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RES.15-002 | Summer 2016 | Graduate

# Mission & Metrics: Finance Training for Federal Credit Program Professionals

SES # | TOPICS | DESCRIPTIONS
--- | --- | ---

1 | Program Objectives - Understanding Mission and How Best to Achieve It | This introductory session provides an opportunity for participants to consider, more broadly, government involvement in the credit marketplace. Discussion centers on market failures that commonly lead to the creation of government credit programs and ways to identify and quantify mission objectives and program outcomes for the purpose of ensuring policy effectiveness. Go to Session 1

2 | Considerations in Program and Product Design | Providing financial aid or support with the aim of promoting economic and social policy entails subsidization, and that general concept is introduced in this session. Some missions require a larger federal footprint while others might benefit from more private involvement. There are five basic platform options for delivering intended subsidies and they are designed to be responsive to the distinction. Delivery platforms should be evaluated and compared in terms of structure, taxpayer risk and cost, magnitude of obligation, difficulty of management, need for partnership, level of control, extent of mission impact and other attributes – including whether the proposed credit product is suitable to the beneficiary. A range of decisions is associated with product design including: amount, rate, term, amortization, credit risk and demography. Finally, this session focuses on the functioning of the combined product and platform over time and considers metric adjustments to ensure the portfolio reflects market conditions. GCFP provides a proprietary calculator that incorporates the product design, delivery platform and program performance assumptions into a single set of forecasts for both the agency and its lending partners or grantees. Objective is to ensure delivery platform and product design minimize taxpayer risk/cost and maximize prospects for mission accomplishment. Go to Session 2

3 | Valuation and Subsidy Measures | Determining whether a particular government credit program is in the public interest requires a careful assessment of costs and benefits. A primary focus is the credit subsidy. This session aims to educate participants on the basic finance principles used to assess and forecast costs. For illustrative purposes, the discussion will be based around an example of how each facet shows up in the planning process of one agency. Go to Session 3

4 | Credit Portfolio Costs and Managing Performance | Extending credit involves more than getting money out the door in a timely manner. There are widely used techniques and tools for managing credit portfolios efficiently and prudently, and also for measuring program effectiveness. In this session, focus is on the the information necessary for managing performance including the functions associated with extending credit, the costs, the range of choices in performing the functions and the benchmarking of performance. The session is not about Information Technology, but rather how to think about the dynamics of credit-related activities. From the standpoint of the agency budget, such activities are generally funded out of the administrative budget. Session also includes an overview of methods for identifying, assessing and managing credit risk. Finally, this session addresses the metrics that can be used to identify program impact and effectiveness. Together such metrics provide a general basis for performing program cost-benefit analysis. Go to Session 4

5 | Panel Discussion Working with Private Partners | Practitioner’s panel will cover credit program-related issues that could arise during the Presidential transition and a broader discussion of the economic justification for governmental involvement in the credit/insurance marketplace, with particular attention to the use of evidence-based decision making and metrics to justify credit market involvement. This session explores how for-profit institutions approach the provision of credit. The purpose is to gain insights into their operations to enable government partnering agencies to better interface and protect taxpayer dollars in various public-private partnerships that can form to extend credit to borrowers. Go to Session 5

6 | Case Studies | In this session the participants break into groups to explore the creation of various hypothetical federal credit programs. Groups consider mission and metrics including program design (e.g., market failure / rationale, objectives, structure), funding (e.g., taxpayer risk, subsidy BA, operating expenses), management (e.g., operate, monitor, measure impact, adjust) and sunset. #### Cases Health care mortgages Climate change adaptation Municipal infrastructure assistance Community development lending by state governments Eye Bonds Zero-emissions auto-manufacturers assistance program Go to Session 6

## Course Info

##### Instructors

- Deborah Lucas
- Douglas Criscitello
- Charles Tansey

##### Departments

- Sloan School of Management

##### As Taught In

Summer 2016

##### Level

Graduate

##### Topics

- Business
  - Accounting
  - Finance
  - Management
- Social Science
  - Economics
    - Public Economics
  - Public Administration
    - Public Policy

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