Submitted by Alex Hamilton (not verified) on October 3, 2008 - 1:34pm.
Anonymous doesn't get it.
No one has a problem with accrual accounting.
The problem is that the federal government uses a bastardized form of accrual accounting. It always wins. It's no different than a Las Vegas casino--the house (the government) always wins because it doesn't have to account for market risks (that loans won't get paid back or will be prepaid, that operations will have problems, and so on). Private banks hedge against such risk; the Direct Loan program looks the other way.
If the government used textbook-accrual accounting -- the same way the law requires every financial institution that lends money over time to account for market risk -- direct loans would cost more.
Doesn't Get It
Anonymous doesn't get it.
No one has a problem with accrual accounting.
The problem is that the federal government uses a bastardized form of accrual accounting. It always wins. It's no different than a Las Vegas casino--the house (the government) always wins because it doesn't have to account for market risks (that loans won't get paid back or will be prepaid, that operations will have problems, and so on). Private banks hedge against such risk; the Direct Loan program looks the other way.
If the government used textbook-accrual accounting -- the same way the law requires every financial institution that lends money over time to account for market risk -- direct loans would cost more.