It is not by accident that the Federal Home Loan Bank System continues to work after more than 80 years. It is by design. When Congress created the Federal Home Loan Bank System in 1932, it produced a national network of regional cooperatives tasked with the mission to provide reliable liquidity to community-based member institutions to support housing finance and community investment through collateralized wholesale loans. And for the past eight decades, the 11 Federal Home Loan banks have operated within the parameters set by Congress and overseen by a series of federal regulators as the system evolved. On Jan. 12, the Federal Housing Finance Agency — the system’s regulator — finalized its FHLB membership rule, ensuring that the Home Loan banks will continue to operate as Congress intended, and that our nation’s local lenders will continue to have access to a reliable, cost-effective source of funding.
As the former top prudential regulator of the Federal Home Loan Bank System, I am familiar with the full scope of its stakeholders: its membership of more than 7,200 brick-and-mortar financial institutions; housing organizations; policymakers; and elected officials at the federal, state and local levels. This broad spectrum was well-represented in the critical response the FHFA received on its proposal for the membership rule.