Summary

The National Advisory Council on International Monetary and Financial Policies (NAC) approved more than $6 billion in Agriculture Department (USDA) loans and credit guarantees to Iraq despite that country's poor creditworthiness. NAC's use of majority voting to decide issues, as well as approval letters that omitted dissenting opinion, enabled USDA to continue to provide loans to Iraq while giving the impression that interagency backing for its credit decisions was unanimous. In addition, although the NAC review and approval process is not essentially an analysis of financial considerations, USDA represented NAC as a financial review process in describing its credit guarantees to Iraq. NAC's role shrank even further after the Iraq incident when the Bush administration did not consult NAC before announcing USDA credit guarantees to the former Soviet Union.

GAO found that: (1) the NAC debate on USDA agricultural credit guarantees to Iraq has focused on USDA market development goals in Iraq, U.S. foreign policy toward Iraq, and Iraq's creditworthiness; (2) NAC support for USDA market development objectives has outweighed certain NAC members' concerns about Iraq's creditworthiness; (3) NAC approvals are determined by a majority vote of its seven members; (4) NAC members with primary responsibility for monetary and financial matters make up the minority in NAC; (5) the NAC approval process and the final NAC letter of approval did not reveal the concerns of certain members; and (6) the role and responsibilities of NAC have diminished since the enactment of the Bretton Woods Agreements Act.