oversight

Audit of Financial Statements of the Federal Financing Bank, Fiscal Years 1975 and 1976

Published by the Government Accountability Office on 1977-04-27.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

REPORT TO THE CONGRESS

BY THE COMPTROLLER   GENERAL
OF THE UNITED STATES
                                                 ‘~~l~~~~~~~~~n~~~n~


Audit Of Fin

Fisca I
The Federal Financing Bank charges interest,
including   a fee for expenses and contin-
gencies, on its loans to Federal agencies--its
only customers.     It accumulated profits of
$126 million through the end of fiscal year
1976 and will continue to add to them under
its present lending practices.

The Bank should transfer accumulated      and
future profits to the Treasury and should dis-
continue the practice of adding a fee to the
rates it charges on its loans.
                   COMPTROLLER     GENERAL       OF      THE      UNITED   STATES
                                 WASHING-i-ON.    D.C.         20548




B-174958




To the President of the Senate and the
Speaker of the House of Representatives
       This report   summarizes the results      of our examination
of the financial     statements    of the Federal Financing Bank
for fiscal     years 1975 and 1976 and other information        con-
cerning its operation      and financial    condition.    Public Law
93-224, which established       the Federal Financing Bank, makes
the Bank subject to the budget and audit provisions            of the
Government Corporation       Control Act (31 U.S.C. 841 et seq).
That act requires     us to examine the financial      transac
of the organizations      subject   to it at least once every 3
years.     This is our first    audit report   on the Bank pursuant
to that provision.
       We are sending copies of this report to the Director,
Office  of Management and Budget: the Secretary   of the Treas-
ury; and the Chairman, Board of Directors,    Federal Financing
Bank.




                                             Comptroller  General
                                             of the United States
               for the years then    ended; and the changes in
               financial  position   for the year ended June 30,
               1976, in conformity    with principles    and stand-
               ards of accounting    prescribed   by the Comptrol-
               ler General of the    United States.     (See p.
               16.)




Tear   shryt
                                        V
                               Contents
                               ---
                                                                  Page

DIGEST                                                              i

CHAPTER
           .
  1       INTRODUCTION                                              1
              Management                                            3

  2       OPERATIONS
             Satisfaction  with the Bank
             Savings to borrowing  organizations
             Budget status of the Bank
  3       NEED TO REDUCE INTEREST RATES                            8
             How excess profits  can be reduced                    9
              Conclusions                                         11
             Agency comments                                      12
             Recommendations to the Chairman
                of the Board of Directors                         13
  4       SCOPE OF EXAMINATION AND OPINION ON
            FINANCIAL STATEMENTS                                  15
              Scope of examination                                15
              Opinion on financial statements                     15
FINANCIAL STATEMENTS
SCHEDULE
  1       Comparative statement  of financial            condi-
            tion,  June 30, 1976 and 1975                         17
  2       Comparative statement   of income and expense
            for the fiscal  years ended June 30, 1976
            and 1975                                              18
  3       Comparative statement  of changes in capital
            for the fiscal  years ended June 30, 1976
            and 1975                                              19
  4       Changes in financial            position  and working
            capital for fiscal            year 1976               20
  5       Federal   security      holdings,     June 30, 1976     21
  6       Loans and interest    receivable,  borrowings
            from the Secretary    of the Treasury,
            and interest   payable, June 30, 1976                 22
                                                                             Page
APPENDIX
        I   Principal  agencies           or programs eligible
               and not eligible           to utilize  the Bank                24

   II       Letter    dated January 12, 1977, from the As-
              sistant     Secretary, Capital Markets and
              Debt Management, Department of the
              Treasury                                                        25

 III        Principal       officials      responsible        for admin-
               istering      activities       discussed       in this
               report                                                         28
                                     ABBREVIATIONS
DOT         Department        of Transportation
DSAA        Defense       Security      Assistance       Agency
GAO         General       Accounting      Office
GSA         General       Services      Administration
HEW         Department       of Health,       Education,       and Welfare
HUD         Department       of Housing       and Urban Development
OPIC        Overseas       Private      Investment       Corporation
REA         Rural     Electrification         Administratrion
SBA         Small     Business       Administration
                                    CHAPTER
                                          -1
                                INTRODUCTION
                                ---
           The Federal Financing Bank was created on December 29,
    1973, by the Federal Financing Bank Act of 1973 (Public Law
    93-224) as a wholly owned Government corporation.             The pur-
    pose of the act was to (1) assure that Federal and federally
    assisted   borrowings   are coordinated     with overall    Government
    economic and fiscal     policies,    (2) reduce the costs of Fed-
    eral and federally     assisted   borrowings    from the public,    and
     (3) assure that such borrowings        are financed   in the manner
    least disruptive     to private   financial    markets and institu-
    tions.
           In testimony   before the House Ways and Means Committee
    on March 1, 1973, the Treasury's     Under Secretary   for Mone-
    tary Affairs     gave the following reasons for introducing   the
    legislation.
                 "The pressing need for the Federal Financing
         Bank Act at this juncture      arises from the growing
*        tendency to finance credit      programs directly   in
         the securities     markets rather   than through lending
         institutions."
                         *      *         *    *      *

               '* * * Similar financing arrangements         have
         been proposed for a number of new agencies          or
         programs.
                 "Federal credit     agencies are thus required
         to develop their      own financing   staffs,  and their
         abilities     to cope with their principal     program
         functions     are lessened by the need also to deal
         with the complex debt management operations
         essential     to minimizing    their borrowing costs
         and avoiding cash flow problems which could
         disrupt    their  basic lending programs.
                "Borrowing costs of the various Federal
         agency financing   methods normally exceed
         Treasury borrowing costs by substantial    amounts
         despite the fact that these issues are backed
         by the Federal Government.
               "Borrowing costs are increased because of
         the sheer proliferation  of competing issues
         crowding each other in the financing  calendar,


