By Basil N. Petrou and Karen Shaw Petrou
At a recent meeting with senior White House and Congressional budget experts, we revisited the benefits of using federal guarantees to drive private capital to public need. Much of the discussion centered on taxpayer protection, a significant challenge due to risk-taking incentives baked into the federal budgeting process. There are many reasons – billions of them in fact – to reject the budgeting approach mandated by the Federal Credit Reform Act (FCRA) in favor of a fair-value methodology. Less known and not discussed is an issue of equal importance: getting guarantees right not just for taxpayers, but also for the regulated financial companies from which the private capital for successful guarantees must come. Here, we lay out principles for equality-enhancing guarantees that meet needs ranging from sound mortgage lending to translational biomedical research. Continue reading “Guarantees that Deliver the Equality Goods”