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Julia Wanzco, (202) 225-5406

ENGLISH PROPOSAL TO SPUR ECONOMIC DEVELOPMENT; BIPARTISAN BILL RECEIVES PRAISE FROM ERIE MAYOR AND FHLBANKS

ERIE, PA, April 13, 2006 — To help promote economic development and revitalize local communities, U.S. Rep. Phil English (R-PA) today touted legislation he will soon introduce to allow municipal bonds backed by letters of credit (LOC) for Federal Home Loan Banks (FHLBanks) to be treated as tax-exempt. English was joined by the Mayor of Erie Joe Sinnott and the President/CEO of the Federal Home Loan Bank of Pittsburgh John Price during his announcement today at the City Hall in Erie, PA.

"Municipal bonds have long been used as a critical tool for economic development in communities fighting to attract and retain well paying jobs at a local level," said English, a member of the House Ways and Means Committee, which has jurisdiction over tax policy. "By closing an existing loop hole in the tax code, my proposal will increase access to capital for municipalities, just like Erie, helping to bolster our area's economic growth and stimulate job creation."

"I am pleased to support Congressman English's legislation which will expand access to resources to help finance the city's public projects," said Sinnott. "I look forward to continuing to work with the congressman and the Federal Home Loan Bank in exploring initiatives that are going to further improve the quality of life for Erie residents. Now is a time to put partisan politics aside and work together to turn this city around."

"Obtaining a performance guarantee from an FHLBank will lower borrowing costs, save taxpayers money, serve as a catalyst for action by government and give local financial institutions new opportunities to serve their communities," said John R. Price, president and chief executive officer of the Federal Home Loan Bank of Pittsburgh, who joined Congressman English and Mayor Sinnott in making the announcement. "These benefits are underscored by the statements of support put forward by the Pennsylvania Association of Community Bankers and Pennsylvania Housing Finance Agency as well as leading national organizations. We thank Congressman English for his continued leadership in finding new ways to spur additional community revitalization."

Under current law, state and local governments are able to issue tax-exempt bonds to help fund community and economic development projects. To ensure that bond investors will be paid in full, FHLBanks provide a credit enhancement known as a letter of credit (LOC).
The Internal Revenue Service (IRS) has classified FHLBank LOCs as a federal guarantee, triggering the loss of the bonds' tax-exempt status. Since 1984, financial institutions such as Fannie Mae and Freddie Mac among others have been permitted under Section 149(b) of the Internal Revenue Code (IRC) to issue LOCs in support of state and municipal tax-exempt bonds.

The English proposal would update the U.S. tax code to exempt FHLBank LOCs from its current classification as a federal guarantee. This measure is useful especially for high risk credit cities, such as Erie, because it will expand the city's access to credit and reduce the cost to taxpayers of public projects such as wastewater treatment facilities, fire stations, medical clinics and infrastructure improvements.

To date, the English proposal has been endorsed by the National League of Cities, United States Conference of Mayors, America's Community Bankers (ABC), Independent Community Bankers of America (ICBA) and the Pennsylvania Association of Community Bankers (PACB).

"This type of assistance from FHLBanks is invaluable especially for cities trying to create new opportunities, while looking at dwindling assistance from the federal government and, possibly, their states," said Don Plusquellic, mayor of Akron, OH, and former president of the Conference of Mayors. "My sincere thanks to Representative English for his compassion for and understanding of the American city and its needs today."