                                      1
      the cumbersome nature of many of the securities,
      problems of timing and small size of issues,
     'and the limited     markets in which they are sold.
      Underwriting    costs are often a significant  ad-
      ditional    cost factor   due to the method of
      marketing.
            "Under the proposed Federal Financing Bank
      Act, these essentially    debt management problems
      could be shifted   from the program agencies to the
      Federal Financing Bank. Many of the obligations
      which are now placed directly     in the private
      market under numerous Federal programs would
      instead be financed by the bank.       The Bank in
      turn would issue its own securities.        The bank
      would have the necessary expertise,      flexibility,
      volume, and marketing    power to minimize financing
      costs and to assure an effective     flow of credit
      for programs established    by the Congress."
       The Bank operates as a financing        mechanism for the
credit   programs of other Federal agencies.            Instead of the
agencies issuing their own securities          in the private      market,
they may borrow funds directly        from the Bank.         The Bank can
finance these loans by (1) borrowing         from the Secretary        of
the Treasury or (2) issuing       its own securities         to the public.
The Secretary    is required,    upon request,       to loan the Bank at
least $5 billion     but may, at his discretion,          lend additional
amounts without    limit.     The act limits     the amount of securi-
ties that the Bank may have outstanding            to the public at any
one time to $15 billion.
        The act requires     the Secretary     of the Treasury to act
promptly upon receipt        of a request for a loan from a Federal
agency.     He must either      grant his approval or advise the
agency and the Congress of the reasons for withholding              ap-
proval.     Withholding    of approval shall be made in a manner
which is not disproportionately          detrimental   to the func-
tioning    of any particular       type of Federal program.
       Federal agencies subject        to the provisions      of the act
may issue their     own securities       to the public.     However, to
insure (1) orderly     and coordinated       marketing    of Treasury
and Federal agency obligations           and (2) appropriate      financial
planning,    the act requires     the agencies to obtain prior            ap-
proval of the Secretary      of the Treasury.         The Secretary
must approve (1) the method and terms of financing,                 includ-
ing rates of interest      and maturities,       (2) the source of
financing,     and (3) the timing of financing          in relation     to
market conditions.       The Tennessee Valley Authority           and the
Farmers Home Administration         are exempt under the act from

                                      2
obtaining    this approval.      However, the Tennessee Valley
Authority,      under its authorizing    legislation,      is required
to have the Secretary       approve the time of issuance and the
maximum rates of interest        on its bonds.       The Farmers Home
Administration,      under the Participation       Sales Act of 1966,
is also required      to have the Secretary's        approval to sell
any obligation.
      The act exempts certain    federally   sponsored and chart-
ered organizations     that are privately   owned from using the
Bank.   (See app. I. A list    of the principal   agencies or pro-
grams eligible     to use the Bank is also included in app. I.)
MANAGEMENT
a--------
       Bank management is vested in the Board of Directors
consisting    of a Chairman and four members.            The act desig-
nates the Secretary      of the Treasury as Chairman of the Board
and provides    that the four members be appointed by the Pres-
ident of the United States.            The President,     instead of
appointing    specific    individuals      to be members of the Board,
has named the holders of specific            positions   within    the Trea-
sury Department to occupy the Board positions.                 The Board
of Directors    authorized      establishing     six principal     positions
to supervise    Bank operations.         The President     also created,
by Executive Order 11782, dated May 6, 1974, the Federal
Financing Bank Advisory Council consisting              of eight members.
A list   of the Board members and Bank officers              is included
as appendix III.       The Bank became operational           on May 6, 1974,
when the President      signed the Executive order appointing              the
Board of Directors.
     The Bank uses the Treasury's   facilities  and staff in
conducting    its operations. Most of the personnel are used
on a part-time    basis.




                                     3
                                  CHAPTER
                                  --e-m-  2
                                 OPERATIONS
                                 -----e-e-
     From May 6, 1974, the date it became operational,      to
June 30, 1976, the Bank awarded loans totaling   $32 billion.
As of June 30, 1976, the Bank had loans totaling   $22.4 bil-
lion outstanding  to 17 agencies.
    1
     As initially     envisioned,    the Bank was to obtain its
funds by selling    its securities      to the public, although it
also had the authority       to borrow from the Treasury.     When
it began operations,      the Bank borrowed funds from the Treas-
ury to finance the loans it made to the agencies.           On
July 23, 1974, the Bank sold its only issue of securities
to the public.    The issue was for $1.5 billion       and matured
on March 31, 1975.
       A Treasury official     estimated   that for this issue the
Bank paid an interest      rate one-fourth      to three-eighths   of
1 percent higher than the Treasury would have had to pay
had the Bank borrowed the funds.          Subsequently,     the Bank
established    the policy of borrowing       from only the Treasury,
In testimony     before the Senate Finance Committee on Feb-
ruary 10, 1975, the Secretary        of the Treasury stated:
        '* * * In the future,        I believe that the Bank
        should borrow from the Treasury rather than
        going into the market.          The Bank's cost of
        borrowing     is somewhat greater       than Treasury's
        and the additional       interest    costs which result
        are inappropriate.         Moreover, we can already
        anticipate      that large budget deficits        projected
        for fiscal      years 1975 and 1976 will put some
        upward pressure on interest          rates.    Federal
        Financing Bank market borrowing would be likely
        to put somewhat more pressure on rates than the
        equivalent      Treasury borrowing.        In order to
        minimize costs to the Government and the tax-
        payers,    it would thus be prudent for the Bank
        to borrow from the Treasury."
The Bank functions     basically as a conduit for agency borrow-
ing reguests.    The Treasury borrows the funds needed by the
agencies from the public and loans the funds to the Bank
which, in turn,    loans them to the agencies.
     The financing   method used by the Bank--borrowing     from
the Treasury-- has the effect  of placing Bank borrowing      into
the public debt subject to the debt limitation     because,
when the Bank borrows from the Treasury to finance its

                                     4
loans, the Treasury must increase its borrowing   from the
public.   However, if the debt ceiling  were in danger of
being reached, the Bank could sell its own securities,
which are not subject to the debt ceiling.
      The direct borrowings   of most of the agencies served
by the Bank are not classified    as part of the public debt.
SATISFACTION WITH THE BANK_
        We sent questionnaires       to all 15 agencies that had
outstanding     loans from the Bank at June 30, 1975, to obtain
an indication      of their satisfaction        with its operations.
The 14 agencies that responded said that they were generally
satisfied    with the loan arrangements with the Bank, such as
the paperwork involved,        interest     rates charged, interest
payment dates, and maturity          dates.
SAVINGS TO BORROWINGORGANIZATIONS
       We also asked the agencies to estimate      their savings by
using the Bank. Eleven of the organizations         provided such
information    and stated that it was less costly to use the
Bank than to borrow in the private      financial   markets to
finance their programs.      The 11 agencies estimated       that
during fiscal    year 1975 they saved about $43 million         in
interest    expenses and about $10 million     in administrative
expenses.
BUDGETSTATUS OF THE BANK
         The Bank is an off-budget    agency and as such its ac-
tivities     are not included within    the unified     budget.   We have
consistently     opposed the creation     of off-budget    agencies
principally     because the outlays of those agencies are not
subject to the same detailed       review and control      given programs
that are in the budget.
     The President's   Commission on Budget Concepts in 1967
recommended a unified   budget concept in which all Government-
owned entities  were to be included in the Federal budget.
The Commission's concept was adopted in 1969.
      An important departure     from the Commission's recommenda-
tions has been the development of off-budget           agencies.     Since
the Commission's recommendations,        legislation    has been en-
acted to remove several Federal agencies from the discipline
of the overall    budget process;    including     the Export-Import
Bank (the first    of the off-budget     agencies which moved back
onto the budget for fiscal      year 1977), the Postal Service,


