bonds differ from most other agency bonds in that their principal is fully collateralized by Treasury bonds and full payment of coupons is guaranteed by the Treasury under the provisions of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989.
In spite of the substantial obligation in the form the REFCORP payment, interest in System membership remains strong.
Moreover, switching the REFCORP payments from a flat-rate to an income-related payment might generate incentives for Congress to expand the remit of the System, as increased payments would allow increased discretionary spending in other areas on current pay-as-you-go budgetary rules.
Many of the new GSEs were created to assist other GSEs: FICO and Refcorp
(Resolution Funding Corporation) were created to help provide funds needed by FSLIC to close insolvent thrifts, and the Farm Credit System Financial Assistance Corporation to help the Farm Credit System's banks.
Another is that the yields on Resolution Funding Corporation (Refcorp
) bonds, which are guaranteed by the Treasury, (5) are nonetheless substantially higher than yields on ordinary Treasury securities of comparable maturity.