FEDERAL LOAN PROGRAMS WAXING; GOVERNMENT OVERSIGHT WANING.

Byline: Jeff Gerth The New York Times

When President Clinton delivered his State of the Union message last month, no part was more warmly applauded than his declaration that the "era of big government is over."

To the audience and the president, "big government" meant the huge federal bureaucracy, with its thousands of programs and workers.

But even as the number of federal workers has begun to shrink significantly for the first time in decades, there has been enormous growth in a largely unnoticed side of the ledger: federal liabilities.

Each time a student or small business takes out a federal loan, or a home buyer seeks a federally guaranteed mortgage, or a farmer seeks federal insurance against crop damage, the government's liabilities grow.

And the list of federal liabilities, including loans, loan guarantees and insurance, is expanding so fast that by 1998 federal loan guarantees alone are expected to exceed $1 trillion, up from $600 billion in 1992, according to the Office of Management and Budget. And in 1995 the government set aside between $180 billion and $300 billion to cover costs and estimated losses on these programs.

"People want the government to go away, to be less intrusive, less bureaucratic and more efficient," said John Koskinen, OMB's deputy director for management. "But they also want all the guarantees, the insurance, the promises. It's built into the fabric of their assumptions about what their lifestyle is like."

But with this unheralded growth of the government's liabilities have come major cuts, beginning with Ronald Reagan, in the numbers of inspectors, auditors and regulators to oversee federal loans, promises and projects. And with less oversight, experts warn, the financial health of the federal government's loan and insurance programs is at increased risk.

Comptroller General Charles Bowsher said the General Accounting Office's recent audits have found that the government now has insufficient financial accounting systems and managers to insure that those liabilities are properly monitored.

Consequently, he believes the government cannot afford to further weaken this system of controls as it continues to take on more responsibilities for loans and financial promises.

"When you don't have the management systems in place," Bowsher said, "you're taking a really big risk in downsizing, especially when there are a lot of things on the liability side of the balance sheet that are going up. You have to extend oversight."

During the 1980s, government commitments grew, but, in the name of deregulation, federal oversight was all too often lax, numerous reports show.

Eventually, little noticed government insurance and credit programs lost hundreds of billions of dollars as the savings and loan industry collapsed, and farm, student and housing loan programs experienced large defaults.