HILL BRIEFS

Bush Cool To Using FFB To Provide Loan Liquidity

Thu. Apr. 24, 2008


The Bush administration said Wednesday it was taking steps to address concerns about the availability of student loans in the summer, but downplayed the possibility of the Federal Financing Bank, a Treasury Department unit, playing a role in any federal intervention, Reuters reported.

“We explored utilizing the Federal Financing Bank (FFB) in this manner but after a thorough analysis, it is clear that the FFB does not have the authority,” said a Wednesday letter from administration officials to Senate Banking Chairman Christopher Dodd.

The letter was signed by Treasury Secretary Paulson, Education Secretary Spellings and OMB Director Nussle.

Turmoil in the $85-billion student loan market has raised concerns about loan availability this summer as students lock in financing before heading to colleges for the fall term.

Among the steps that could be taken are measures included in a bill passed last week by the House, the letter said.

That bill would let the Education Department buy federally guaranteed student loans from lenders unable to sell them on the largely inactive secondary market and funnel loan capital to colleges through state guaranty agencies.

In a response, Dodd said the letter was “disappointing” and “perhaps most troubling, the letter offers a one-sentence rejection of the notion that the Treasury Department has the authority to utilize the Federal Financing Bank to provide liquidity directly to the loan market. This response is inconsistent with the views of industry experts who recently testified before the committee and the legal opinion of others who have studied this matter.”

Thu. Apr. 24, 2008