April 4, 2006
The Honorable John W. Snow
Secretary
Department of the Treasury
1500 Pennsylvania Avenue, NW
Washington, DC 20220

Dear Mr. Secretary:

America’s Community Bankers believes the Federal Home Loan Bank System is critical to community banks. Our members own well over 50 percent of the stock in the System and care deeply about its safe and sound operation. With the recent adoption of a rule that requires the 12 Federal Home Loan Banks to register with the Securities and Exchange Commission, a pressing governance issue has arisen as a result of the Administration’s decision not to appoint public interest directors to the boards of the Federal Home Loan Banks.

The Federal Home Loan Bank Act requires that each Federal Home Loan Bank have at least 14 directors. Six of those 14 are public interest directors who must be appointed by the Federal Housing Finance Board. Today, each of the Federal Home Loan Banks has a significant vacancy rate on its board because the public interest director positions are not being filled. These vacancy rates will increase by the end of the year as the last public interest directors finish their terms.

Public interest directors can play an important role in the proper functioning of the boards of the Federal Home Loan Banks. The attrition of public interest directors has had an impact on the operations of many of the boards resulting in the abolition or combination of essential board committees–simply because there are too few directors.

A full complement of qualified directors is an important element of good governance, which is even more important for SEC registrants. In addition to the financial expertise of the bankers who serve as elected directors, many of the Federal Home Loan Banks rely on the public interest directors to provide specialized expertise to the boards in areas such as financial accounting and auditing, market risk analysis, technology, community development and affordable housing. Moreover, the public interest directors provide a critical element of independence, which is an important part of the corporate governance standards applicable to public companies.

We understand that the Congress is currently considering legislation to create a new regulatory structure for the government-sponsored enterprises. ACB has been very supportive of the Administration’s efforts to adopt GSE reform legislation. We also understand that the legislation addresses board composition. However, we have come to the conclusion that the appointment of public interest directors to the boards of the Federal Home Loan Banks cannot wait for a resolution of the GSE reform debate.
The Honorable John W. Snow April 4, 2006 Page Two

We respectfully request the Administration to fill these positions. We believe that an approach to the appointments of public interest directors can be devised without sacrificing the Administration’s principles in the GSE debate. For instance, to improve on the existing process for appointing public interest directors, the members of the Federal Home Loan Banks, working through the boards of the Banks, could advise the Federal Housing Finance Board on the areas of expertise that could be provided by the public interest directors and then could recommend candidates for the open positions.

Thank you for considering our views. We look forward to working with you on this vital issue.

Sincerely,

Diane Casey-Landry
President and CEO