Mortgage Corporation (Freddie Mac) are congressionally chartered, shareholder-owned corporations known as Government Sponsored Enterprises (or GSEs). Congress chartered them to provide stability in the secondary market for residential mortgages, and promote access to mortgage credit throughout the Nation, including under-served areas. The GSES issue and guarantee mortgage-backed securities (MBS), and they hold debt-financed portfolios of mortgages, MBS, and other mortgage-related securities. By the end of 1996, Fannie Mae and Freddie Mac had financed $1.51 trillion in mortgages and other assets. As of September 30, 1996, the two GSES had outstanding $1.4 trillion in mortgages purchased or guaranteed. Because they are classified as private, Fannie Mae and Freddie Mac are not included in the budget.

A third housing GSE, the Federal Home Loan Bank System (FHLBS), is a memberowned cooperative that provides liquidity to mortgage lenders by making collateralized loans, called advances. At the end of 1996, outstanding FHLBS advances totaled $153 billion.

The Government also plays an important role in ensuring that consumers get the information they need to make informed housing decisions. For example, HUD and the Environmental Protection Agency jointly issued a regulation in 1996 to require owners of housing built before 1978 to disclose, to prospective buyers or renters, information about any known lead-based paint hazards. Informed buyers and renters are best-positioned to decide how to protect their families at an affordable cost.

Rental Housing and Homeless Assistance Grants

The Federal Government also provides support for housing assistance through a number of HUD programs in the Income Security function. HUD's rental programs provided subsidies for over 4.8 million low-income households in 1996-1.4 million for units in conventional public housing projects; 1.8 million in rental subsidies attached to privately-owned multifamily housing projects; and 1.6 million in rental vouchers not tied to

specific projects. In addition, USDA's RHS rental assistance grants to low-income rural households provided $541 million to support 40,050 new and existing rental units in

1996.

The Federal Government also makes grants to help the homeless, supporting emergency shelters and transitional and permanent housing. Four agencies-HUD, VA, the Department of Health and Human Services, and the Federal Emergency Management Agency-provide 98 percent of the Federal help targeted to the homeless. For 1996, HUD provided $823 million in homeless assistance grants, representing 73 percent of the $1.13 billion targeted Government-wide funding total.

Housing Tax Incentives

The Government provides significant support for housing through tax preferences. The two largest tax benefits are the mortgage interest deduction for owner-occupied homes (which will cost the Government $285 billion in lost revenue from 1998 to 2002) and the deductibility of State and local property tax on owner-occupied homes (costing $95 billion over the same five years).

Other tax provisions also encourage investment in housing: (1) homeowners can avoid capital gains taxes from selling their homes if they use the gains to buy another one (costing $81 billion from 1998 to 2002); (2) taxpayers 55 and older can avoid capital gains taxes on up to $125,000 from selling their homes (costing $27 billion); (3) States and localities can issue tax-exempt mortgage revenue bonds, whose proceeds subsidize purchases by first-time, low- and moderate-income home buyers; and (4) installment sales provisions let some real estate sellers defer taxes. Finally, the Low-Income Housing Tax Credit provides incentives for constructing or renovating rental housing that helps low-income tenants for at least 15 years. The President proposes to expand tax benefits for homeowners, which would ensure that 99 percent of all home sales are exempt from capital gains taxes.

Commerce, Technology, and International Trade

The Commerce Department and SBA promote industrial competitiveness.

Commerce promotes the development of technology and advocates sound technology policies. Commerce's Advanced Technology Program provides cost-shared, competitive grants for industry research and development that are paying off in jobs created, strategic alliances formed, and technology developed. Commerce's Manufacturing Extension Partnership (MEP) provides technological information and expertise to the Nation's 381,000 smaller manufacturers. MEP's clients indicate an 8to-1 return on Federal investment in firm sales, jobs created or retained, and labor and material savings. Commerce's Patent and Trademark Office (PTO) protects U.S. intellectual property rights around the world through bilateral and multilateral negotiation, and through its domestic patent and trademark system, now issuing over 100,000 patents a year. Its International Trade Administration (ITA) promotes exports, fights unfair foreign trade barriers, and negotiates multilateral and bilateral trade agreements. In 1995 alone, ITA estimates that it supported $15.5 billion in gross exports and 248,000 jobs.

Commerce's Census Bureau collects, tabulates, and distributes a wide variety of statistical information about Americans and the economy. A key effort is the constitutionally-mandated decennial census-the basis for reapportioning seats in the U.S. House of Representatives, redrawing State legislative districts, and distributing billions of dollars of Federal, State, and local funds. In addition, Commerce's Bureau of Economic Analysis prepares and interprets U.S. economic accounts, including the gross domestic product, wealth accounts, and the U.S. balance of payments.

