​Currently, the government accounts for the cost of a lending program based on a method that has been used for over 20 years based on multiple factors, including the historic track record of repayment in the program. The current accounting method called FCRA, (Federal Credit Reform Act) estimates for default, recovery, prepayments and interest rates and has been accurate within approximately one percent for loans made since 1992. That’s remarkably precise.

Unfortunately, proposals to switch to so-called “fair-value accounting” would jeopardize one of the most successful, low-risk programs operated by the federal government, the Rural Utilities Service Electric Loan Program. Fair value accounting adds an artificial and arbitrary “risk premium” to all loans, inflating the expected cost to the government and requiring Congress to appropriate more funding to support the same loan volume.

Congress should avoid simply changing the way it looks at programs and calling it “reform,” and refrain from adopting a one-size-fits-all system ill-suited to RUS Electric loan program.

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