Uncle Sam, the Loan Man

Farmers, businessmen and home buyers hard pressed for a loan have turned increasingly to Uncle Sam. With 180 different lending programs, his pot is the most plentiful around. In the past three years federally sponsored credit has almost tripled, going from $26.8 billion in 1976 to $73.3 billion last year.

Since the Federal Farm Loan Act was passed in 1916, Government credit programs have helped borrowers who could not obtain money from regular savings institutions. One of the most successful was the Rural Electrification Administration, which, beginning in 1936, provided the money that lighted American farm communities. More recently, Dwight Eisenhower's Sputnik- inspired student loan program helped deserving kids go to college. Federal agencies frequently lend money directly on bargain terms. Some Farmers Home Administration credits carry interest rates of 1%. More often, the Government guarantees loans from private sources, such as the proposed $1.5 billion line of credit to Chrysler.

Like so many Government programs, the federal loan agencies quickly developed their own constituencies and lived long after the initial goals had been achieved. Now that 98.7% of American farms have lights, the Rural Electrification Administration has kept alive by moving into telephone and even cable TV loans. The Farmers Home Administration, which was set up to help farmers buy land, has guaranteed credit to a ski resort, a distressed steel company and at least two Ramada Inns. Financial hardship is not always a criterion. In 1978 Congress opened the student loan program, which charges only 7% interest, to everyone, regardless of the size of their parents' bank balances.

Washington policymakers are now alarmed about these mushrooming federal loan programs. Says Federal Reserve Board Governor Nancy Teeters: "The nature and use of these programs has changed, and they are growing like Topsy." President Carter has pledged to cut federal loan outlays by 3% in fiscal 1981a modest proposal considering their explosive growth. As part of the battle against inflation, America's rich uncle may soon be forced to say no.

This file is automatically generated by a robot program, so viewer discretion is required.