ICBA - News - News Release - ICBA Voices Concern Over Administration's Recommendations on GSE Bill
ICBA News Release Header


ICBA Voices Concern Over Administration's Recommendations on GSE Bill

Washington, D.C. (Oct. 3, 2003) - The Independent Community Bankers of America (ICBA), the only national trade association exclusively representing community banks, sent a letter Oct. 2, 2003, to House Financial Services Committee Chairman Michael G. Oxley (R-Ohio) expressing concern with two key aspects of the Administration's recent recommendations on legislation (H.R. 2575) to restructure housing GSE regulation.

Copies of the letter were sent to all members of the House Financial Services Committee, as well as the Majority and Minority leadership of the House of Representatives.

The letter, by ICBA President and CEO Kenneth A. Guenther, states:

"First, ICBA is strongly opposed to any measures to include the Federal Home Loan Banks in the new supervisory and regulatory structure of Fannie Mae and Freddie Mac. The FHLBanks should continue to be regulated by a separate and independent agency. Moving supervision and regulation of the FHLBanks under Treasury will create numerous conflicts of interest and conceivable policy biases that will seriously impair the ability of community banks to access this important source of funding. This is an issue of critical importance to community banks. Please recall, it was a recent high level Treasury official who floated the idea that banks using FHLBank advances should be assessed higher risk-based deposit insurance premiums. Since the passage of the Federal Home Loan Bank System Modernization title of the Gramm Leach Bliley Act, community banks have become increasingly dependent on FHLBank advances as a competitive and flexible funding source. This may not be in sync with the philosophy of present and prospective Treasury officials, and regulatory actions have the potential of undermining clear Congressional intent. As you know, community banks are not able to access the capital markets individually as larger banks can for competitive wholesale funding.

"The structure of the FHLBanks is unique and substantially different from that of Fannie Mae and Freddie Mac. The issue regarding their inclusion in the proposed regulatory structure remains highly controversial. Prospective concerns that the FHLBanks would be at a competitive funding disadvantage because of their regulatory structure are highly speculative. Therefore, we feel it would be highly premature and unwise to change the regulation of the FHLBanks in legislation that overhauls the regulatory structure of Fannie Mae and Freddie Mac. As Assistant Treasury Secretary Wayne Abernathy has just testified, the Treasury Department has a major study underway of the FHLBanks and their regulator. We will strongly oppose legislation containing language to include the FHLBanks in the new regulatory and supervisory structure with Fannie Mae and Freddie Mac. "Second, while ICBA would support moving the safety and soundness regulation of Fannie Mae and Freddie Mac to an independent regulatory agency, we oppose the establishment of a politically controlled regulator at the Treasury. The new regulatory body must be truly independent with effective firewalls to insulate it from political interference or control, and should be modeled after top-notch regulators such as the OCC and OTS.

"We share the Homebuilders' and Realtors' concern over any transfer of HUD's mission oversight and program approval authority to an agency that lacks expertise in housing issues. Such a move threatens to jeopardize the success of our housing finance system and undermine the housing market that has sustained the economy in recent years. The secondary market activities of Fannie Mae and Freddie Mac are an integral part of the strength and success of our housing finance system. Community banks are able to continue to make home loans in their communities because of the liquidity provided by Fannie Mae and Freddie Mac as a result of their secondary market activities. Therefore, to ensure the continued vitality of our housing market, it is vitally important that the mission and program approval authority remain with HUD.

"ICBA appreciates your continued responsiveness and attention to our issues and concerns, and stands ready to work closely with you and members of the Committee as this important legislation moves forward."