Federal Home Loan Bank System: Policy Issues (CRS Report for Congress)
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| Release Date |
Nov. 8, 2007 |
| Report Number |
RL32815 |
| Report Type |
Report |
| Authors |
Edward Vincent Murphy, Government and Finance Division |
| Source Agency |
Congressional Research Service |
Summary:
The Federal Home Loan Bank (FHLB) System comprises 12 regional banks (the Banks) that form a collective government-sponsored enterprise (GSE). As a GSE, the Banks have special ties to the federal government that accord them "agency" status and lead investors in capital markets to infer that the government would step in to make good any failure in the debt of the Banks.
Originally begun in 1932 as lenders to the savings and loan associations that were the primary lenders for home mortgages, the Banks have undergone several changes since the savings and loan crisis of the 1980s. Membership in the Banks has changed, today encompassing more commercial banks than savings associations and including credit unions, insurance companies, and some associated housing providers. Purposes of lendingâwhile still primarily housing-relatedânow include agricultural and small business lending. The changes have also resulted in special mission set-asides for low- and moderate-income housing and special programs for community development. The five-member Federal Housing Finance Board (FHFB) regulates the System.
Some advocate combining the FHFB with the Office of Federal Housing Enterprise Oversight (OFHEO), which is the current regulator of Fannie Mae and Freddie Mac, the other two housing-related GSEs. Differences between FHFB and OFHEO, including capital and ownership standards, requirements for the housing mission, and regulatory powers, complicate regulatory consolidation. In the 110th Congress, two major bills would merge regulation for the housing-related GSEs. Both S. 1100 and H.R. 1427 would combine regulation of the three housing GSEs under a single regulator who would have powers and independence similar to those of the FHFB. H.R. 1427 passed the House on May 22, 2007. S. 1100 was referred to the Senate Committee on Banking, Housing, and Urban Affairs on April 12, 2007. The measures have several important differences. (See CRS Report RL33940, Reforming the Regulation of Government-Sponsored Enterprises in the 110th Congress, by Mark Jickling, Edward V. Murphy, and N. Eric Weiss for additional information.)
The slowdown in housing markets and rise in foreclosures have led to concerns about the health of the FHLBs. Some large non-member lenders have affiliates that are members of a regional FHLB. These affiliates could draw on FHLB resources to move some troubled loans onto System balance sheets. This is a concern because some believe that the government would not let the FHLB System fail, and that such affiliate actions could raise the potential risk and cost to taxpayers.
Possible mergers of FHLBs is another issue. FHLB Dallas has been in negotiations to merge with FHLB Chicago, in part because of the financial difficulties of FHLB Chicago. The potential merger would be the first of its kind and raises several oversight issues, including FHFB approval powers and System organization. This report will be updated as events warrant.
