WASHINGTON -- Bankers on Thursday urged the Federal Housing Finance Board to reject the views of antipoverty activists who want the agency to tie cash advances more closely to housing loans.
During a finance board hearing called to gather comments on legislation to modernize the Federal Home Loan Bank System, industry representatives warned against setting any specific system lending goals.
"I know my bank would leave the system if specific targets were established," said Richard L. Mount, president and chief executive of Saratoga National Bank in Saratoga, Calif.
Mr. Mount, who is also president-elect of the Independent Bankers Association of America, said the IBAA strongly opposes establishing specific lending mandates for fear they may lead to credit allocation.
However, Alan J. Fishbein, general counsel for the Center for Community Change, said the FHLB system should follow the lead of government-sponsored enterprises like the Federal National Mortgage Association, or Fannie Mae, which must target a third of its business to housing for low-and moderate-income households.
"You can lead a cow to water, but you can't make it drink," said Mr. Fishbein, referring to the results of a survey showing that the largest users of the system's cash advances were often those with the smallest amount of housing loans in their portfolio.
"There ought to be a condition for these institutions to continue to use the system," he added. "With proper legislation, you could not only lead these cows to water, but make them drink from the trough."
Currently, any system member drawing advances is required to document how it is aiding its community, according to Rita Fair, managing director of the finance board. "Layering some kind of goals on the advances a bank gets could be a disincentive for banks to join the system, and that money is hard to track," she said.
However, the Republican takeover of Congress eases the fears of many in the industry who believe that GOP lawmakers are less willing to subject banks to anything that hints at credit allocation.
"I don't think we'll be asked to bear the brunt of some sort of social agenda," said Paul A. Schos-berg, president of Savings and Community Bankers of America. Lawmakers shouldn't "throw new elements of risk into a system that works very well, especially in an era that is moving towards voluntary membership. Voluntary members just wouldn't stay in the system," he said. As mandated by the Financial Institutions Reform, Recovery, and Enforcement Act of 1989, commercial banks, which make up half of the system's membership, are not restrained from leaving the system and taking their capital with them. Federal savings and loans, however, are required to own stock in the Home Loan Bank System.
Ms. Fair said that once a plan is developed to make the system's capital more permanent, voluntary membership for all members will become a serious goal of the finance board.
"The capital structure is a critical issue for us," said Ron Ence, director of legislative affairs for the IBAA.
The 12 district Home Loan banks provide liquidity for stockholder banks and thrifts that make housing loans by providing low-cost residential mortgage credit.