ATLANTA - After years of trying, credit unions finally got a seat on a Federal Home Loan Bank board of directors.
The appointment of Thomas Webber, chief financial officer of IDB-IIC FCU, in Washington, represents a milestone for the credit union lobby, which has been working to gain greater representation on the FHLBs as their membership has grown to almost 1,000 credit unions.
"We've been lobbying the system," said Mary Dunn, vice president, regulatory affairs for CUNA, "because there really has not been adequate representation on the (FHLB) boards."
"The number of credit unions that are members is growing because they offer a number of really good programs," said Dunn.
Lobbying For Recognition
CUNA and NAFCU have been lobbying to get some kind of recognition of the growing role credit unions are playing in the FHLB system, which has about 8,100 financial institution members. "There ought to be some kind of mechanism for getting credit unions on the board," said Dunn. "This is going to be an issue going forward, as we see more credit unions in the system."
But she acknowledged the political difficulty in expanding credit unions' role in a system that was created to serve savings and loans and only expanded to include credit unions, commercial banks and insurance companies in 1989, when the S&L crisis threatened the viability of the FHLBs.
The bias against credit unions is also evident in other ways, as credit unions receive far less than other member institutions in affordable housing grants and other assistance than the 12% of the system they represent.
For example, the FHLB of Des Moines announced last week it had awarded more than $8 million in housing grants for members to offer urban and rural home buyers, but just $500,000 of it, or just 6%, went to credit unions. The funds will allow participating institutions to give grants to eligible home buyers to pay down payments or closing fees.
And credit unions are regularly left out of the millions of dollars in affordable housing grants each of the 12 FHLBs is required to fund with 10% of its annual earnings.
Webber's Financial Pedigree
Webber, who has more than 35 years of banking and investment management experience, the last seven with IDB-IIC FCU, is the only credit union representative on the boards overseeing the 12 FHLBs. The $270-million credit union serves mainly employees of the Inter-American Development Bank and the Inter-American Investment Corp., two multi-lateral loan programs.
The FHLBs were created during the Great Depression to provide low-cost funding for mortgages. The system attracts credit unions and other lenders for two main reasons. The first is the low-cost advances the FHLBs provide for mortgage programs, which are also used by the recipients for arbitrage in the credit markets. The second reason is that most of the FHLBs regularly pay an attractive dividend on their stock that is usually higher than returns credit unions are able to earn on other investments.(c) 2006
