Think that congress makes all the laws? Only about 5% of bills pass. The vast majority of changes (I’m guessing 95%) in the law are done in the public administration system. Things like the IRS changing the tax code a little bit, the Department of Transportation altering speed limit policy, Homeland security making a new drug illegal, that sort of thing; no act of congress needed.
So what do you do if you’re a government agency in this huge public administration and need to raise some money but the federal government has a debt limit that they can’t exceed without an act of congress?
Well, the answer is you sell your own bonds, say that they are not official government bonds and don’t count towards the debt limit, but you can imply or sometimes legally state that they are backed by the full faith and credit of the federal government!
Agencies do this all the time, and in general they pay higher yields on their bonds than government bonds of the same maturity! Does that make sense to you? That a government agency will pay you more than the government for the same bond with the same guarantee of government support? Well it’s true, it’s kind of like the agencies are paying the citizens that buy their bonds a premium in order to get around the national debt ceiling.
A non-exhaustive list of these agencies and their offerings is as follows:
- Federal National Mortgage Association – Fannie Mae – Although Fannie explicitly stated for decades that their bonds did not come with a federal guarantee, during the financial crisis the federal government bailed them out in a deal that was ultimately profitable for the government. Fannie Mae’s bond offering portal starts here.
- Federal Home Loan Mortgage Corporation – Freddie Mac – Same story as Fannie Mae. There’s a wide range of bonds here under the debt products section of their website for investors.
- Government National Mortgage Association – Ginnie Mae – They did much better in the financial crisis than Fannie and Freddie above, and have a lot of information on their bonds here.
- The Tennessee Valley Authority – An agency that’s been around since the last depression, and still going strong, has a great listing of bonds available here.
- Federal Farm Credit Administration – They are nice enough to publish circulars of their bonds.
- Federal Home Loan Banks Administration – A listing of their bond underwriting is here.
Keep in mind this is just on the topic of the federal government, state and local governments issue a myriad of public bonds that, ultimately, may have a federal guarantee.