Future of Funding
Gulledge, Bob, Independent Banker
My bank, Citizens' Bank in Robertsdale, Ala., has been a Federal Home Loan Bank member for seven years. The membership has helped my bank and thousands of other community banks tremendously in meeting our customers' borrowing needs.
As more and more community banks join the FHLB System and use its services, the 70-year-old network continues to adapt to the changing structure of the financial services industry. The Gramm-Leach-Bliley Act, for instance, made it easier for smaller community banks to participate in the system. Meanwhile, ever-bigger financial institutions operating in ever-larger geographic market areas are creating new challenges for the 12-district system.
Moreover, for the first time since its establishment, the Federal Housing Finance Board, the FHLB System's safety and soundness regulator, has all of its five board seats filled. Former North Dakota businessman John Korsmo, the Finance Board's new chairman, is focusing on strengthening the FHLB System's foundation while also improving it.
Amid these developments, the FHLB System is facing one of its most critical decisions that will set its future course. Some of the system's largest members-most notably its largest, Washington Mutual Bank-have asked the Finance Board for permission to join more than one FHLB district under a single charter. These pending multi-district applications, if approved, would give Washington Mutual membership in FHLB districts where the thrift has acquired major institutions-Bank United in Texas and Dime Savings Bank in New York. Some FHLB members strongly oppose the request, while others strongly support it. There are good arguments on both sides of the issue.
The Finance Board has put out a formal request asking the public for their views. Broad issues being thought through are how to preserve the FHLB System's cooperative structure, maintain the system's regional nature and uphold the balance of power between FHLB members of different sizes. …