ACB: Press Releases

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 July 23, 2001 #01-48
E-mail: [email protected]

GAO REPORT ON THE FEDERAL HOME LOAN BANK

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Statement by America’s Community Bankers, on the GAO report on the Federal Home Loan Bank’s establishment of a new capital structure and new regulator:

ACB is pleased and encouraged to read the July 20, 2001 Congressionally mandated GAO report on the Federal Home Loan Bank System’s “Establishment of a New Capital Structure.” The report suggests that the FHLBank capital structure is an improvement over the current structure and, if properly implemented, will address risks associated with the cooperative nature of the System.

The reports specifically states that the “new capital structure has the potential to better address the increased risks associated with advances and the direct acquisition of mortgages, because it offers greater capital permanence, and includes both leverage and risk-based capital requirements.” GAO also recognizes the benefits of the cooperative System noting that the “FHLBank stock will not be perpetual equity stock like that issued by publicly traded companies.” FHLBank stock cannot be bought and sold freely; it can only be redeemed at par value and only when “all restrictions are met.”

On the second major point of the report, ACB strongly disagrees with GAO’s suggestion of a single regulator for the FHLBank System, Fannie Mae and Freddie Mac. The cooperatively owned FHLBank System has a strong regulator charged with safety and soundness regulation and mission oversight. A separate regulator is appropriate and important for the System because the FHLBanks are unique, both in structure and operation, which stands in stark contrast to the publicly traded operations of Fannie Mae and Freddie Mac. Even the GAO recognizes this difference in the report by stating that, “the regulations differ substantially due to the different business activities of the regulated entities, statutory requirements faced by each regulator, and conceptual approaches.”

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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