[Congressional Record Volume 141, Number 65 (Friday, April 7, 1995)]
[Extensions of Remarks]
[Page E863]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]


      THE FEDERAL HOME LOAN BANK SYSTEM MODERNIZATION ACT OF 1995

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                         HON. RICHARD H. BAKER

                              of louisiana

                    in the house of representatives

                         Friday, April 7, 1995
  Mr. BAKER of Louisiana. Mr. Speaker, today I am introducing 
comprehensive legislation to provide the Federal Home Loan Bank System 
the tools it needs to expand on the significant contributions it has 
already made to the nation's housing finance delivery system. It is 
especially fitting today, as we debate the future of housing and 
housing finance in the 104th Congress, to work with an existing private 
entity to deliver a much need public purpose.
  Since 1932, the Bank System has served as a link between the capital 
markets and local housing lenders, quietly making more money available 
for housing loans at better rates for Americans. Today the Federal Home 
Loan Banks' 5,400 member financial institutions provide for one out of 
every four mortgage loans outstanding in this country, including many 
loans that would not qualify for funding under secondary market 
criteria. The Bank System accomplishes this without a penny of taxpayer 
money through an exemplary partnership between private capital and 
public purpose.
  More than 3,200 of the Bank System's current members are commercial 
banks, credit unions, and insurance companies that became eligible for 
Bank membership in 1989. They demonstrate the market's value of the 
Bank System by investing in the capital stock of the regional home loan 
banks. These institutions have recognized the advantages of access to 
the Bank System's credit programs and have responded to their local 
communities' needs for mortgage lending. As the financial marketplace 
grows larger and more complex, I envision the Bank System as a 
necessary vehicle for serving community lending needs especially in 
rural and inner-city credit areas.
  The Federal Home Loan Bank System serves an active and successful 
role in financing community lending and affordable housing through the 
Affordable Housing Program [AHP] and the Community Investment Program 
[CIP]. The AHP program provides low-cost funds for member institutions 
to finance affordable housing, and the CIP program supports loans made 
by members to community-based organizations involved in commercial and 
economic development activities to benefit low-income areas.
  The Federal Home Loan Banks' loans--advances--to their members have 
increased steadily since 1992 to the current level of more than $122 
billion. Since 1990, the banks have made $7.1 billion in targeted 
Community Investment Program advances to finance housing units for low-
and moderate-income families and economic development projects. In 
addition, the banks have contributed more than $350 million through 
their affordable housing programs to projects that facilitate housing 
for low- and moderate-income families.
  While these figures are impressive, the Federal Home Loan Bank System 
needs some fine tuning to enable it to continue to meet the needs of 
all its members in a rapidly changing financial marketplace. My 
legislation recognizes the changes that have occurred in home lending 
markets in recent years which is reflected in the present composition 
of the Bank System's membership. Enacting this legislation will enhance 
the attractiveness of the banks as a source of funds for housing and 
related community development lending, and will encourage the banks to 
maintain their well-recognized financial strength. Specifically, my 
legislation: Articulates the Bank System's mission in statute to 
emphasize the System's important role of supporting our nation's 
housing finance system by providing long term credit and liquidity to 
housing lenders; establishes voluntary membership and equal terms of 
access to the System for all institutions eligible to become Bank 
System members, and eliminate artificial restrictions on the Banks' 
lending to member institutions based on their Qualified Thrift Lender 
status; equalizes and rationalizes Bank members' capital stock purchase 
requirements, preserving the cooperative structure that has served the 
System well since its creation in 1932; separates regulation and 
corporate governance of the Banks that reflect their low level of risk 
while ensuring the Banks can meet their obligations; and modifies the 
methodology for allocating the Bank System's annual $300 million 
REFCORP obligation so that the individual Bank's economic incentives 
are consistent with their statutory mission to support home lending.
  Taken together, these interrelated provisions address the major 
issues identified in a recent series of studies of the Bank System that 
Congress required from the Federal Housing Finance Board [FHFB], the 
Congressional Budget Office [CBO], the General Accounting Office [GAO], 
the Department of Housing and Urban Development [HUD] and a Stockholder 
Study Committee comprised of 24 representatives of Federal Home Loan 
Bank stockholder institutions from across the country.
  My legislation will make the banks more profitable by enabling them 
to serve a larger universe of depository institution lenders more 
efficiently, and it will return control of the banks to their regional 
boards of directors who are in the best position to determine the needs 
of their local markets. At the same time, it will provide for the 
safety and soundness oversight necessary to ensure that this large, 
sophisticated financial enterprise maintains its financial integrity 
and continues to meet its obligations.
  I first offered comprehensive legislation to modernize the Bank 
System in 1992. The legislation is the culmination of efforts over the 
last 3 years to address in a balanced way the concerns of the bank's 
member institutions, community and housing groups, and various 
government agencies. I look forward to passage of this important 
legislation to modernize an institution that works to improve the 
availability of housing finance and the opportunity of home ownership 
for all Americans.


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