Magazine article American Banker

Firing Strengthens Opponents of Nonhousing Investments by the Home Loan Banks

Magazine article American Banker

Firing Strengthens Opponents of Nonhousing Investments by the Home Loan Banks

Article excerpt

Long-simmering disputes at the Federal Housing Finance Board boiled over this month with the firing of board member Lawrence U. Costiglio.

Though Mr. Costiglio was rebuffed in an attempt to take a seat on the panel at last week's board meeting, the disagreements that led up to his dismissal continue to roil the Federal Home Loan Bank System, which the agency regulates.

In addition, Mr. Costiglio is expected to file today a challenge to his dismissal in federal court here. The 82-year-old New York lawyer, whose term on the board expired in 1995, was fired by President Clinton on March 9. Mr. Costiglio charged that his removal was illegal because no successor has been named.

At the heart of the controversy, said sources familiar with the Finance Board's operations, is a fight between Chairman Bruce A. Morrison on one side and Mr. Costiglio and several Home Loan Bank presidents on the other over efforts to rein in the banks' securities investments.

Mr. Morrison argued that the 12 banks, which have invested more than a quarter of their assets in nonhousing investments to boost income, should be forced to put the funds they raise with low-cost government debt in more "mission-related" assets.

"There are people in the system who do not want to see their investment arbitrage curtailed," Mr. Morrison said. "With them I disagree."

Mr. Costiglio asserts that Mr. Morrison finally sought his dismissal after he informed the Finance Board chairman that he would oppose the appointment of Nicolas Retsinas, former assistant secretary for housing at the Department of Housing and Urban Development, to a panel that oversees the issuance of the Home Loan Bank debt. Mr. Retsinas was also a member of the Finance Board until he left HUD in February. Last week the board delayed making any changes to the debt oversight panel.

"I resisted Mr. …

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