Magazine article American Banker

Banks to Congress: Don't Touch Home Loan Banks

Magazine article American Banker

Banks to Congress: Don't Touch Home Loan Banks

Article excerpt

Byline: Kevin Wack

WASHINGTON - As policymakers inch slowly toward reforming the housing finance system, the Federal Home Loan banks and their allies have a simple message to Congress: Leave the system alone.

Home Loan bank representatives and community bankers urged lawmakers Wednesday to leave the Home Loan banks out of any overhaul, arguing they have weathered the financial crisis well and are a key source of liquidity for financial institutions.

"In a time when so many of our institutions are in need of repair, we have a system that works," said Lee Gibson, the chairman of the Federal Home Loan Bank of Dallas. "It's a structure that must not be changed."

Timothy Zimmerman, the president of Standard Bank in Monroeville, Pa., said that as much as 50% of short-term agricultural production loans are funded using advances from the Federal Home Loan banks.

"Their loss, or any changes that would impair their ability to offer low-cost funding, would present a very significant challenge to community banks serving a variety of markets from coast to coast," Zimmerman, who was testifying on behalf of the Independent Community Bankers of America, said in written testimony.

So far the administration has declined to offer a concrete proposal for the future of the housing government-sponsored enterprises, but it has suggested the Home Loan banks should at least be addressed as part of a revamp. Options range from placing restrictions on the types of lending that Home Loan banks may support to forcing a consolidation of the 12 regional banks. Some have also called to restrict membership to small institutions and restricting investments in risky assets.

During the hearing, some lawmakers suggested changes were necessary.

"Do we need 12 Federal Home Loan banks?" asked Rep. Randy Neugebauer, R-Texas, who chairs the House Financial Services oversight subcommittee. …

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