                                   5
the Rural Telephone Bank, the Rural Electrification      and
Telephone Fund, the Housing for the Elderly     or Handicapped
Fund, the Federal Financing Bank, the United States Railway
Association,  and the Pension Benefit Guarantee Corporation.
       The existence    of major Federal activities           of this sort
outside the budget is a matter for serious concern.                    These
programs do not have to compete for resources within                   the
same decision     framework as is applied to those on-budget,
perhaps equally worthwhile,        projects.       In addition,      the
magnitude of such off-budget        activities       is sufficiently       large
to undermine the credibility        and analytical         usefulness     of
the unified    budget concept.      Thus, we have consistently             op-
posed the creation      of off-budget     agencies except in the very
specific    and limited   circumstances       recognized by the Commis-
sion.    These conditions     were, in effect,         that the activity
in question be owned and controlled            by private     parties.       In
the case of the Bank, these conditions,              do not appear to
have been met.
Problems    Relating    to Financing          Loan Guarantees
       Not only is the Bank's off-budget        status worrysome, but
its financing    of loan guarantees poses additional        budgetary
problems.     The Bank purchases loans guaranteed by on- and
off-budget    agencies.    During fiscal    year 1976 the Bank under-
wrote $6.1 billion      in loan guarantees of these agencies.
Estimates for this activity       in fiscal   years 1977 and 1978 are
$8.7 billion    and $6.0 billion,    respectively.
        This Bank activity      changes the nature of Federal credit
programs by substituting         direct  Government loans for loan
guarantees,      Direct    loans have typically    been intended for
distribution     to those borrowers who could not obtain credit
on reasonable terms.          Hence, it is a questionable    practice to
substitute    direct    loans for another form of credit      assist-
ance whose fucntion        it is to fill   some other purpose.
        This practice      also    results  in a loss of controllability
over a relatively        large     amount of direct   loan activity.
That is, because of the            Bank's purchase of guaranteed loans,
a large volume of direct             loans which would normally be re-
ported at face value in            the budget and subject      to budgetary
control     and discipline        can be transferred    to off-budget
status.
       Because of these concerns, we believe that the activi-
ties   of the Federal Financing Bank should be included within




                                          6
the unified    budget.    We are studying   the alternative    methods
of getting    these and other off-budget      transactions   back in
the budget    as well as the implications       of such on the budget
and related     programs.




                                  7
                                CHAPTER
                                --------- 3
                   NEED     TO REDUCE INTEREST RATES
                   ----------------------------
      The Bank has charged interest   on its loans exceeding
in most instances  the rates it paid to borrow funds and, as
a result,  had accumulated profits  of about $126 million
through the end of fiscal   year 1976.   It will continue to
accumulate funds exceeding its needs.
      One of the purposes       of creating    the Bank was:
      "To reduce the costs of Federal and federally              as-
      sisted borrowings  from the public."
       The Bank's accumulation  of funds exceeding its needs
prevents the borrowing agencies from obtaining     the full
benefits   of the reduced borrowing costs.
      Section    6(c)   of the act provides      that:
      "The Bank is authorized  to charge fees for its
      commitments and other services   adequate to
      cover all expenses and to provide for the accumu-
      lation of reasonable contingency   reserves."
The Bank has implemented this provision       by adding a frac-
tion of a percent to the interest    rate it charges on its
loans to cover any expenses and contingencies.         From May 6   .
until   December 2, 1974, the fee was three-eighths       of 1 per-
cent.    On December 2, 1974, the Bank reduced the fee to           .
one-fourth    of 1 percent and on June 5, 1975, reduced the fee
to one-eighth    of 1 percent.  A Bank official    said that the
reductions   were made because the fee generated more funds
than were necessary to cover expenses and contingencies.
      It is not clear from the history          of the act what con-
tingencies   the reserves were expected to cover.                The Bank
maintains,   and we agree, that because the borrowers                are
all Federal agencies or the loans are guaranteed by Federal
agencies,  there is little     likelihood     that the borrower or
guarantor  can default    on a loan.        Therefore    there is no
need to establish    a contingency      reserve for this purpose.
A reserve would be needed to absorb any losses which might
occur if the interest     that the Bank is required            to pay on
the funds it borrows were more than the interest                 charged on
its loans to the Federal agencies.           As the program operates
now, however, a reserve for an interest           differential        is not
needed either.
       During most of fiscal    year 1975, the Bank obtained     its
funds through short-term      borrowings   from the Treasury and
one short-term     issue of its own to the public.      The loans it
made to the agencies were of varying maturities        at interest
rates geared to the maturity       of the loans.   Under this sys-
tem, interest     paid or accrued could have exceeded the in-
terest   charged.
         On June 5, 1975, however, the Bank adopted a new system.
It paid off all its outstanding        short-term     borrowings      from
the Treasury and replaced them with new borrowings                with ma-
turities     to match the maturities     of the Bank's loans to the
agencies.      The interest  rates assigned to the new borrowings
by the Bank from the Treasury were based on rates determined
by the Treasury,      taking into consideration       the yield as of
June 5, 1975, on outstanding        marketable    obligations      of the
United States of comparable maturities.            No change was made
in the interest      rates on the Bank's outstanding         loans to the
agencies.      On loans made by the Bank after        June 5, 1975, the
maturities     on its loans to the agencies and its borrowings
from the Treasury are also matched.           The interest      rates are
also matched, except that the Bank adds a fee of one-eighth
of 1 percent to cover its expenses.
       As of June 30, 1976, the 'Bank had accumulated a profit
of $126 million.     Some of this was accumulated because.the
fees charged by the Bank exceeded its administrative
expenses--the    Bank had administrative expenses of $302,000
in fiscal   year 1975 and $250,000 in fiscal   year 1976.   Part
of the profit    was accumulated because the interest  paid or
payable by the Bank on its borrowings    was less than the
interest   earned on its loans to the agencies.
      Also it is Bank policy to invest excess cash in Trea-
sury obligations,     and it began to do so in fiscal   year 1976.
During that year the Bank earned about $2 million       on its
investment    in Treasury special   issues. As of June 30, 1976,
the Bank had $95.9 million     invested in such issues.
HOWEXCESS PROFITS CAN BE REDUCED
                          II--
      The profit     that will be realized    on loans outstanding
as of June 30, 1976, plus the fee added to any new loans and
the interest     which the bank will receive on its investment
in Treasury special       issues will further   increase the Bank's
accumulated profits.
     To reduce the further  accumulation         of unneeded profits
and provide the using agencies the full          benefit of the


