Joint ABA and State Bankers Association Letter to FHFA on the FHLBank System

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

Dear Director Thompson,

The American Bankers Association (ABA)and the undersigned state banker associations appreciate this opportunity to provide further comments on the Federal Housing Finance Agency's (FHFA) comprehensive review of the Federal Home Loan Banks (FHLBanks). We note at the outset that ABA and a number of the undersigned associations have submitted prior comments, and these are intended to supplement those.

As was noted in a recent American Banker article, the FHLBs are a vital liquidity source for their member institutions and have been since the FHLB System was established. The importance of that role has been highlighted in recent days, with the System raising historic levels of funds in the capital markets to respond to heavy advance demand from members in light of the developments surrounding Silicon Valley Bank and Signature bank.

As noted in ABA's earlier comment letter, many changes have occurred in the financial services industry, and with the FHLBanks over their long history. Among those are 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.

Download the joint comment letter to read the full text.