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Contact:	Robert Schmermund (202) 857-3104 Jim Eberle (202) 857-3145	Jim Eberle (202) 857-3145 (work) (703) 893-2593 (home) [email protected]	For Immediate Release October 23, 2003 #03-52
E-mail: [email protected]

AMERICA’S COMMUNITY BANKERS URGES CONGRESS TO CREATE AGENCY WITH INDEPENDENCE TO REGULATE HOUSING GSES

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WASHINGTON, D.C. — America’s Community Bankers urged Congress today to strengthen the regulation of the housing government sponsored enterprises by creating a strong, independent agency with powers and resources sufficient to address the risks their activities pose.

“It is essential that a new regulator be independent,” said John D. Koch, executive vice president and chief credit and lending officer, Charter One Bank, NA, Cleveland, in testimony before the Senate Banking Committee. Koch is also a member of ACB’s board of directors.

Koch said ACB supports proposals that would include all of the housing GSEs — Fannie Mae, Freddie Mac and the Federal Home Loan Bank System — in the new regulatory agency. Koch also supported housing the agency within the Treasury Department, provided it has independence within the department.

While recognizing the Treasury Department’s concerns about the need for control of the new agency, Koch said ACB “differs with Treasury on this issue.” As an alternative, Koch said ACB would support formation of a new, independent regulator as a stand-alone agency.

Koch said ACB continues to prefer a separate regulator for the FHLBanks, but “strongly supports” an amendment proposed by Reps. Ed Royce (R-Calif.), Carolyn Maloney (D-N.Y.) and Jim Leach (R-Iowa) that would merge the Office of Federal Housing Enterprise Oversight and the Federal Housing Finance Board into a new, independent and fully funded Treasury agency.

The Royce-Maloney-Leach amendment would establish two deputy directors within a new single agency. “The new agency should separately administer the unique statutory arrangements that apply to the FHLBanks and Fannie Mae/Freddie Mac,” Koch said.

“If the new agency does become the regulator for the FHLBanks, it should maintain the Banks’ access to the capital markets and their current well-defined mission to support the mortgage finance, affordable housing and community development activities of members banks,” said Koch.

“A merged agency would avoid a perception that any of these government sponsored entities are subject to more effective regulation than any of the others,” Koch added. “We also note that the FHLBanks, Fannie Mae and Freddie Mac are all engaged in extensive interest rate risk management and believe a combined agency would be better able to supervise these risks.”

The new regulator “should recognize the unique and successful business model of the FHLBank System,” said Koch. Unlike Freddie Mac and Fannie Mae, the system is a cooperative owned by its member institutions, its stock is not publicly traded and does not fluctuate in value and each FHLBank is jointly and severally liable to all the others. “Each of these GSE business models has it strengths,” said Koch. “Any revised regulatory system should continue to respect those differences, while advancing the common goal — to maintain their financial safety and soundness.”

Koch said ACB “strongly endorses the administration’s position that the new agency should have full authority to ensure that Fannie Mae and Freddie Mac are carrying out their secondary market mission.” He said the agency “must have the authority to review both current and future programs.” The unwillingness of the Department of Housing and Urban Development to exercise its current program approval authority, Koch said, has allowed Fannie and Freddie to engage in or attempt to engage in activities inconsistent with their secondary market responsibilities.

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America’s Community Bankers is the national trade association committed to shaping the future of banking by being the innovative industry leader strengthening the competitive position of community banks. To learn more about ACB, visit www.AmericasCommunityBankers.com.

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