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STATEMENT BY DIANE M. CASEY, PRESIDENT, ACB, ON TODAY’S ACTION BY THE FHFB REMOVING PROPOSED LIMITATIONS ON FEDERAL HOME LOAN BANK SYSTEM INVESTMENTS AND EXPANDING ELIGIBLE COLLATERAL FOR COMMUNITY IN
The Federal Housing Finance Board acted in the best interests of community banks and homebuyers today by agreeing not to impose prospective limits on the investments of the Federal Home Loan Banks and by implementing expanded collateral requirements. America’s Community Bankers took the lead in working with the FHFB and others to assure that the potential prohibition on the FHLBanks’ mortgage-backed securities investments was eliminated from the final mission-related rule. The FHFB made the appropriate decision on the Banks’ investment authority to enable the individual FHLBanks to determine their investments in support of the Bank Systems’ mission. The FHFB’s decision, which tracks the Gramm-Leach-Bliley Act’s shift of governance to the FHLBanks, will allow the Banks to serve the needs of community banks and their home lending programs, as well as being able to continue fully funding the Banks’ Affordable Housing Program. This flexibility is critical as the FHLBanks create new capital plans. Similarly, the flexibility of the final rule implementing expanded collateral requirements for advances will be extremely important to smaller institutions in meeting local community development needs. On the other hand, the FHFB’s decision to define the core mission activities of the Bank System is ill-conceived because it establishes a direction for the FHFB to later mandate specific FHLBank investments or programs. ACB will work diligently to prevent the establishment of any targets or quotas. Member-owners of the cooperative FHLBank System know better than central planners in Washington what’s best for the system; how best to direct the system’s mission in providing community banks with important financial support in meeting local community housing and development needs. This in no way diminishes the FHFB’s appropriate role as safety and soundness regulator. After working with the FHFB to assure that the FHLBanks can govern their own investments at this critical time, ACB will continue to lead the industry on behalf of all Bank System members in developing the new FHLBank capital plans.
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