U.S. Senate, 111th Congress.
U.S. Senate, 111th Congress. Photo by Senate Photo Studio
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The U.S. House of Representatives followed the Senate's lead and passed legislation last week extending the period of American government loan guarantees to Israel to 2016.

Without the legislative action, which requires the signature of President Barack Obama before coming into force, the guarantees would have expired at the end of September. The bill was sent to Obama on Thursday for his signature.

Last week's Congressional action was part of a broader piece of legislation providing U.S. support to Israel. It follows a series of discussions on the loan guarantees between Israeli foreign and finance ministry officials and American government representatives.

In 1992, the Americans provided initial loan guarantees of $10 billion at a time of massive immigration to Israel. In 2003, when Israel was facing major economic problems after the outbreak of the second intifada, the current $9 billion in guarantees was provided.

By giving U.S. government backing for Israeli loan obligations, the Americans have enabled Israel to borrow at lower interest rates without involving actual expenditure of U.S. funds.

Due to U.S. opposition to Israeli government investment in Jewish settlements in the territories, the terms of the guarantees in 1992 and 2003 have allowed the Americans to deduct amounts spent on settlement activity from the total amount backed by the United States. Consequently, $1.1 billion of the $9 billion guarantee provided in 2003 has been deducted by the United States to offset such spending.

In 2003 and 2004, the Israeli government issued American-backed bonds in a total amount of $4.1 billion, but has not done so since. Israel therefore still has $3.8 billion of the $9 billion at its disposal.