Government Risk-Bearing: Proceedings of a Conference Held at the Federal Reserve Bank of Cleveland, May 1991 - Hardcover

Hardcover

ISBN 10: 0792393120 ISBN 13: 9780792393122

Publisher: Kluwer Academic Publishers, 1993

Synopsis

The u.s. government bulks large in the nation's financial markets. The huge volume of government-issued and -sponsored debt affects the pricing and volume ofprivate debt and, consequently, resource allocation between competing alternatives. What is often not fully appreciated is the substantial influence the federal government wields overresource allocation through its provisionofcreditandrisk-bearing services to the private economy. Because peopleand firms generally seekto avoid risk, atsomeprice they are willing to pay another party to assume the risk they would otherwise face. Insurance companies are a class of private-sector firms one commonly thinks of as providing these services. As the federal government has expanded its presence in the U.S. economy during this century, it has increasingly developed programs aimed at bearing risks that the private sector either would not take on at any price, or would take on but atapricethoughtto besogreatthatmostpotentialbeneficiarieswouldnotpurchase the coverage. Today, roughly three-fifths of all nonfederal credit outstanding is 1 assisted by some form of federal program. The federal government provides insurance of many private pension plans through the Pension Benefit Guaranty Corporation, subsidizesand implicitly guarantees the liabilitiesofseveral agencies dominating secondary loan markets (for example, the Federal National Mortgage Association, Federal Home Loan Mortgage Corporation, and Student Loan Mar­ ketingAssociation),andeithermakesdirectloansorguaranteesprivatelygenerated loans through a varietyofcreditprograms to farmers, exporters, home purchasers, and others.

About this title

Synopsis

The federal government wields substantial influence over resource allocation in the economy through its provision of credit and risk-bearing services to the private economy. As the federal government has expanded its presence in the US economy during this century, it has increasingly developed programmes aimed at bearing risks that the private sector either would not accept at any price, or would take on but at a price thought to be so great that most potential beneficiaries would not purchase the coverage. In addition to the allocative effects these federal credit and risk-bearing programmes impose on the economy, they also expose taxpayers to losses when programme revenues do not cover costs. A recent example of this problem is the federal government's payments to depositors at a large number of insolvent financial institutions. "Government Risk-Bearing" is based on a Federal Reserve Bank of Cleveland conference and deals with the concept and performance of the federal government as a risk-bearing enterprise.

The authors in this volume - primarily experts on insurance products in which the federal government has some involvement - consider the rationale for a federal presence in these markets and discuss the resulting effects on market performance and taxpayer exposure. This volume provides better understanding of the government as a risk manager and will assist public discussion about the appropriate role for government in the provision and administration of deposit insurance.

Edition details

• Publisher: Kluwer Academic Publishers
• Publication date: 1993
• Language: English
• ISBN 10: 0792393120
• ISBN 13: 9780792393122
• Binding: Hardcover
• Number of pages: 199
• Editor: Sniderman Mark S.