Transferring Government Financial Risk to Private Sector to Protect Taxpayers
This law mandates federal agencies that offer credit, guarantees, or insurance to create strategies for transferring this financial risk to private companies. The primary goal is to shield taxpayers from potential catastrophic losses and reduce government costs by utilizing private risk management techniques. Crucially, the law prohibits any risk transfer that would directly increase fees or premiums for individual citizens.
Key points
Federal agencies must develop plans to shift financial risks (such as loan guarantees) to the private market to safeguard taxpayer money from potential catastrophic losses.
A key protection is established: the risk transfer cannot directly result in higher fees, premiums, or other costs for individual citizens.
These risk transfer strategies must be made public and include detailed analyses of expected costs and savings for the government.
The law applies to agencies managing credit, guarantee, and insurance programs, including Fannie Mae and Freddie Mac while under conservatorship, but excludes Social Security and Medicare/Medicaid services.
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