The pundits will continue to debate the meaning of November's election for months, if not years to come. Whether a rejection of one party, the support of a new policy direction, or yet another turn of a cranky electorate, one message was absolutely clear: Voters have a strong preference for local bodies making local decisions.
Decentralization is in; centralization is out.
Corporate governance will also be among the hottest issues considered during the upcoming debate on reform of the Federal Home Loan Bank System, which is likely to take place during the next session of Congress. And if Congress is looking for volunteers in this age of empowerment, the Home Loan Bank System will be at the head of the line.
Under current federal law, the system's regulator, the Federal Housing Finance Board, is far more than a safety-and-soundness regulator. It is effectively the manager of the 12, banks day-to-day activities.
Finance Board approval is now required for business plans, budgets, and corporate bylaws. The board hires outside auditors for the banks and determines how much they will be paid.
It approves the banks, travel policies and determines the mileage rates at which they will be reimbursed.
The Federal Home Loan banks are even required to seek the approval of the Finance Board for meetings of the board of directors outside their districts. When the Seattle bank board recently met in San Francisco with our sister bank, Finance Board approval was first required.
Virtually every aspect of the Federal Home Loan banks, widely acclaimed affordable housing program is regulated by the board, despite a mandated contribution level and formula for recipients.
The delays that result do not merely create frustration, but can threaten the viability of the often fragile nature of affordable-housing finance.
The most frustrated of all with the current situation are those local nonprofits on the front lines of developing affordable housing.
Safety-and-soundness regulation has little to do with executing management responsibility. Virtually every body that has studied the Home Loan Bank System, from the Department of Housing and Urban Development to the General Accounting Office, has identified this overlap of management and regulation as a problem.
The Finance Board, under the leadership of Acting Chairman Nicolas Retsinas and Director Lawrence Costiglio, were supporitive of Home Loan Bank System's efforts to identify those areas that can be delegated back to the banks long before this tsunami of an election washed out much of Congress.
They have also reduced agency costs, which are paid for by the 12 banks. The agency's costs are now less than its 1991 approved budget.
But even with the best of intentions, many of those management delegations under consideration can not be accomplished without congressional action. It is up to Congress to fully and appropriately empower the banks and their boards of directors so that the Federal Home Loan Bank System may better meet the needs of its customers and the communities they serve.
In this new Congress, Republicans and Democrats alike want to demonstrate that they can make more happen with less cost and frustration. They need look no further than the Federal Home Loan Bank System.