                                    9
interest   savings achieved by the Bank, the Bank could dis-
continue   its practice   of adding a fee of one-eighth    of 1 per-
cent on its new loans.      Accumulated and future profits    could
be returned    to the Treasury by declaring  dividends.
       The major reasons given by Bank officials   for maintain-
ing the practice    of adding a fraction of a percent to the
interest   rates it charges on loans are that the Bank needs
to
      --provide     for   administrative         expenses,
      --maintain  a contingency         reserve       in the event that it
         may have to issue its         securities       to the public,  and
      --reimburse     the Treasury         for   marketing   risks   and costs.
Administrative      expenses
       Administrative    expenses could be provided        for by having
the Bank at the end of each fiscal        year estimate       expenses
for the following      year and withhold   that amount from the
money to be transferred      to the Treasury.       This would be pref-
erable to the present method of recovering            administrative
expenses by adding a fraction       of a percent to the interest
rate charged on each loan.        The amount of the fees charged
under this system depends entirely        on the size of the loan
and its maturity      and may have little    relation    to the costs             .
incurred   to make and service the loan.
      If the administrative     expenses increase to a point
where the profit   is not sufficient    to pay them, a charge to
cover such expenses could be levied either       through a one-
time fee or by billing      the using agencies quarterly  or an-
nually for each new loan or loan commitment.
Bank sale    of securities
                  --
        The only likely  event that would reguire  the Bank to
sell its own securities     in the market would be if the debt
ceiling    prevented the Treasury from borrowing   to meet the
needs of the Bank.      The Bank could then sell its own obliga-
tions,    which are not chargeable to the debt ceiling,   to the
public.
        There would be some risk to the Bank if it ever had to
resume issuing its own securities       to the Public because of
its possible      inability to match the maturities   on such se-
curities    with the maturity   requirements  of the borrowing
agencies.      If the Bank used this method of financing


                                       10
again it could provide for a contingency  for interest              rate
differentials  by charging a fee on the specific   loans            for
which it borrowed in the market.
Treasury    risks    and costs
        Treasury marketing         risks occur because the Treasury does
not borrow funds to meet the needs of the Bank by issuing
specific     securities.      When required       to provide such funds,
the Treasury increases           its regular     borrowings     from the
public.      The maturity      of these borrowings        will    rarely, if
ever, match the maturities              desired by the agencies borrowing
from the Bank.         Marketing costs are incurred            by the Federal
Reserve banks in marketing              Treasury securities.
      The act requires  the Treasury in assigning   interest
rates on funds loaned to the Bank to consider the current
average yield on outstanding   marketable U.S. obligations
of comparable maturity.    No mention is made of a fee for
risks assumed by the Treasury in borrowing    funds to make
the loans to the Bank.
      Other agencies that borrow directly   from the Treasury--
not through the Bank-- are not charged by the Treasury for
marketing  risks or for the costs incurred    by the Federal
Reserve banks in marketing  Treasury obligations.
      Treasury borrowings    are, for the most part,     for a
short maturity.     Bank loans, on the other hand, are for
comparatively   longer periods.     Interest    rates are generally
lower for loans of short maturity.         Treasury could make as
well as lose money on borrowings       for financing   Bank loans.
CONCLUSIONS
        In its first two fiscal   years of operation,     the Bank
accumulated a profit      of $126 million.    The profit    that will
continue to be earned on outstanding       loans as of June 30,
1976, plus the fee added to any new loans and the interest
which the Bank will     receive on its investment      in Treasury
special issues will     further  increase the Bank's accumulated
profits.
        There    is no need for the Bank to retain     accumulated
profits.        The Bank's administrative    expenses are relatively
minor and       can be covered by yearly    income.   The Bank as it
currently       operates has no contingencies     for which it must
provide.



                                    11
                                                                    ,



       We believe   that accumulated and future   cash profits   of
the .Bank should    be transferred  to the Treasury by declaring
dividends.
      The amount of profit   that will   continue to accumulate
seems, in the absence of any studies      to the contrary,  to be
more than is needed to reimburse the Treasury for marketing
risks and costs.   Treasury,     over the long run, could have
borrowing and loan rate differential      gains offsetting  los-
ses.   Marketing costs, which are not charged to those agen-
cies which borrow directly     from the Treasury,   would appear
to be relatively  minor.
       We therefore  believe that the Bank should reduce prof-
its by discontinuing      the practice of adding a fee to the
interest    rate on future   loans.
AGENCYCOMMENTS
     The Bank agrees that accumulated profits  in excess of
needs should probably be transferred  to the general fund of
the Treasury.
      The Bank thinks it is imprudent,   however, to suspend
fees because of marketing  risks incurred   by the Treasury but
admits that it is doubtful   that the risks could be measured.
       We do not deny that the element of risk exists,        but the
act establishing      the Bank requires the Treasury,    in assign-
ing interest     rates on funds loaned to the Bank, to consider
only the current      average yield on oustanding   marketable   U.S. '
obligations    of comparable maturity.     No mention is made of a
fee for risks assumed by the Treasury in borrowing funds to
make the loans to the Bank. Moreover, Treasury does not
charge a fee for such risks when it makes loans directly          to
Federal agencies.
       Treasury borrowings     are, for the most part,     for a short
maturity.      Bank loans, on the other hand, are for compara-
tively    longer periods.    Interest    rates are generally   lower
for loans of short maturity.          Over the long run, Treasury
could make, as well as lose money on borrowings          for financ-
ing Bank loans.       But the amount of gain or loss is not mea-
surable.
     The   Bank is unique in its operation     and cannot be com-
pared to   any other financial     body. As it currently   operates,
the Bank   borrows directly    from the Treasury and then makes
loans to   the agencies at no risk to the Bank.       In essence,
the Bank   serves merely as a conduit for Treasury funds.


