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November 15, 2009 (LPAC)—As the economy collapses, the demands on government guarantees go up and those agencies that provide them start hemorrhaging red ink. Stephen Foley of the London Indepedent reports that the Federal Housing Administration is one of those agencies, since it has been used, over the past two years, to try to prop up subprime mortgages. Congress requires the FHA to maintain cash reserves of 2 percent of the mortgages it insures, but it was learned this week that its reserves are only 0.53 percent and the percentage of loans in arrears is 17.9 percent. The agency said, this week, that if there is no economic recovery, it may have to increase its line of credit at the Treasury by $1.6 billion in 2011.

Another agency, the Pension Benefit Guarantee Corporation, is not saying it will need a bailout soon, but dangled that possibility in its annual report to Congress, this week. It reported that it ended fiscal year 2009 with an overall deficit of $22 billion, compared to $11.2 billion in 2008. The PBGC's report to Congress classified 27 large pension plans with total underfunding of $1.64 billion as probable losses on the PBGC balance sheet. It also shows the agency's potential exposure to future pension losses increasing from $47 billion booked in 2008 to $168 billion in 2009. Possible future terminations mean that the PBGC "could face much higher deficits in the future," said acting director Vincent K. Snowbarger. "We won't fail to meet our obligations but ultimately, we will need a long-term solution to stabilize the pension insurance plan."