The historic Federal Home Loan Bank Board Building CC BY-SA 4.0
The U.S. Government Accountability Office (GAO) has invited me to participate in a review of the Federal Home Loan Banks’ Liquidity Role During Financial Crises. I have previously written about the FHLBs here. The invite reads in part,
GAO is an independent, nonpartisan federal agency that supports Congress by evaluating federal programs and activities. In response to a request from the House Committee on Financial Services, our team is conducting a review of the Federal Home Loan Banks’ (FHLBank) liquidity role during financial crises.
As part of our work, we plan to provide Congress and the public more information on the strengths, limitations, and feasibility of certain changes that academics, interest groups, and others have suggested to address perceived issues with FHLBank lending during crises. We identified the changes through a review of academic, trade, and grey (dissertations, blog posts, etc.) literature since 2007. We then narrowed the list down to a shorter list of changes for further discussion. While we recognize there is currently substantial discussion around the FHLBanks’ housing mission and membership, we are focusing on FHLBanks’ lending to banks. Please note that the changes to be discussed are not GAO recommendations.
The GAO is seeking input “from individuals, organizations, federal agencies, and FHLBanks on the list of changes to address concerns with FHLBank lending during crises.” I had previously written that while the FHLBank System
was originally designed to support homeownership, it has morphed into a provider of liquidity for large financial institutions.
Banks like JPMorgan Chase & Co., Bank of America Corp., Citibank NA and Wells Fargo & Co. are among its biggest beneficiaries and homeownership is only incidentally supported by their involvement with it.
As part of the comprehensive review of the system, we should give thought to at least changing the name of the system so that it cannot trade on its history as a supporter of affordable homeownership. But we should go even farther and give some thought to spinning off its functions into other parts of the federal financial infrastructure as its functions are redundant with theirs.
This GAO review is a good start to subjecting the System to such a comprehensive review!
