I want to get this question out there in stark terms.

Here’s the case — I’ll use several quotes from my published WFM articles because they’re public and I’ve received no pushback or call for corrections on the conclusions:

FCRA Criteria: Bad Solution to a Fake Issue, With Real Consequences

From the start, OMB’s FCRA Criteria looked more like a ‘manufactured issue’ than a real budgeting problem with significant consequences. From WIFIA FCRA Criteria: Poster Child of Bureaucratic Overreach:

“Yes, on the surface the Criteria were a response to a Congressional directive. But why would Congress be involved in such a technical matter, much less put out detailed instructions for its resolution, in the absence of some sort of behind-the-scenes initiative from relevant federal bureaucrats? We’re not talking about a Solyndra-type, headline-grabbing issue here. The Criteria are solely about the FCRA classification of cash flows from investment-grade Water Infrastructure Finance & Innovation Authority (WIFIA) and Corps Water Infrastructure Financing Program (CWIFP) loans for non-federal cost shares in federal projects.“

Someone or some group certainly put a lot of thought and effort into making the FCRA Criteria (a mere ‘Notice’ in the Federal Register, not even a rule) effectively into an amendment of WIFIA’s standard eligibility.

For what outcome? The preservation of our precious budgetary standards? Hardly — the Criteria are a grotesque distortion of FCRA law and underlying principles. No, the outcome was in fact what was always intended by this slimy bureaucratic maneuver. The Corps’ section of WIFIA, CWIFP, was prevented from fulfilling its most natural and useful role, financing non-federal cost shares. That was the point.

Circular A-129: No Questions Asked About Obvious Issues

In the meantime, OMB was apparently studiously avoiding any application of their own fundamental policies for federal credit programs to WIFIA, despite glaringly obvious inconsistencies. From Explaining the Decline in WIFIA Loan Volume: Part 2:

Whatever the intentions or expectations of WIFIA policymakers were in 2014, displacement as the explanation for much of WIFIA’s actual history 2018-2024 implies that the program has not been in strict compliance with the Office of Management and Budget’s standard policy for federal credit programs.

That policy is stated in detail in OMB Circular A-129, most recently updated in 2024. The first sentence of section 2 of the Circular says bluntly that “Federal credit assistance should be provided only when it is necessary…to achieve clearly specified Federal objectives.” The section goes on to require periodic review of the credit program with respect to a list of goals.

The description of one goal, relevant to SRF displacement, asks “Whether any Federal credit or non-credit program exists that addresses a similar need…” It could be argued that WIFIA was originally designed to provide larger loans than most SRFs and is better able to address the needs of large projects. But the program’s statute does include some exceptions for smaller loans. Perhaps more importantly, EPA press releases since 2021 have emphasized loans to smaller projects as a WIFIA priority, in effect indicating an intention to compete with SRFs.

Though federally subsidized, tax-exempt bonds are of course issued and traded in a private market. Another Section 2 goal explicitly requires that “that private lending is displaced to the smallest degree possible by agency [credit] programs.” This requirement is hard to reconcile with the interaction of WIFIA loans and bonds 2018-2024, especially in 2021.

The inconsistencies were obvious from WIFIA’s start in 2018 (large, highly rated agencies were among the first applicants) and were glaring in 2020-2021 when Program loans took a 25% share out of the water & sewer bond market volume. From OMB? AFAIK, crickets.

Mandatory Spending: If Anyone Could Have Known, It Was OMB

Using purely public information, I was able to predict WIFIA’s high levels mandatory spending from interest rate estimates early in 2021, accurately, as it turns out. OMB directly had all the same information and much more, and presumably the expertise to understand what was happening. Yes, WIFIA was just following FCRA law and its own statutes, but that was also the case for loans financing cost shares in federally involved projects. OMB didn’t hesitate to modify (or more precisely, distort) law with the FCRA Criteria. But for growing mandatory spending? Not a problem in the least. In fact, they approved twelve downward resets. The result for federal taxpayers? From Is WIFIA’s Interest Rate Reset Feature at Risk?:

The answer, and the source of risk for the reset feature, is simply that the scale of WIFIA’s mandatory spending for interest rate re-estimates is now emerging. In the White House FY 2026 Budget Technical Appendix for EPA, WIFIA’s mandatory spending for fiscal years 2024 and 2025 totals about $1.6 billion. When amounts from prior Budget Technical Appendices are included, WIFIA’s total mandatory spending is over $2 billion. That’s about 9% of the program’s $22 billion portfolio, an amount far above WIFIA’s discretionary funding. It is unlikely that this has gone unnoticed by the Trump administration’s OMB – they did the numbers, after all.

The Real Question: Cui Bono?

Who would benefit from this pattern of excessive focus on a non-issue while ignoring real policy and economic problems at the WIFIA loan program? A bureaucrat with some strange private agenda? Maybe, at least in part, as I outlined in the ‘poster child’ article.

But, in terms of rational behavior and the influence required to achieve desired results, isn’t there a more likely beneficiary? How about the EPA WIFIA ‘base’ — larger, Aa3/AA- municipal water agencies? For them, a successful CWIFP was a potential dilution of their ‘ownership’ of the program, while obviously Circular A-129 policy and mandatory spending levels had to be ignored for them to access WIFIA loans’ interest rate management features.

Let me stress that ‘cui bono’ inferences are speculative — I don’t know what was really happening. But I think there’s enough information here to raise a question, and as noted at the outset, I want to get that question out there.