Letter to FHFA on FHLB at 100 Request for Comments

The Honorable Sandra Thompson
Director
Federal Housing Finance Agency
400 7th Street, SW
Washington, DC 20019

Dear Director Thompson,

The American Bankers Association (ABA) appreciates this opportunity to provide comments on the Federal Housing Finance Agency's (FHFA) comprehensive review of the Federal Home Loan Banks (FHLBanks).

The FHLBs have, for 90 years, quietly and efficiently served as an important liquidity source for their member institutions. During the nearly a century that they have been in existence, many changes have occurred in the financial services industry, including those that have affected the FHLBanks, most notably the 1989 enactment of the Financial Institutions Reform, Recovery and Enforcement Act (FIRREA). That law made significant changes to the FHLBank System, including the extension of membership eligibility for commercial banks and credit unions, the creation of the Affordable Housing Program (AHP) and the imposition of the Resolution Funding Corporation (REFCORP) obligation on the FHLBanks. In 1999, the passage of the Federal Home Loan Bank System Modernization Act as part of the Gramm/Leach/Bliley Act made membership voluntary for all members and expanded access to FHLBanks' products and services. It also required reform of the capital structure of the FHLBanks and transferred many corporate governance responsibilities to the FHLBanks directly. In 2005 the FHLBs became registrants with the Securities Exchange Commission, and in 2008, the FHFA was created, becoming the new regulator of the FHLBs as well as Fannie Mae and Freddie Mac.

Thus, throughout their 90-year existence, the FHLBanks have not escaped Congressional and regulatory oversight and reform. Still, ongoing oversight and review is prudent, and we welcome the current comprehensive review. This review, however, must recognize that the FHLBanks' mission, ownership structure and membership criteria are set by statute and can only be changed by Congress. We urge FHFA to be mindful of the limits of its statutory mandate and to focus on ensuring that the Banks are meeting their statutorily defined mission in a safe and sound manner. FHFA has posed six topics for respondents to consider. We offer initial comments based upon general experience and feedback from our members, particularly members of our Federal Home Loan Bank Committee. However, we believe that each of these topics deserves in depth discussion that we hope the additional listening sessions, roundtables and other aspects of the comprehensive review can foster. We urge FHFA to provide more information about the format of each of these forums, as well as information about the timing and goals of the comprehensive review as soon as practicable.

With the above history, recommendations and reminder of the mandate of the FHFA in mind, we offer feedback on each of the topics in turn. They are:

1. The FHLBanks' general mission and purpose in a changing marketplace;
2. FHLBank organization, operational efficiency, and effectiveness;
3. FHLBanks' role in promoting affordable, sustainable, equitable, and resilient housing and community investment;
4. Addressing the unique needs of rural and financially vulnerable communities;
5. Member products, services, and collateral requirements; and
6. Membership eligibility and requirements.

Download the letter to read the full text.