SBA, which Congress created in 1953 to aid, counsel, assist, and protect small business, expands access to capital by guaranteeing private loans. The loans carry longer terms and lower rates than the small businesses otherwise would have received. SBA guaranteed over $8.2 billion in small business loans in 1996.

Financial Regulation

The Government protects depositors against losses when insured commercial banks, thrifts, and credit unions fail. Deposit insurance also wards off widespread disruption in financial markets by making it less likely that one institution's failure will cause a financial panic and a cascade of other failures. From 1985 to 1995, Federal deposit insurance protected depositors in over 1,400 failed banks and 1,100 savings associations, with total deposits of over $700 billion. The Resolution Trust Corporation (RTC), a temporary agency created to handle thrift failures from 1989 to 1995, protected 25 million deposit accounts in 747 failed institutions.

The Federal Deposit Insurance Corporation (FDIC) insures the deposits of banks and savings associations (thrifts) through two separate insurance funds, the Bank Insurance Fund (BIF) and the Savings Association Insurance Fund (SAIF). The National Credit Union Administration (NCUA) insures the deposits of credit unions. Currently, these varied kinds of deposits are insured for up to $100,000 per account. The FDIC insures deposits at over 9,500 commercial banks and almost 2,000 savings institutions, for a total total of $2.7 trillion in insured deposits. The NCUA insures about 11,500 credit unions, with $260 billion in insured deposits.

Because the Government bears the risk of losses, it regulates banks, thrifts, and credit unions to ensure that they operate in a safe and sound manner. Five agencies regulate Federally-insured depository institutions: The Office of the Comptroller of the Currency regulates national banks, the Office of Thrift Supervision regulates thrifts, the Federal Reserve regulates State-chartered banks that are Fed members, the FDIC regulates other State-chartered banks, and the NCUA regulates credit unions.

Other regulatory institutions include the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC). The SEC oversees U.S. capital markets and regulates the securities industry, protecting investors and maintaining the fairness and integrity of domestic securities markets by preventing fraud and abuse and ensuring the adequate disclosure of informa

tion. The CFTC regulates U.S. futures and options markets, preventing fraud and abuse. Commerce Tax Incentives

The tax law provides incentives to encourage business investment and savings. Those who inherit capital assets, for instance, do not pay taxes on gains that accrued during the original owner's lifetime-a benefit that will cost the Government an estimated $173

billion from 1998 to 2002. Capital gains also are subject to a maximum 28 percent rate, making them attractive to taxpayers who are paying higher income tax rates. Other capital gains provisions benefit investments in small businesses. Other tax provisions benefit small firms, including the graduated corporate income income tax and up-front deductions, or "expensing," for certain investments by small businesses.

America's transportation network moves people through a combination of public and private systems, financed by Federal, State, and local governments and the private sector. Maintaining and improving these systems requires infrastructure investment, safe operations, and new technology.

Though the Federal Government plays a major role in each of these areas, it does not act alone in any of them. With just a few exceptions, Federal transportation programs are designed to promote transportation access for all citizens, ensure the safe design and movement of privately-owned and operated vehicles, help a struggling segment of the transportation industry, or advance transportation research. In total, Federal transportation spending comes to about $39 billion

a year.

Infrastructure Investment

America has four million miles of roads, 580,000 bridges, 123,000 miles of railway, 5,500 public-use airports, 6,000 transit systems, and 25,000 miles of commercially-navigable waterways. This extensive, multi-modal network is essential to the Nation's commerce,

The Federal Government has helped develop large parts of the system, with much of the help financed by user fees and transportation taxes. Total Federal investment in transportation represents about half of total public investment-that is, $27 billion of the $54 billion of Federal, State, and local spending on transportation infrastructure in 1993.

Highways and Bridges: About 950,000 miles of roads and all bridges are eligible for Federal support, including the Interstate highway system, urban freeways, urban and rural principal and minor arterials, defense highways, and Federal lands roads. In 1998, the Federal Government plans to spend $19.8 billion to maintain and expand these roads, with the Federal funds financed by motor fuels taxes, mainly the gasoline tax. The Federal gas tax is 18.4 cents a gallon, of which 12 cents finances formula grants to States for highway-related repair and improvement.

State and local governments provide 56 percent of total highway and bridge infrastructure spending, most of which they generate