shall be maintained in a form of 
        uninvested funds and the Secretary of the Treasury 
        shall pay interest on these funds. The Secretary of the 
        Treasury shall charge (or pay if the amount is 
        negative) financing accounts an amount equal to the 
        risk component for a direct loan or loan guarantee, or 
        modification thereof. Such amount received by the 
        Secretary of the Treasury shall be a means of financing 
        and shall not be considered a cash flow of the 
        Government for the purposes of section 502(5).
    (c) Authorization for Liquidating Accounts.--(1) Amounts in 
liquidating accounts shall be available only for payments 
resulting from direct loan obligations or loan guarantee 
commitments made prior to October 1, 1991, for--
            (A) interest payments and principal repayments to 
        the Treasury or the Federal Financing Bank for amounts 
        borrowed;
            (B) disbursements of loans;
            (C) default and other guarantee claim payments;
            (D) interest supplement payments;
            (E) payments for the costs of foreclosing, 
        managing, and selling collateral that are capitalized 
        or routinely deducted from the proceeds of sales;
            (F) payments to financing accounts when required 
        for modifications;
            (G) administrative costs and essential preservation 
        expenses, if--
                    (i) amounts credited to the liquidating 
                account would have been available for 
                administrative costs and essential preservation 
                expenses under a provision of law in effect 
                prior to October 1, 1991; and
                    (ii) no direct loan obligation or loan 
                guarantee commitment has been made, or any 
                modification of a direct loan or loan guarantee 
                has been made, since September 30, 1991; or
            (H) such other payments as are necessary for the 
        liquidation of such direct loan obligations and loan 
        guarantee commitments.
    (2) Amounts credited to liquidating accounts in any year 
shall be available only for payments required in that year. Any 
unobligated balances in liquidating accounts at the end of a 
fiscal year shall be transferred to miscellaneous receipts as 
soon as practicable after the end of the fiscal year.
    (3) If funds in liquidating accounts are insufficient to 
satisfy obligations and commitments of such accounts, there is 
hereby provided permanent, indefinite authority to make any 
payments required to be made on such obligations and 
commitments.
    (d) Reinsurance.--Nothing in this title shall be construed 
as authorizing or requiring the purchase of insurance or 
reinsurance on a direct loan or loan guarantee from private 
insurers. If any such reinsurance for a direct loan or loan 
guarantee is authorized, the cost of such insurance and any 
recoveries to the Government shall be included in the 
calculation of the cost.
    (e) Eligibility and Assistance.--Nothing in this title 
shall be construed to change the authority or the 
responsibility of a Federal agency to determine the terms and 
conditions of eligibility for, or the amount of assistance 
provided by a direct loan or a loan guarantee.

SEC. 506. TREATMENT OF DEPOSIT INSURANCE AND AGENCIES AND OTHER 
                    INSURANCE PROGRAMS.

    This title shall not apply to the credit or insurance 
activities of the Federal Deposit Insurance Corporation, 
National Credit Union Administration, Resolution Trust 
Corporation, Pension Benefit Guaranty Corporation, National 
Flood Insurance, National Insurance Development Fund, Crop 
Insurance, or Tennessee Valley Authority.

SEC. 507. EFFECT ON OTHER LAWS.

    (a) Effect on Other Laws.--This title shall supersede, 
modify, or repeal any provision of law enacted prior to the 
date of enactment of this title to the extent such provision is 
inconsistent with this title. Nothing in this title shall be 
construed to establish a credit limitation on any Federal loan 
or loan guarantee program.
    (b) Crediting of Collections.--Collections resulting from 
direct loans obligated or loan guarantees committed prior to 
October 1, 1991, shall be credited to the liquidating accounts 
of Federal agencies. Amounts so credited shall be available, to 
the same extent that they were available prior to the date of 
enactment of this title, to liquidate obligations arising from 
such direct loans obligated or loan guarantees committed prior 
to October 1, 1991, including repayment of any obligations held 
by the Secretary of the Treasury or the Federal Financing Bank. 
The unobligated balances of such accounts that are in excess of 
current needs shall be transferred to the general fund of the 
Treasury. Such transfers shall be made from time to time but, 
at least once each year.

