The agency that supervises the 12 Federal Home Loan banks is overreaching its authority, Sen. Lauch Faircloth charged Friday.
The North Carolina Republican announced that the Senate Banking Committee's financial institutions subcommittee, which he heads, will hold an oversight hearing on the Federal Housing Finance Board Sept. 24.
The lawmaker said that a new mission statement proposed by the agency could force the Federal Home Loan banks to fulfill unmet credit needs in the communities they serve.
The plan "goes too far from the traditional mission of the banks," Sen. Faircloth said in a prepared statement. "The mission of the Home Loan banks is a decision for Congress to make, not the finance board."
The finance board plan, issued in April as an advanced notice of proposed rulemaking, requested comment on several new ways that the system could meet its congressionally mandated mission of promoting and financing housing and community development.
Options suggested by the finance board included offering new products targeted to low-income housing or community needs, furnishing technical assistance to member institutions, and giving rebates or discounts to member institutions that meet certain housing or community investment goals.
The finance board also asked whether it should issue a policy statement listing nontraditional activities that would help Federal Home Loan banks fulfill their mission.
In a letter sent to Sen. Faircloth Friday, finance board Chairman Bruce A. Morrison said the senator had misread the agency's objectives. "There seems to be a misunderstanding about the finance board's intention regarding mission," he wrote. "We did not issue a statement of mission."
Rather, Mr. Morrison argued, "the finance board requested public comment on how best to discharge our statutory responsibility to ensure that the FHLBanks carry out their ... mission."
Sen. Faircloth also criticized the appointment of Roberta Achtenberg, former assistant secretary of the Department of Housing and Urban Development as an assistant director to the board of the San Francisco Home Loan Bank. He described HUD's former chief fair-lending officer as "ultra- liberal."
"This is a clear sign that the administration wants to turn the Home Loan Bank System into a new HUD, and I am not going to let that happen," wrote Sen. Faircloth, who in the previous Congress introduced a bill to abolish HUD.
Separately, Sen. Chuck Hagel, R-Neb., is circulating draft legislation to revamp the Federal Home Loan Bank System.
The measure largely parallels the Federal Home Loan Bank provisions approved by the House Banking Committee June 20. For example, it would make system membership voluntary, even for thrifts.
However, Sen. Hagel, a freshman on the Senate Banking Committee, is proposing to remove several restrictions placed on the system in the House bill.
For example, Sen. Hagel's measure does not include a provision forcing district banks to limit investments to those necessary for liquidity, safety and soundness, and housing finance. This provision has come under fire from several Home Loan Bank presidents.
Industry representatives applauded Sen. Hagel's interest in Federal Home Loan Bank reform.
"If system reform is going to go anywhere during this Congress, we need a champion on the Senate side to be a catalyst," said Robert Davis, director of government relations for America's Community Bankers.