As Congress funds the federal government through a short-term budget measure and continues working on a solution, the Federal Home Loan Bank (FHLB) system is also in focus by its regulator — the Federal Housing Finance Agency (FHFA). Credit union leaders should be aware of this debate surrounding FHLB’s mission and purpose.
Any considerable regulatory change to the current FHLB system could impact credit union members’ access to liquidity and affordable housing programs, as affordable liquidity remains essential to credit unions and their member-owners. This is true in both healthy economic times and volatile economic periods.
The California and Nevada Credit Union Leagues and the Credit Union National Association (CUNA) are working together to continue stressing the importance of affordable liquidity for credit unions and their members on Capitol Hill, especially as Congress works on a budget solution to fund the federal government during this interim period. As a mortgage and non-mortgage lender resource, the FHLB system has played an increasingly important role in backstopping the credit union liquidity ecosystem and remains a key partner with credit unions — among others.
To that end — and in support of FHLB and its mission to provide credit unions and banks affordable liquidity — a former long-time state financial institutions regulator for California (Jan Owen) is officially backing the home-loan banking system through a published opinion piece in the Sacramento Business Journal and Silicon Valley Business Journal — “Federal Home Loan Banks’ Benefits to Consumers and Economy Outweigh Risks.” Owen is former commissioner of the California Department of Business Oversight, known today as the California Department of Financial Protection and Innovation (DFPI).
Owen is supporting the current FHLB structure just as the FHFA recently released a much-anticipated report on the mission, operations, and efficiency of the 11 FHLB banks after several months of nationwide listening sessions, regional roundtables, public comments, and research. Six areas are analyzed in this report:
Some industry groups and policymakers also think the FHLB system is taking on too much risk, especially after the collapse earlier this year of four larger banks that relied on FHLB liquidity.
The Leagues and CUNA continue monitoring this situation and will keep credit union leaders aware of any updates. The last sentences of Owen’s opinion piece spotlights exactly why the FHLB home-loan banking system is essential in its current form to credit union members and others: “The winners are the American people.”