                                  12
       If the Bank returns   to the market, it would be appro-
priate    for it to accumulate its own contingency    reserve
since it will bear measurable risks.       Even then, however,
the portfolio    should be evaluated periodically    and any ex-
cessive reserve paid to the Treasury as a dividend.
      The Bank maintains  that eliminating      the fee and later
reimposing it to cover anticipated     shortfalls     and administra-
tive expenses is contrary    to sound financial     practices   and
would create inequalities    among the Bank's borrowers.
       Time and conditions determine borrowing      terms.    Those
borrowing at a time and under conditions     different     than
others can usually be expected to pay more or less than
others.    This is not a unique practice  but, rather,       a normal
practice.
      At its inception    the Bank charged three-eighths     of
1 percent add-on fee; it later reduced this to one-fourth
of 1 percent and then to the present rate of one-eighth         of
1 percent.   Loans made by the Bank are still      outstanding    at
the old fees while it is making new loans at the one-eighth
of l-percent   fee.    The monetary needs of the Bank have
changed, which has caused the reduction      in the fees.      We do
not believe this is inequitable     to the agencies that bor-
rowed from the Bank in the past.
       We believe the Bank, in lieu of accumulating     money in
an amount that cannot now be justified,      should discontinue
charging a fee and thereby further     reduce the costs of bor-
rowing under Federal programs-- one of the purposes for estab-
lishing   the Bank.
RECOMMENDATIONS TO THE CHAIRMAN
OF
-- THE BOARD OF DIRECTORS
     We recommend that the Bank:
     --Transfer    accumulated    and future    cash profits   to the
        Treasury   by declaring    dividends.
     --Discontinue      the practice    of adding a fraction   of a
        percent to the rates it charges on its loans until
        studies confirm that the Treasury will,         over the long
        run, incur a shortfall       because of borrowing and loan
        rate differentials.        If the Bank returns to the
        market, then it would be appropriate         for it to ac-
        cumulate its own contingency        reserve since it will
        bear the risks.      Even then, however, the portfolio



                                   13
  should be evaluated periodically and any excessive
  reserve paid to the Treasury as a dividend.
--Estimate   its following    year’s expenses and withhold
   this amount from the profits        to be transferred  to
   the Treasury as a dividend.         If the expenses should
   exceed the profits,     the difference    should be re-
   covered by a quarterly     or annual charge to the bor-
   rowing agencies for each new loan or commitment.




                            14
                                 CHAPTER
                                 -a---   4
                      SCOPEOF EXAMINATION
                      ---I_            --- AND
                   OPINION -- ON FINANCIAL STATEMENT5
SCOPEOF EXAMINATION
--               -
       Our audit of the Federal Financing Bank consisted
principally    of examining its statements       of financial      condi-
tion at June 30, 1975 and 1976, and the related              statements
of income and changes in capital.          The internal      audit staff
of the Treasury's      Bureau of Government Financial         Operations--
the cognizant    internal    audit group--had    not performed any
work at the Bank; therefore,         we made detailed     tests of the
accounting   records.     We reviewed the enabling legislation,
the system for internal       control,   and the Bank's policies
and procedures.      We also sent questionnaires        to all organi-
zations that,    as of June 30, 1975, had loans outstanding
from the Bank.      The review was conducted at the Bank in
Washington, D.C.
       Our audit was made in accordance with          generally  accepted
auditing   standards and included such tests          of the accounting
records and such other auditing    procedures         as we considered
necessary in the circumstances.
OPINION ON FINANCIAL STATEMENTS
      The financial    statements   and schedules accompanying this
report are essentially      the same as prepared by the Federal
Financing Bank, with some modifications        to improve clarity
and provide comparability       for 2 years, with the exception   of
the summary schedule on loans (schedule 6), which we prepared.
       The Bank has classified    its borrowings    ($13.5 billion    in
fiscal   year 1975 and $22.4 billion     in fiscal   year 1976) from
the U.S. Treasury as a liability.        (See p. 17.)     However,
under the accounting principles       and standards prescribed     by
the Comptroller   General of the United States for Federal
agencies, such borrowings      should be classified    as part of
the investment   of the United States in the assets of the
borrowing agency.
       The Bank stated that its classification     of the borrowings
from the U.S. Treasury as liabilities       rather than as part of
the investment of the U.S. Government was based on the Bank's
following   the procedure prescribed    by the Treasury "Fiscal
Requirements Manual" (II TFRM 4140.1 and app. 1).
     The manual establishes    a unified system of central
accounting and reporting    and is issued under the authority

                                    15
of title    31, section 66b(b), United States Code. However,
it is required     by 31 U.S.C. 66b(c) to be consistent    with the
principles,    standards,   and related requirements  prescribed
by the Comptroller      General.
       Efforts    are being made to resolve this difference     in
prescribed     requirements.    In the meantime, the Treasury has
advised us that the Bank will modify its accounting proce-
dures to conform to the Comptroller        General's principles
and standards.        (See app. II.)
       In our opinion,    except for the classification         of
borrowings    from the Treasury discussed above, the accompany-
ing financial     statements    (schedules 1 through 4) present
fairly   the financial    position    of the Bank at June 30, 1975
and 1976; the results       of its operations      for the years then
ended; and the changes in financial          position    for the year
ended June 30, 1976, in conformity          with principles     and
standards of accounting       prescribed    by the Comptroller      General
of the United States.




                                    16
SCHEDULE1                                                                        SCHEDULE 1

                                  FEDERAL FINANCING BANK
           (A WHOLLYOWNEDFEDERAL GOVERNMENTCORPORATION)
            COMPARATIVESTATEMENTOF FINANCIAL CONDITION
                                 JUNE 30, 1976 AND 1975

                 ASSETS                     -June 30, 1976             J_une 30, 1975
                                                               (000 omitted)
Funds with the U.S. Treasury                    $             816      $             *
Federal Security  Holdings
  (from schedule 5)                                  95,859                       0
Loans                                           22,411,098                  13,300,404
Accrued interest  receivable                        543,200                     297,701
Accrued interest  purchased                           0                           2,915
Accrued commitment fees                         --    0                               31
        Total     assets                        $23,050,973                $13,601,051
           LIABILITIES

Borrowings from the Secretary
  of the Treasury                               $22,413,168                $13,466,003
Borrowings from the public
  (non-interest-bearing
  matured debt--Bank      bills)                               75                    9,000
Accrued interest      payable                            511,178                    61,903
Accounts payable                                           0                            780
Advances from the public                                      598                    0
Accrued administrative
  expenses                                          -_I----    40          ---I-         26
        Total     liabililties                      22,925,059
                                                    ----                    13,537,712
                  CAPITAL
Retained        earnings                            --- 125,914             -I      63,339
        Total liabilities            and
          capital                               $23,050,973
                                                 -                         $13,601,051
        *Less     than $500.00
Note:      The opinion of the General Accounting                    Office         on these
           statements  appears on page 16.




