WASHINGTON - In a rare display of unity, the 12 Federal Home Loan banks are proposing to disclose much more information about their finances -- an attempt to head off a move to make them register their stock with the Securities and Exchange Commission.
The Home Loan banks are offering to file annual and quarterly reports containing the same information as the SEC's 10-K and 10-Q filings. They would also file data about "additional reportable events," or the equivalent of the SEC's 8-K reports.
The government currently reports on the financial performance of the 12 banks as a group, with no breakdown by institution.
The banks' proposal would allow them to continue making financial disclosures to the Federal Housing Finance Board rather than to the SEC -- a transfer of authority that the banks said was unnecessary and potentially dangerous.
In testimony Monday before the Finance Board, James D. Roy, the president of the Home Loan Bank of Pittsburgh, said the consequences of forcing the Home Loan banks to make the same disclosures as publicly held companies "are so profound as to threaten radical transformation in the very nature and structure" of the system.
Dean M. Schultz, the president of the San Francisco bank, said the only difference between the proposed disclosure regime and that of public companies would be "specific modifications that are needed as a result of the unique attributes of the bank system and the banks' capital stock."
The idea of requiring SEC registration for the debt and equity of the 12 Home Loan Banks gained momentum in July with a push from the Treasury Department's Under Secretary for Domestic Finance, Peter Fisher. In a letter to the regulators of all housing-related government-sponsored entities, Mr. Fisher asked them to explore the possibility of requiring uniform financial disclosures from the GSEs, which would be filed with the SEC.
The request came after the mortgage giants Fannie Mae and Freddie Mac, under pressure from Congress and regulators, agreed to voluntarily register their stock with the SEC. The question of registering their debt with the agency was left to a study, due to be completed early next year.
In November, Finance Board Chairman John T. Korsmo asked members of that agency's staff to draft two proposals: one to subject the debt issued by the Home Loan banks to disclosure requirements modeled on the Securities Act of 1933, and a second to have them register their stock with the SEC under the provisions of the Securities and Exchange Act of 1934.
The Home Loan banks are owned by their members, nearly 8,000 banks and thrifts nationwide. And unlike Fannie and Freddie stock, the ownership stakes are not traded publicly.
The testimony of the bank presidents, as well as statements submitted to the Finance Board by other institutions and bank trade groups, took pains to point out the differences between the nontrading stock issued by the Home Loan banks and the publicly traded shares of Fannie and Freddie.
"Unlike other housing government-sponsored enterprises, the Federal Home Loan banks are cooperatives in which a member joins the [bank] and becomes a shareholder so that it can obtain the benefits of membership, not to subject itself to the rewards and risks of investing," said Alfred A. DelliBovi, the president of the Home Loan Bank of New York.
Mr. Korsmo indicated in his opening statement at Monday's meeting, however, that the Finance Board expected to move ahead this month with the 1933 act's requirements. The more controversial proposal concerning the 1934 act would be discussed further, he said.
"At the end of the day, the SEC and the Finance Board will have to carefully consider whether the SEC can or cannot accept disclosure jurisdiction over the system without treading on the exclusive safety-and-soundness jurisdiction of the Finance Board," Mr. Korsmo said.
He said he understood that registering Home Loan Bank stock with the SEC might not advance "the interests of the investors and the interests of the bondholders. … But I think it is important to keep in mind that there is another interested party in this, and that is the members of the public, who do not necessarily have the same vehicles available to them to understand the nature of the obligation that they are underwriting."
Mr. Korsmo added that though Home Loan banks differ markedly from Fannie and Freddie, there is one similarity: "They are government-sponsored enterprises that, at some level, are responsible to the public."
