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FHFB: No Plans to Go Forward on Multidistrict Membership

SEPTEMBER 12, 2003


FHFB: No Plans to Go Forward On Multidistrict Membership

There will be no push for multidistrict Federal Home Loan Bank membership in the near future. This week Treasury assistant secretary for financial institutions Wayne Abernathy testified before a subcommittee of the Senate Banking Committee, followed by Federal Housing Finance Board chairman John Korsmo. Abernathy said a plain reading of the statute governing the FHLBanks finds little room to conclude that the FHFB has the legal authority to approve multi-district membership. It is up to Congress to decide whether any change to the statute is needed, he said.

Chairman Korsmo then appropriately pounded the nail in the coffin of further FHLB system concentration by indicating that the FHFB does not plan to take further action to establish procedures to review and accept or reject applications for multi-district membership. Earlier, Korsmo had secured a legal opinion that indicated that multi-district membership was legal.

SEC Registration Proposal. The FHFB voted this week to issue for public comment a proposed regulation that would require each FHLB to make certain public disclosures relating to its business and financial condition by "voluntarily" registering a class of its securities with the SEC under the Securities Exchange Act of 1934. By doing so, the FHLBs would become subject to the 1934 Act's periodic disclosure regime as interpreted and administered by the SEC. While the vote was unanimous, board members Franz Leichter and Allan Mendelowitz went on record saying they voted to issue the proposal to move forward in exploring the issues surrounding potential SEC registration, not because they have a predetermined position on registration.

Both board members pointed to issues that need to be analyzed, such as the impact of accounting standards on FHLB capital treatment and REFCorp. obligation and disclosure of joint and several liability. The proposal will have a 120-day comment period during which Chairman Kormso hopes the FHLBs will individually meet with the SEC to work through their concerns.

Acquired Member Assets. The FHFB also voted to withdraw a controversial proposed rule on Acquired Member Asset programs such as the Mortgage Partnership Finance, Mortgage Purchase Program and Shared Funding Program. Korsmo said there has been a misunderstanding of the intent of the proposal, seen by some as broadly expanding the FHLBank System's secondary market activities. Korsmo said the proposal will be revised and brought back to the board for reconsideration.