Big banks, Nonbanks Largely Absent from FHFA's Home Loan Bank Inquiry

Source: American Banker

Dozens of community bankers flocked to Washington this past week to discuss the relevance of the Federal Home Loan Bank System. The regulatory review may determine whether the little-known but politically powerful cooperative is fulfilling its congressionally mandated mission to "provide reliable liquidity to its member institutions to support housing finance and community investment." 

One by one, small community bankers and housing experts spoke virtually or from a lectern in the high-ceilinged auditorium at Constitution Center the headquarters of the banks' regulator, the Federal Housing Finance Agency. 

FHFA Director Sandra Thompson this summer launched the first review of the Federal Home Loan Bank System in nearly 100 years. The review may result in changes to the Home Loan banks, a group of 11 regional banks across the country that provide liquidity to banks but whose continued relevance has increasingly been called into question. 

Largely absent from the listening tour that ended on Oct. 2 were large banks and insurance companies. Big banks and insurers such as MetLife, JPMorgan Chase and TIAA, were among the top 10 users of FHLB funding last year, accounting for more than 70% of advances at five of the 11 Home Loan Banks, according to the bank's financial reports. So while smaller banks have been defending the system as it is, it is larger banks, nonbanks and insurance companies that are actually the primary beneficiaries. 

47 Virginia-based credit unions are members of the Federal Home Loan Bank System.