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DelliBovi Calls SEC Registration Proposal "Goofy"

MARCH 7, 2003


DelliBovi Calls SEC Registration Proposal "Goofy"

In Orlando, near Disney World, New York Federal Home Loan Bank President Al DelliBovi called the administration's proposal to require FHLBanks to register their debt and member stock with the SEC "goofy."

"Everyone in the system is committed to full and complete disclosure, up to the gold standard," DelliBovi said. "The real issue is not about disclosure, but rather where we disclose." DelliBovi stated that this issue has not been fully vetted in the administration and that a speech by Treasury Deputy Secretary Peter Fisher doesn't necessarily represent administration policy.

DelliBovi was part of a well-received panel of Federal Home Loan Bank presidents that also included Atlanta president Raymond Christman and Des Moines president Pat Conway. The panel was moderated by ICBA Chairman-elect Rusty Cloutier.

DelliBovi further noted that one of the "unintended consequences" of SEC disclosure and registration could be an increase in the cost of funds. Atlanta's Ray Christman agreed, saying there had been a "massive failure to communicate" between the FHLBanks and their primary regulator, the Federal Housing Finance Board. Questioning why the Finance Board would advocate that FHLBanks register with another regulator, he asked, "is this de-regulation in the New Washington?"

Des Moines' Pat Conway echoed these concerns, adding that bringing FHLBanks under the SEC would lead to higher cost of funds and create new liquidity problems. But the disclosure issue was one of only a few issues on which the three FHLB presidents were in full agreement.

On the question of multi-district membership, Christman said there should be no change in the rules, arguing that in reality multi-district membership already exists for banks chartered in more than one district. Christman summarized his objections in three points: First, he said nothing has happened in recent years that would call for a change of rules; second, he said such a change would require significant administrative changes and dominate the attention of the System for several years; and third, he said we need to look at the long-term structure of the System rather than focus on short-term needs.

DelliBovi disagreed. He advocated a "limited" system that would allow banks to have memberships in other districts up to the level of their footings. He said this would be a "win-win" proposal for all banks.

The panel fully discussed the multi-district membership and concentration issues, which are linked. There were differences on the panel, and the ICBA agrees with Christman's concern that concentration poses political risks. The presidents agreed that concentration is not a safety and soundness problem.