On Aug. 9 the Federal Home Loan banks' affordable housing program celebrated its 10th anniversary. Established by Congress in 1989, this dynamic program provides substantial subsidies for the creation and preservation of affordable housing.

Each of the 12 Federal Home Loan banks funds its own regional affordable housing program with 10% of annual profits. This decade-old commitment has meant that the Home Loan banks have awarded funds totaling over three-quarters of a billion dollars for 5,300 locally directed housing initiatives across the country. More to the point, these initiatives have helped generate nearly 200,000 new affordable housing units.

The affordable housing program has succeeded beyond anyone's expectations. It has been an experiment that has worked and is working. The program works hand in hand with federal housing programs, saves tax dollars, and often serves as a "keystone funding source" in affordable housing initiatives. Congress can be proud of what it created, for it has promoted extraordinary innovation through public-private partnerships, leveraging a huge amount of dollars to help house low- and moderate-income Americans.

The federal law under which the program was created states that the Home Loan banks will provide each year either $100 million or 10% of profits, whichever is greater, to fund the affordable housing initiative. Because of the strong economy and prudent management by the Home Loan banks, the system has provided well in excess of $100 million for a number of years. For example, in 1999 it will provide $169 million.

As a director of the Federal Housing Finance Board, the agency charged with ensuring the safety and soundness of the Home Loan banks, I know from firsthand experience that they are proud of their contributions and do not want their affordable housing contributions cut.

Unfortunately, seeds are being sown during this anniversary period that will lead to a dramatic reduction in funding.

Finance Board Chairman Bruce Morrison recently unveiled a new proposal, the financial management and mission achievement initiative. The Home Loan banks would be required to divest themselves of a key and worthy housing investment vehicle, mortgage-backed securities.

This cut would reduce the income for the bank system and cut the dollar flow into affordable housing.

I believe this decision is wrongheaded, and I hope the board would reconsider it.

To state that mortgage-backed securities are not housing-related is simplistic and arbitrary. Mortgage-backed securities, like it or not, are a critical part of the housing finance mix. Pull out this brick and the whole house could collapse. That there are other housing investments more socially desirable is a given, and a laudable goal is to maximize them. But what we are talking about is a subtle nuance.

Mortgage-backeds provide the needed, incremental income for a fair return and directly further the economic purpose of the Home Loan banks. Now is not the time to needlessly mandate a restructuring of Home Loan Bank portfolios to appease a few vocal critics of the system, particularly when such a restructuring is being done on the backs of those who can least afford it.

As Chairman Morrison said as a member of Congress about the affordable housing program 10 years ago, this is only "a small amount of subsidy for the poorest Americans to get a home that they can afford."

Given the cutbacks in federal subsidy over recent years and the obvious social need of millions of families, now is not the time to diminish this modest subsidy for the poorest Americans.

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