                                           17
SCHEDULE 2                                                           SCHEDULE2
                        FEDERAL FINANCING BANK
         (A WHOLLYOWNEDFEDERAL GOVERNMENTCORPORATION)
             COMPARATIVESTATEMENTOF INCOME AND EXPENSE
        FOR THE FISCAL YEARS ENDED JUNE 30, 1976 AND 1975

                                                 1976                      1975
                                                    (000 omitted)
OPERATING INCOME:
   Amortized discount     on Federal
      security   holdings                  $      2,094               $     0
   Interest    on loans                     1,409,756                     415,241
   Fees                                           0                           a/10
   Commitment fee income                    --I__    49                      a/31
          Total   operating   income           1,411,859                  415,282
OPERATING EXPENSES:
   Interest     on borrowings                  1,349,034              269,776
   Amortized discount       on
      securities    issued                          0                   81,905
   Administrative      expenses             -_I-        250           --    302
          Total   operating   expenses         1,349,284              351,983
NET INCOME                                 $-      62,575            $ 63,299

a/These figures     show income from fees for       title   transfers
   of Bank securities    and a loan commitment.          They do not
   include the income from the fee charged          by the Bank for
   expenses and contingency    reserves.     The    income from the
   fee expenses and contingency     reserves   is     included in the
   interest on loan figures.
Note:   The opinion of the General Accounting               Office    on these
        statement  appears on page 16.




                                  18
                                                                              /
SCHEDULE3                                                         SCHEDULE3


                              FEDERAL FINANCING BANK

            (A WHOLLYOWNEDFEDERAL GOVERNMENTCORPORATION)
             COMPARATIVESTATEMENTOF CHANGESIN CAPITAL
           FOR THE FISCAL YEARS ENDED JUNE 30, 1976 AND 1975

                                              FY
                                              -I_- 1976       FY
                                                              -- 1975
                                                   (000 omitted)
Capital,     July   1, 1974                                   $       40
             July   1, 1975                 $ 63,339
Net income for       fiscal     year          62,575              63,299
Capital,     June 30, 1975                                    $63,339
             June 30, 1976                  $125,914
The opinion of the General Accounting           Office    on these
statements  appears on page 16.




                                       19
 SCHEDULE 4                                                                                                      SCHEDULE 4


                                             FEDERAL FINANCING BANK
                          (A WHOLLY OWNED FEDERAL GOVERNMENT CORPORATION)
                                        CHANGES IN FINANCIAL                 POSITION
                                                  FOR FISCAL YEAR 1976
                                                                                                    (000 omitted)
FUNDS PROVIDED BY:
    Borrowings   from the Secretary                    of    the   Treasury            $8,947,165
    Net income for the year                                                                  62,575
         Total funds provided                                                                                      $9,009,740
FUNDS APPLIED TO:
    Loans                                                                               9,110,694
    Redemption    of Federal  Financing                     Bank
      bills                                                                             --          8,925
          Total funds applied                                                                                          9,119,619
DECREASE IN WORKING CAPITAL                                                                                       ($ ~- 109,879)


                                  STATEMENT OF CHANGES IN WORKING CAPITAL
                                                  FOR FISCAL YEAR 1976
                                                                                                          Changes in
                                                                                                        working capital
                                                                          June     30                       Increase
                                                                   1976                 1975              (Decrease)
                                                                   ---------(OOO                  omitted)----------               *

CURRENT ASSETS:
    Funds with the U.S. Treasury                              $        816         $         *               $       816
    Federal  security  holdings                                   95,859                0                      95,859
    Accrued interest   receivable                               543,200            297,701                    245,499
    Accrued   interest purchased                                       0              2,915                     (2,915)
    Accrued commitment    fees                                 --      0           --      31                           31

             Total      current     assets                     639,875             300,647

CURRENT LIABILITIES:
    Accrued interest      payable                              511,178                 61,903                (449,275)
    Accounts   payable                                               0                           780                (780)
    Advances payable                                                  598                        0                  (598)
    Accrued administrative        expenses                     --      40                          26                 (14)

             Total      current     liabilities                511,816                 62,709

        Working      capital                                   128,059             --237,938
        Decrease      in working       capital                                                              ($109,87?)
*Less     than     $500.00.
Note:      The opinion of the General                  Accounting         Office        on these             statements
           appears on page 16.



                                                        20
SCHEDULE 5                                                                 SCHEDULE 5
                             FEDERAL FINANCING BANK
           (A WHOLLY OWNEDFEDERAL GOVERNMENTCORPORATION)
                            FEDERAL SECURITY HOLDINGS
                                  JUNE 30, 1976

Nonmarketable      special      issues:
                                                         Less
                 Maturity             Face          unamortized            Book
Security           date            amount
                                   --                 discount             value
                                                                           --
                                   ---------(O()O      omitted)---------
             ,
 Bills           7/X/76           $13,785               $ 34               $13,751
 Bills           8/19/76           62,860                 311               62,549
 Bills           g/16/76           19,820                 261               19,559
                                  $96,465               $2                 $95,859
                                                                            --




                                          21
  SCHEDULE 6                                                                                              SCHEDULE6
                                 FEDERAL FINANCING BANK
                      (A WHOLLY OWNEDFEDERAL GOVERNMENTCORPORATION)
                              LOANS AND INTEREST RECEIVABLE
                       BORROWINGSFROM THE SECRETARYOF THE TREASURY
                              AND INTEREST PAYABLE (note                    a)
                                        JUNE 30, 1976
                                           SUMMARY
                                                                                   Accrued                 Accured
     Agency or                                     Loans and                       interest                interest
      E'ogr   - am            Guarantor
                              -- ----_             borrowings
                                                   --------   -                  receivable
                                                                                 ___----                   EYY?ble
                                                                                                                 ---
                                                    -----------(()OO               omitted)------------


Department     of
  Agriculture,
  Farmers Home
  Administration                                   $8,800,000                    $395,963                 $369,011

