In 2013, the Federal Home Loan Bank of New York paid more than $100 million to its members in the form of a steady dividend. In 2012, the FHLBNY made $1 billion in low-cost disaster relief funding available to its members to help their communities in the wake of Superstorm Sandy. And since 1990, the FHLBNY has partnered with its members to award nearly $450 million in affordable housing grants. While these three factors are very important to Investors Bank, we are a member of the Home Loan Bank for different reasons.
We have belonged for more than 80 years because the FHLBNY, just like the other 11 Banks in the Federal Home Loan Bank System, has been a stable and reliable partner for its members. As a member, I urge policymakers to ensure that this vital support system maintains the stability that makes it so valuable to our nation's community lenders.
The Federal Home Loan Banks exist to provide members with access to a reliable and stable source of liquidity so they can meet the credit needs of their communities at all points in the economic cycle. Throughout the recent financial crisis, for many community lenders, a Federal Home Loan Bank membership helped keep their operation functioning. Since the crisis, the Federal Home Loan Banks have shined brightly as a reliable system that works. The Home Loan Bank structure is a key reason for its stability: each Federal Home Loan Bank is a self-capitalizing cooperative. Each member must hold a certain level of capital stock and maintain "activity-based" capital stock in proportion to the amount of advances it has outstanding. Members do not trade on this stock and its price does not fluctuate. The capital provides the foundation for our Home Loan Bank, and as members, we only insist that our capital be protected.
This foundation supports a broad membership with institutions of all sizes and types, including thrifts, commercial banks, credit unions, insurance companies and community development financial institutions. As diverse as this membership is, every institution has key common traits: each is, or owns, a regulated depository institution and a brick-and-mortar member of the community. Just as these members' capital provides the foundation for their Home Loan Bank, so too does their responsible lending provide the foundation for the economies in the communities they serve.
Now some want to significantly alter this time-tested formula with "membership-lite."
On Oct. 31, in testimony before the Senate, David H. Stevens, president and CEO, Mortgage Bankers Association stated, "MBA believes serious consideration should be given to expanding Federal Home Loan Bank membership eligibility to include access for non-depository mortgage lenders .In exchange for membership in the FHLB system, these institutions could be required to hold a limited class of stock with appropriate restrictions."
The strength of the Home Loan Bank is in its members. I know this is true. Federal Home Loan Bank members are community-focused local lenders committed to the goals and needs of their customers. As local lenders, we do not look at our borrowers as a one-time transaction, but rather as partners in a long term relationship that can benefit the entire community. This type of partnership is what we have with our Home Loan Bank, too.
Over the past five years, we have heard about the importance of having "skin in the game." This is as true for loans as it is for Home Loan Bank membership our capital is our investment in the cooperative, and our capital is that skin in the game. Now is not the time to lessen the capital standards for membership.
On the FHLBNY's web site, a quote from Al DelliBovi, president of the FHLBNY, is given prominence. It says: "As long as markets remain open and a member has pledged sufficient qualifying collateral and is willing to purchase the requisite amount of capital stock, the Home Loan Bank will always continue to lend to our members to help them meet their communities' needs." This is why Investors Bank, just like so many community lenders across the nation, is a member of the Federal Home Loan Bank. It is an investment and a membership that must be protected, as it is a membership that is vital in helping us fulfill our mission as a community bank.
Kevin Cummings is president and chief executive officer of Investors Bancorp and Investors Bank in Short Hills, N.J., a member of the Federal Home Loan Bank of New York. The FHLBNY and its board recently elected him a member director, who will represent FHLBNY members in New Jersey.