           *       *       *       *       *       *       *

                              ----------                              


       BALANCED BUDGET AND EMERGENCY DEFICIT CONTROL ACT OF 1985



           *       *       *       *       *       *       *
  PART C--EMERGENCY POWERS TO ELIMINATE DEFICITS IN EXCESS OF MAXIMUM 
DEFICIT AMOUNT

           *       *       *       *       *       *       *


SEC. 251. ENFORCING DISCRETIONARY SPENDING LIMITS.

    (a) * * *
    (b) Adjustments to Discretionary Spending Limits.--
            (1) Concepts and definitions.--When the President 
        submits the budget under section 1105 of title 31, 
        United States Code, OMB shall calculate and the budget 
        shall include adjustments to discretionary spending 
        limits (and those limits as cumulatively adjusted) for 
        the budget year and each outyear to reflect changes in 
        concepts and definitions. Such changes shall equal the 
        baseline levels of new budget authority and outlays 
        using up-to-date concepts and definitions, minus those 
        levels using the concepts and definitions in effect 
        before such changes. Such changes may only be made 
        after consultation with the Committees on 
        Appropriations and the Budget of the House of 
        Representatives and the Senate, and that consultation 
        shall include written communication to such committees 
        that affords such committees the opportunity to comment 
        before official action is taken with respect to such 
        changes. A change in discretionary spending solely as a 
        result of the amendment to title V of the Congressional 
        Budget Act of 1974 made by the Budget and Accounting 
        Transparency Act of 2012 shall be treated as a change 
        of concept under this paragraph.

           *       *       *       *       *       *       *

                              ----------                              


                      TITLE 31, UNITED STATES CODE



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SUBTITLE II--THE BUDGET PROCESS

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CHAPTER 11--THE BUDGET AND FISCAL, BUDGET, AND PROGRAM INFORMATION

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Sec. 1108. Preparation and submission of appropriations requests to the 
                    President

    (a) * * *

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    (h)(1) Whenever any agency prepares and submits written 
budget justification materials for any committee of the House 
of Representatives or the Senate, such agency shall post such 
budget justification on the same day of such submission on the 
``open'' page of the public website of the agency, and the 
Office of Management and Budget shall post such budget 
justification in a centralized location on its website, in the 
format developed under paragraph (2).
    (2) The Office of Management and Budget, in consultation 
with the Congressional Budget Office and the Government 
Accountability Office, shall develop and notify each agency of 
the format in which to post a budget justification under 
paragraph (1). Such format shall be designed to ensure that 
posted budget justifications for all agencies--
            (A) are searchable, sortable, and downloadable by 
        the public;
            (B) are consistent with generally accepted 
        standards and practices for machine-discoverability;
            (C) are organized uniformly, in a logical manner 
        that makes clear the contents of a budget justification 
        and relationships between data elements within the 
        budget justification and among similar documents; and
            (D) use uniform identifiers, including for 
        agencies, bureaus, programs, and projects.

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                       Views of Committee Members

    Clause 2(l) of rule XI of the Rules of the House of 
Representatives requires each committee to provide two days to 
Members of the committee to file Minority, additional, 
supplemental, or dissenting views and to include such views in 
the report on legislation considered by the committee. The 
following views were submitted:

