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the last 2 years dealing with them on their very pressing financial 

 problems. So I assure you we are intimately aware of the financial 

 needs of State and local governments. 



Senator Stevens. I commend you on it as one who supports that 

 proposal. But again, I think the problem in regard to these State and 

 local securities is that there has been an antipathy downtown toward 

 these for many years. It seems that what you are saying to us is that 

 you have no objection as long as we use taxable securities and guaran- 

 tee them. I agree that there is a built-in advantage in this plan, but I 

 do not think there is a necessary subsidy. "We are trying to have the 

 Federal Government bear part of this responsibility through a 

 financing program. 



There are some positions, which you have presented, you have in 

 common with us. You have indicated that we should help local govern- 

 ments undertake high priority programs. You also agree that the local 

 governments do not have those resources, and also that the Federal 

 Government's borrowing capacity and its standing will assure the 

 marketability of these, if either a guarantee is given or the Govern- 

 ment issues them themselves, if it can be done cheaper by the Federal 

 Government. 



Mr. Weidenbatjm. May I add a proviso? Point one, many State and 

 local governments clearly demonstrate the ability to market substan- 

 tial amounts of their own securities without any Federal assistance. 



Senator Stevens. I agree, but not in new program areas. We have 

 demonstrated in new communities and other areas that with the Fed- 

 eral guarantee in new program areas, there is a borrower acceptance 

 immediately, whereas, otherwise, you have to have an attractor. I think 

 you agree with that. 



Mr. Weidenbaum. That is why in our EFA proposal, which is before 

 the Public Works Committee at tliis time, we have a proviso that EFxl 

 will lend only if credit cannot be obtained — if these bonds cannot be 

 issued at a reasonable rate in the private market. I do not think we 

 should underestimate the ability of State and local governments to 

 raise large amounts of funds in private markets without any Federal 

 participation. We certainly do not want to preempt that. 



In other words, in an incremental sense, these programs are de- 

 signed to assist State and local governments but not to replace 

 the great bulk of their efforts to raise their own capital. Again, 

 I need to point out that the administration — the President person- 

 ally, in his budget message — showed very strong concern over the 

 growing proliferation of Federal credit programs. My formal state- 

 ment quoted at greater length than I did orally from the President's 

 message. He has instructed us subsequently, of course, to develop 

 specific legislation. Wlien you sit in the Treasury you are impressed 

 by the proliferation — I can use no other term — the proliferation of 

 Federal financing arrangements, whether it be guarantees or other 

 credit programs, outside of the budget. Whether they involve budget 

 expenditures or not, because of the Federal guarantee, they pre- 

 empt the credit market in the sense the Federal Government is 

 deciding which items in the private sector are going to be financed 

 with private funds. 



Senator Stevens. I do not think we have any disagreement, Mr. 

 Secretary. We just happen to think this is a very high priority 



