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Legislative Updates

March 23, 2007

This update covers developments since the last update (2/20/07).

I. GSE Regulatory Reform

On March 9, Chairman Frank, Rep. Mel Watt (D-NC), Rep. Richard Baker (R-LA) and Rep. Gary Miller (R-CA) introduced H.R. 1427, a revised version of the bill that passed the House in the last congress. Hearings were held in the Capital Markets Subcommittee on March 12, including testimony by John Price, and the full committee held a hearing on March 15.

H.R. 1427: Upon introduction, Treasury under secretary for domestic finance Robert K. Steel strongly endorsed the bill. Steel said, "Chairman Frank has introduced a bill that will significantly improve the supervision of the GSEs. This legislation creates a strong regulator, with authorities that are commensurate with other financial regulators' powers, to ensure that the housing finance system remains vibrant."
The bill differs from the bill that passed the House in the 109th Congress (H.R. 1461) in a number of ways that affect Fannie Mae and Freddie Mac, but there are no changes with respect to FHLBanks.
GSE Hearings: On March 12, John Price and representatives of banking trades testified before the Capital Markets Subcommittee on GSE reform. John testified on behalf of the Council of Federal Home Loan Banks. His testimony can be found here.

Additional testimony can be found on the committees website here.

On March 15, representatives from Treasury, HUD, OFHEO (the regulator of Fannie Mae and Freddie Mac), the CEOs of Fannie Mae and Freddie Mac, and housing advocates testified. These statements can be found here.

Chairman Kanjorski raised the importance of retaining the FHLBank appointive director process as well as the need to reinforce the importance of the economic and community development mission of the FHLBanks.

In his opening statement, Chairman Kanjorski said:

We should also look at the upcoming legislative debates as an opportunity to update the statutory mission of the Federal Home Loan Bank System to reflect what it actually now does. In 1999, I worked with then-Chairman Baker to allow the Federal Home Loan Banks to provide liquidity to community financial institutions for the purposes of serving small farm, small business, and small agri-business customers.

In its bill in the last Congress, the Senate Banking Committee had language that would have explicitly added such economic development activities to the mission of the Federal Home Loan Banks. This idea has merit, and we ought to consider it in this chamber.

Rep. Capito (R-WV) said in a statement,

I am concerned that, absent congressional direction, the deputy mission regulator might create burdensome regulations on the Federal Home Loan Banks’ primary product, loans to member banks. Let us keep in mind that the ultimate mission test is applied to the profits generated by these loans in the form of a ten percent tithe that is applied to affordable housing grants.

Secondly, I believe the Federal Home Loan Banks represent an untapped resource for community and economic development. Their ability to issue letters of credit, provide direct investment in qualifying projects and provide financing for economic development makes them an important resource as federal, state and local dollars become more constricted. I am pleased that H.R. 1427 includes the provision subcommittee Chairman Kanjorski authored last year to allow Federal Home Loan Banks to provide credit to community banks to support economic development. I can assure you this will have a direct positive impact in my district and throughout the state.