The past three years provided a stern reminder that housing is the beating heart of both our nation's economy and its communities. There is no doubt that our housing finance system is in need of healing, but it is vital that policymakers do no harm. Community lenders do not require intensive care.

The 12 Federal Home Loan banks are a source of strength and stability for the community banking system. They enable the delivery of credit to communities for homeownership and rental housing, businesses, infrastructure and jobs. In her statement last week to the House Financial Services Committee's hearing on the future of housing finance, Sarah Rosen Wartell, executive vice president of the Center for American Progress Action Fund, said, "The goals of the housing finance system should include liquidity, stability and affordability."

These are values the Federal Home Loan Bank System provides to its more than 8,000 community member-lenders every day. The system has remained a stable source of credit for local lenders throughout this most recent crisis because that is precisely what it was designed to do when it was created eight decades ago, during the Great Depression.

During the hearing, Chairman Barney Frank said that the Federal Home Loan banks "play a very important role in housing finance." The 12 Federal Home Loan banks have repeatedly been called "a system that works," and it is a system that must be allowed to continue to work if the economy is to fully recover.

The most concise way to capture what the Federal Home Loan Bank System means to the economy is that it supports the local lender. Of course, as the past three years have proven, it is local lenders who are supporting the nation. While the tactics of the shadow banking industry have created veritable ghost towns of homes left vacant by irresponsible, inappropriate lending, the local lender continues to build strong, vibrant communities through the simple, time-tested method of providing affordable mortgages suitable for each individual borrower. It was not these regulated local lenders — active, involved and invested members of the communities they serve — that brought our economy to the brink of disaster. They continue to play an important role in its turnaround.

The Home Loan banks support this role by providing these community lenders with a consistent source of liquidity. Wartell also said, " … to ensure that U.S. housing markets are relatively stable, this credit liquidity must be relatively constant over time, including during economic and financial downturns." At the height of this most recent crisis, while other sources of credit froze, the Home Loan banks continued to provide their members with liquidity, with advances topping $1 trillion during the third quarter of 2008. Our members pour these advances back into the community in the form of home loans and other investments aimed at strengthening communities, such as small-business and agricultural loans. This countercyclical lending is vital to the continued survival of the housing system; without Home Loan bank advances, the economic downturn of the past three years could have been significantly worse.

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