Rural Electrifica-
  tion Administra-
  tion                            REA                     948,026                            222                218
Rural Electrifica-
  tion Administra-
  tion--Cer&&ficate
  of Beneficial
  Ownership                       REA                     166,374                     3,404                  3,352
Department   of
  Defense,
  Defense Security
  Assistance
  Agency                          DSAA                    898,882                     9,560                  9,408
Export-Import   Bank
  of the United
  States                                            4,984,600                      43,702                   42,668

General Services
  Administration                 GSA                         68,803                   6,872                   4,861
Department    of Health,
  Education,     and Wel-
  fare, Medical Facil-
  ities   Direct   Loan
  Program                         HEW                     118,548                        0                      0

Department   of
  Housing and Urban
  Development,
  New Community
  Development   Corpora-
     tion                        HUD                         27,500                          4531               541
National    Railroad
  Passenger Corporation
   (Amtrak)                      DOT                      567,506                  13,436                   13,112
Overseas Private
  Investment   Corpora-
  tion                           OPIC                           5,454                        446                214


                                                                        #
                                              22
SCHEDULE 6                                                                                  SCHEDULE 6
                                   FEDERAL FINANCING BANK
                     (A WHOLLY OWNED     FEDERAL GOVERNMENTCORPORATION)
                                LOANS AND INTEREST RECEIVABLE
                      BORROWINGSFROM THE SECRETARYOF THE TREASURY
                                AND INTEREST PAYABLE (note            a)
                                         JUNE 30,       1976
                                             SUMMARY

                                                                            Accrued             Accrued
        Agency or                                   Loans and                interest           interest
         program
               ---               Guarantor          borrowings            receivable
                                                                          --                    paya_ble
                                                        -------_---   (000 omitted)------------
Small     Business
    Investment
    Companies                          SBA      $            70,695        $      1,475      $     1,460
Small Business
  Administration                       SBA                 164,361                 0                 0
Student Loan Market-
   ing Association
   (Sallie  Mae)                       HEW                 400,000                4,767             4,747
                                                                                                        *
Tennessee Valley
  Authority                                             2,180,OOO               34,669            33,827

United States
  Postal Service                                        2,748,OOO               19,690            19,243

United States
  Railway Associa-
  tion                                 DOT                   85,249               1,134             1,113
Washington
  Metropolitan      Area
  Transit    Authority                 DOT          -      177,000
Total loans      outstand-
   ing                                              22,411,098
                                                    ----__-
Borrowings     from the
  Secretary                                         --------_2,070             -m-e-0            -----__ 16
Total loans      and borrow-
   ings                                 $22,413,168
                                          ----                $543,200
                                                               ~-              $511,178
a/With the exception  of the rate of interest,    obligations       issued by the Bank
  to the Treasury will have terms and conditions       equivalent      to the obligations
  purchased by the Bank.
Summary was prepared         by GAO.




                                                    23
APPENDIX I                                                             APPENDIX I

                       PRINCIPAL AGENCIES
                       ---                   OR PROGRAMS
                                     I------.-I_
                               ELIGIBLE
                               -----I_--------- TO UTILIZE
                            THE FEDERAL  FINANCING BANK
                                    -I__----------
Farmers Home Administration
National    Railroad     Passenger Corporation       (Amtrak)
Export-Import      Bank
Maritime Administration
Department of Housing and Urban Development (public             housing)
Department of Housing and Urban Development (urban renewal)
Department of Housing and Urban Development (new community
  debentures)
United States Postal Service
Rural Telephone Bank
Rural Electrification        Administration
Department of Defense (military           credit   sales)
General Services Administration
Tennessee Valley Authority
Environmental      Financing Authority       (note a)
Overseas Private       Investment   Corporation
Department of Health,        Education,     and Welfare (medical fa-
  cilities)
Small Business Administration
United States Railway Association
Student Loan Marketing Association
Washington Metropolitan        Area Transit      Authority

                       PRINCIPAL AGENCIES OR---I_--
                       -I-------_1---        PROGRAMS

                             -NOT ELIGIBLE
                                        --_I- TO UTILIZE
                            THE FEDERAL FINANCING BANK
                            --a-----
Federal home loan banks
Federal National    Mortgage Association
Banks for cooperatives
Federal land banks
Federal intermediate     credit banks

            ---

a/Charter         expired     July   1, 1975;     no longer   in existence.




                                             24
                                                                                           APPENDIX II
APPENDIX II




                            BEPARTMENTOFTHETREASURY
                                       WASHINGTON.     DC.     20220
ASSISTANT SECRETARY




                                                               January   12,   1977




             Dear Mr.     Lowe:
                    I am pleased   to respond    to            your letter      of November  23,
             1976, in which you request        our             comments on a proposed       GAO
             report    to the Congress    on the             financial     audit   of the
             Federal     Financing   Bank for the              fiscal   years 1975-1976.



                                     [See GAO note,          p.   24.1



                    Initially,          I am concerned         with the finding          on page ii
             of the report            that    the need for the Bank would be “questionable”
             except       for two considerations:                  (1) that      it is “not an
             active       tool of credit            management      by the Executive          Branch”;
             and (2) that           “it    serves     as a safety        valve     since the Bank
             retains        the ability         to borrow      from the public          and could do      .
             so to meet agency needs in the event the public                               debt ceiling
             precluded         further      Treasury      borrowings        for these purposes.”
             In my opinion,             a more precise         statement       of the Bank’s
             purpose        is set forth          in Section       2 of the Federal         Financing
             Bank Act of 1973 and in Chapter                       I of your report.           I also
             believe        that    the Bank is carrying              out the intent        of Congress
             and fully         serving      these needs.

