July 24, 2024
The Wayward Mission of the Federal Home Loan Bank System
Adam Fagen CC BY-NC-SA 2.0
I recently submitted this comment to the Federal Housing Finance Agency in response to its request for input about the mission of the Federal Home Loan Bank System. It opens,
The Federal Housing Finance Agency (the “FHFA”) has requested Input regarding the regulatory statement of the Federal Home Loan Bank System’s (the “System”) mission to better reflect its appropriate role in the housing finance system. I commend the FHFA for being realistic about the System in its Request for Input; it acknowledges that there is a mismatch between its mission and its current operations.
The System’s operations do not do nearly enough to support the System’s stated mission of supporting the financing of housing. The System should recommit to that goal in measurable ways or its name and/or mission should be changed to better reflect its current operations.
While the 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. Or 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. But best of all would be a recommitment by the System to the measurable support of financing for housing.
This comment draws from a column (paywall) I had published when the FHFA first embarked on its reevaluation of the FLBLS.
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