Session 6: Case Studies

In this session participants break into groups to explore the creation of various hypothetical federal credit programs. Groups will consider mission and metrics including program design (e.g., market failure / rationale, objectives, structure), funding (e.g., taxpayer risk, subsidy BA, operating expenses), management (e.g., operate, monitor, measure impact, adjust) and sunset.

Case 1: Health Care Mortgages

Policymakers are exploring the creation of a federal credit program to help people afford transformative therapies that cure potentially lethal conditions such as cancer or hepatitis C. Breakthrough hepatitis C drugs such as Sovaldi and Harvoni can cure people of the liver-destroying disease in a few months, but the price tag of $84,000 or more has led many insurers to limit coverage to people whose disease has significantly progressed to show signs of liver damage. In order to make such treatments more widely available, the government is considering the establishment of a program to increase the availability of funds for such drugs but would require that individuals who are cured would repay amounts provided, over time.

Case 2: Climate Change Adaptation

In anticipation of climate change (e.g., rising sea levels, erratic and severe weather patterns), policymakers are considering the creation of a loan program to help citizens and businesses relocate from high-risk areas that are particularly vulnerable to flooding or other adverse impacts from global warming. Staff have been asked to design a loan program to enable affordable relocation while keeping taxpayer costs at a minimum.

Case 3: Municipal Infrastructure Assistance

Given severe physical infrastructure needs across the US, policymakers are considering ways the federal government might support municipal governments to spur national infrastructure development and improvement. By providing bond insurance or support, costs to municipalities would fall, thereby increasing likelihood of such projects being funded. All options are being considered: Grants, loans, bond guaranties, credit enhancements and tax incentives—although the loan and loan guaranty options seem to have some initial support given expectations of low cost estimates.

Case 4: Community Development Lending by State Governments

Policymakers are exploring the creation of a program to allow state government to "rent" its full faith and credit designation to spur community development lending in distressed parts of the country. Unlike the federal government, state governments are generally prohibited by law from pledging their credit on behalf of private parties. Instead, state loan and loan guarantee programs are backed by dedicated reserve accounts. A new program would have the federal government play some role (e.g., capital provider, lender, guarantor) to stimulate the creation of state-level funds to fund small business creation / growth and other economic development projects.

Case 5: Eye Bonds

Congress is considering legislation to establish an "Eye Bond" program to spur research and investment in the treatment and cure of ocular diseases. The initial program would focus on one category of disease and build within it a diversified portfolio of eligible projects just short of treating patients. Once the concept of attracting new, long term institutional investment funding for biomedical research, other treatments could be considered for funding in a similar fashion. Bond proceed would go to small labs, university researchers and other scientists struggling to take basic research to patients. The National Eye Institute, part of NIH, will select eligible projects. Government risk is initially limited to no more than $1 billion of bonds with no more than $250 million issued in any one year of five authorized for the program. The USG guarantee can apply to no more than 50% of the principal amount of bonds issued and cannot cover any of the interest payments. Bonds must be structured to give first priority to protecting the interests of taxpayers and all cash received from eye bond repayments must first be used to reduce the amount of USG guarantees. No guarantee shall be made unless an appropriation has been provided or the bond issuer makes a payment to the government for the full cost of the guarantee.

Case 6: Zero-emissions Auto Manufacturers Assistance Program

Policymakers are considering the establishment of a program to reduce funding costs for companies involved in the manufacture of zero-emission automobiles. A range of options is being considered where the federal government would play some role (e.g., capital provider, lender, bond or loan guarantor) to stimulate additional development and commercialization of green-car technologies.