                    Regarding    the recommendation             that the Bank cease to
             levy an administrative           charge,      the Board of Directors          of
             the Bank continues         to believe       that a fee should          be charged
             and that the fee should           be applied          to all loans and advances
             as they are made.          The suggested           approach    of eliminating
             the charge and later          reimposing        it to cover shortfalls          and
             administrative        expenses     is contrary          to sound financial
             practices       and would create        inequalities‘among          the Bank’s
             borrowers.        We would find       this method of collection




                                                        25
APPENDIX II                                                                           APPENDIX II




      particularly           inappropriate      in light     of the fact       that most
      FFB loans are made to individual                   guaranteed      borrowers
      rather       than to agencies         and, therefore,         there would be no
      practicable          way of recovering        expenses      from borrowers
      financed        during     the period     when fees were not imposed.
             Similarly,         we would find         it imprudent      to suspend fees
      related        to the Treasury          risk,     which you have recognized,
      “until       studies      confirm     Treasury,       over the long run will
      incur      a shortfall         because of borrowing           and loan rate
      differentials.”               The element      of risk     is- present,        as it
      is in any undertaking                where loans and borrowings                cannot
      be matched,          and this risk must be recognized                   in advance.
      It is doubtful            that a study could be designed                  or a “long
      run period”          defined      that could separate          FFB borrowings
      from other         Treasury       undertakings        and clearly       delineate
      a gain or loss.               But even assuming          an acceptable         study
      were completed,             it would not deny that the element                    of
      risk had existed              or furnish      a practical      means of equitably
      distributing           the gains or recovering             the losses        from the
      many FFB borrowers.
             In contrast        to the other         agencies       that you have
      referred     to who borrow             from the Treasury           at what amounts
      to a subsidized           rate,      the FFB Act specifically             provides
      for the imposition              of fees to cover costs.               We believe
      the application           of a fixed        percentage        charge to each loan
      or advance      is the most equitable                method for providing             for
      these costs.         It may well           develop     that     the current     fee may
      need to be reduced              in the future        as it has been twice             in
      the past.       Moreover,           as we suggested         in our earlier        letter,
      accumulated       profits         in excess of the Bank’s reasonable
      needs should       probably          be transferred         to the general        fund
      of the Treasury.
            Regarding      the finding       that the Bank should          classify
      its borrowing        from the Treasury          as part of its Federal
      investment      rather    than as a liability,             it is my under-
      standing     that the differences           between      the requirements      of
      the Treasury       Fiscal     RequirementsManual           and GAO Policy
      and Procedures         Manual are being resolved.               The Bank will,
      of course,      modify     its accounting         procedures     to conform
      to the Comptroller           General’s     principles        and standards.




                                                26
APPENDIX II                                                                       APPENDIX II




             I very much appreciate            the    opportunity       to   comment
        on your proposed  report    to         the    Congress.
                                                     Sincerely      yours,



                                                     Assistant   &?&etary
                                                     (Capital  Markets    and
                                                        Debt Management)


        Mr. Victor      L. Lowe
        Director
        General     Government     Division
        United    States    General     Accounting       Office
        Washington,       D. C. 20548




       GAO note:       Deleted  paragraph    referred  to comments on
                       a GAO report    which was never issued.     Pertinent
                       comments are dealt      with on pp. g-to  -17,.




                                                27
APPENDIX III                                            APPENDIX III
                        PRINCIPAL OFFICIALS
                  RESPONSIBLE FOR ADMINISTERING
                                        -Mm--
               ACTIVITIES   DISCUSSED- IN THIS REPORT
                                                ---
                                                Tenure of office
                                                From             TO-”
                                                                  -

BOARD OF DIRECTORS:
   CHAIRMAN:
        SECRETARYOF THE TREASURY:
            William E. Simon                  May    1974    Jan. 1977
            W. Michael Blumenthal             Jan.   1977    Present

    DIRECTORS:
        DEPUTY SECRETARYQF THE
          TREASURY:
            Vacant                            May    1974    July 1974
            Stephen Gardner                   July   1974    Feb. 1976
            Vacant                            Feb.   1976    Apr. 1976
            George H. Dixon                   Apr.   1976    Jan. 1977
            Vacant                            Jan.   1977    Present
         UNDER SECRETARYOF THE
           TREASURY (MONETARYAFFAIRS):
             Paul E. Volcker                  May 1974       June 1974
             Jack F. Bennett                  July 1974      June 1975
             Edwin H. Yeo, III                Aug. 1975      Jan. 1977
             Anthony M. Solomon
                (designated)                  Jan.   1977    Present
         GENERAL COUNSELOF THE
           TREASURY:
             Edward C. Schmultz               May 1974       July 1974
             Donald E. Ritger    (acting)     July 1974      Aug. 1974
             Richard R. Albrecht              Aug. 1974      Jan. 1977
             Henry C. Stockell,    Jr.
                (acting)                      Jan.   1977    Present
         FISCAL ASSISTANT SECRETARYOF
           THE TREASURY:
             John K. Carlock                  May    1974    July 1975
             David Mosso                      July   1975    Present
OFFICERS:
    PRESIDENT:
        UNDER SECRETARYOF THE
          TREASURY(MONETARY
          AFFAIRS):
            Paul E. Volcker                   May    1974    June 1974
            Jack F. Bennett                   July   1974    June 1975

                                 28
APPENDIX III                                              APPENDIX III
                                                     Tenure
                                               ----------      of office
                                                     From
                                                     ---                   To
                                                                           -

          Edwin H. Yeo, III                     Aug. 1975        Jan.      1977
          Anthony M. Solomon
             (designated)                       Jan.    1977     Present
    GENERAL COUNSEL:
        GENERALCOUNSELOF THE
          TREASURY:
             Edward C. Schmultz                May 1974          July 1974
             Donald E. Ritger    (acting)      July 1974         Aug. 1974
             Richard R. Albrecht               Aug. 1974         Jan. 1977
             Henry C. Stockell,    Jr.
                (acting)                       Jan.    1977      Present
    VICE PRESIDENT AND TREASURER:
         FISCAL ASSISTANT SECRETARYOF
           THE TREASURY:
             John K. Carlock          May              1974      July 1975
             David Mosso              July             1975      Present
    VICE PRESIDENT:
         SPECIAL ASSISTANT TO THE
           ASSISTANT SECRETARYOF THE
           TREASURY (DEBT MANAGEMENT):
             Edward M. Roob                    May     1974      Dec. 1974
             Vacant                            Dec.    1974      Apr. 1975
             Ralph M. Forbes                   Apr.    1975      May 1976
             Vacant                            May     1976      July 1976
             John Niehenke                     July    1976      Present
    VICE PRESIDENT:
         ASSISTANT SECRETARYOF THE
           TREASURY (CAPITAL MARKETS
           AND DEBT MANAGEMENT)
           (note a):
             Robert A. Gerard                  May     1976      Jan. 1977
             Vacant                            Jan.    1977      Present
    SECRETARY:
        DIRECTOR, OFFICE OF MARKET
          ANALYSIS AND AGENCY FINANCE
           (note b):
             Roland H. Cook           May              1974      Present
a/New position   established   May 20, 1976.
b/The position    was filled   by the Assistant to the Special
  Assistant    to the Secretary   (Debt Management) from May 24,
   1974, to May 20, 1976.



                                  29
                                                                                                      b




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