FHLBank System: Reforms Needed to Promote Its Safety, Soundness, and
Effectiveness (Testimony, 09/27/95, GAO/T-GGD-95-244).

Pursuant to a congressional request, GAO discussed the reforms needed to
promote safety, soundness, and effectiveness within the Federal Home
Loan Bank (FHLBank) System. GAO noted that: (1) the biggest obstacles to
effective FHLBank reform are the Resolution Funding Corporation
(REFCorp) and the Affordable Housing Program (AHP) annual System
obligations; (2) activities undertaken to increase System income to pay
the obligations may have increased the extent of risk in the System; (3)
the fixed nature of the obligations may inhibit potential improvements
in the capital structure, and complicate possible moves toward
consolidation; (4) required capital is not tied to the risks each
FHLBank incurs and it is impermanent; (5) a risk-based capital
requirement would allocate capital on the basis of credit risk and a
retained earnings requirement would provide a buffer for interest rate
risk undertaken by a FHLBank; and (6) administrative control of AHP
along with other management functions should be devolved to FHLBanks
rather than to the Federal Housing Finance Board.

--------------------------- Indexing Terms -----------------------------

 REPORTNUM:  T-GGD-95-244
     TITLE:  FHLBank System: Reforms Needed to Promote Its Safety, 
             Soundness, and Effectiveness
      DATE:  09/27/95
   SUBJECT:  Proposed legislation
             Financial institutions
             Mortgage programs
             Capital
             Internal controls
             Government sponsored enterprises
             Financial management systems
             Federal aid for housing
             Federal corporations
             Banking regulation
IDENTIFIER:  RTC Affordable Housing Program
             Farm Credit System
             Federal Home Loan Bank system
             
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