                             MINORITY VIEWS

    Although there are large differences in budget priorities 
between the parties, we share a common goal of putting the 
federal budget on a fiscally sustainable path. We all want the 
federal government to be efficient, to focus scarce resources 
where they can do the most good, and to not waste a single dime 
of taxpayer dollars. And we want our budget laws to help 
support those goals.
    Budget process rules and laws can make a difference. For 
instance, the PAYGO principle that has been in effect at 
different periods has played a useful role in preventing the 
deficit from getting even worse. But budget process changes 
will never be a substitute for tackling the difficult fiscal 
questions facing us today. It is not that the budget process 
does not work, it is that Congress has failed to follow the 
rules already on the books.
    The Budget Committee has held two hearings on the general 
topic of budget process reform and the recommendations crossed 
party lines. Former Budget Committee Chairman Jim Nussle, a 
Republican witness, testified that ``It may not be that the 
budget process is broken. It may not be, in other words, that 
tools are broken, but it may be the fact that the tools are not 
even being used.'' Similarly, Dr. Philip Joyce, former 
Congressional Budget Office (CBO) staff member and a Democratic 
witness, testified that ``My main message is that most of the 
tools that you need to solve the budget problems faced by the 
country are already in your toolbox. If the goal is to deal 
with the larger fiscal imbalance that faces us, the most 
important thing to do is to make use of them, not search for 
more tools.''
    The reason we are not following the existing budget rules 
is that Republicans have shown a lack of political will and an 
unwillingness to compromise. Until Republicans are willing to 
support a balanced approach, we will never address the urgent 
need to put Americans back to work and to put our nation on a 
path toward long-term fiscal sustainability. Unfortunately, the 
Budget and Accounting Transparency Act of 2012 does nothing to 
create a single job, to reduce the deficit by a single penny, 
or to put the country on a fiscally sustainable path.
    This bill is not yet ready for prime time. It mandates a 
switch to ``fair value'' estimates of cost for all government 
loan and loan guarantee programs, instead of the credit reform 
estimates that have been in use since 1990. Fair value 
accounting is relatively new and there is not a consensus about 
the appropriateness of its use among budget professionals. For 
example, former CBO director Robert D. Reischauer wrote a 
letter strongly opposing the bill's switch to fair value 
estimating, the text of which is included below. On the other 
hand, CBO has begun to provide some fair value estimates as 
supplemental information in addition to its official cost 
estimates for some relevant legislation. We believe it is 
important to hold hearings to examine the different views of 
various practitioners and academics before mandating the use of 
fair value estimates across the government.
    Moreover, neither the Office of Management and Budget (OMB) 
nor CBO has completed estimates for the full range of programs 
conducted by the federal government. There are a multitude of 
conceptual issues to address both in preparing estimates--for 
example, how to develop estimates when there is no market 
offering similar loan instruments--and executing budgets. This 
bill offsets the expected overstatement of cash costs to the 
government over the long-term through a non-budgetary 
transaction. This differs from the approach currently taken by 
OMB in the few areas where the use of fair value has been 
mandated in law.
    The Budget Committee would benefit from holding a hearing 
exclusively to examine both credit reform and fair value 
estimates, which would allow us to determine if the bill takes 
the best approach.
    Letter from Robert D. Reischauer:
                                                  January 23, 2012.
Hon. Chris Van Hollen,
1707 Longworth H.O.B.
Washington, DC.
    Dear Representative Van Hollen: I am writing in response to 
your request for my views on the desirability of adopting 
``fair value accounting'' of federal direct loan and loan 
guarantee costs in the budget as proposed in H.R. 3581. I 
strongly oppose such a change.
    The accounting convention used since enactment of the 
Credit Reform Act of 1990 already reflects the risk that 
borrowers will default on their loans or loan guarantees. Under 
Credit Reform, costs already are based on the expected actual 
cash flows from the direct loans and guarantees (with an 
adjustment to account for the timing of the cash flows). H.R. 
3581 proposes to place an additional budgetary cost on top of 
the actual cash flows. This additional cost is supposed to 
reflect a cost to society that stems from the fact that, even 
if the cash flows turn out to be exactly as estimated, the 
possibility that the credit programs would cost more (or less) 
than estimated imposes a cost on a risk-averse public. Under 
the proposal, this extra cost would be the difference between 
the currently estimated cost of direct loans and loan 
guarantees to the federal government and the cost of those 
loans and loan guarantees if the private market were providing 
them.
    A society's aversion to risk may be an appropriate factor 
for policymakers to take into account in a cost-benefit 
assessment of any spending or tax proposal but adding a cost to 
the budget does not make sense. Nor is clear that the cost of 
societal risk aversion should be based on individual or 
institutional risk which is what the private market reflects. 
Inclusion of a risk aversion cost for credit programs would be 
inconsistent with the treatment of other programs in the budget 
(many of which have costs that are at least as uncertain as the 
costs of credit programs--for instance, many agriculture 
programs and Medicare--and would add a cost element from a 
traditional cost-benefit analysis without adding anything based 
on the corresponding benefit side of such an analysis. It would 
also make budget accounting less straightforward and 
transparent.
    H.R. 3581 represents a misguided attempt to mold budget 
accounting to facilitate a cost-benefit analysis, with the 
result that neither the budget nor the cost-benefit analysis 
would serve their intended purposes well.
    I would be glad to discuss these issues in more detail if 
you would like.
            With best wishes.
                                              Robert D. Reischauer.

                                   Chris Van Hollen.
                                   Mike Honda.
                                   Earl Blumenauer.
                                   Paul Tonko.
                                   Bill Pascrell.
                                   Gwen Moore.
                                   Betty McCollum.
                                   Allyson Schwartz.
                                   Debbie Wasserman Schultz.
                                   Karen Bass.