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ICBA Testifies on FHFB Governance Report

JANUARY 30, 2004


ICBA Testifies on FHFB Governance Report

"A safe and sound Federal Home Loan Bank system is vitally important to community banks. An important part of safety and soundness of any institution is a well functioning and engaged board of directors. The Federal Home Loan Banks are no exception," said ICBA vice chairman David Hayes, testifying before the Federal Housing Finance Board on its FHLB governance report. Hayes is also chairman of ICBA's FHLB Task Force and president/CEO of Security Bank in Dyersburg, TN.

ICBA told the FHFB that if voting rights were changed so that the largest FHLB users could vote all their stock, they would likely dominate their FHLB both through governance and through their influence as dominant customers. Not only would this create safety and soundness and board independence issues, but it would make it far more difficult for community financial institutions to have a voice in their respective districts.

"This is contrary to the wishes of Congress, which expanded community financial institution access to FHLB membership and advances in the Gramm-Leach-Bliley Act of 1999," Hayes noted. "Congress gave the FHLB system a cooperative structure. In a cooperative it is important to give all members an opportunity to be represented, regardless of size and the amount of advances they borrow."

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