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FOR THE RECORD OF THE HEARING ON THE REPORT OF THE GENERAL ACCOUNTING OFFICE ON "ADVANTAGES AND DISADVANTAGES OF CREATING A SINGLE HOUSING GSE REGULATOR"
BEFORE THE SUBCOMMITTEE ON CAPITAL MARKETS, SECURITIES AND GOVERNMENT SPONSORED ENTERPRISES OF THE U.S. HOUSE OF REPRESENTATIVES COMMITTEE ON BANKING AND FINANCIAL SERVICES
Thank you, Mr. Chairman, Congressman Kanjorski and other members of the Subcommittee, for allowing me, as one of four Directors of the Federal Housing Finance Board, this opportunity to offer my comments on the recommendations of the GAO regarding the Federal Home Loan Bank System. My comments are my own and not that of the other members of the Federal Housing Finance Board.
I agree with the GAO's conclusion that mission should be combined with safety and soundness for effective oversight. However, in the case of the Federal Housing Finance Board, the mission and safety and soundness of the Federal Home Loan Bank System are regulated together today. Our twelve District banks have never experienced a credit loss since their creation in 1932. As far as mission, the Federal Home Loan Bank System continues to address more ways to meet community needs to fulfill its public purpose of housing finance and community development. Both the System's Community Investment Program and its Affordable Housing Program, as well as the numerous local and regional programs created by each District Bank, support regional and local housing finance and community investment needs.
I have walked into many homes, whether that be shelters, houses or apartments and heard numerous times how the homeowners, developers, FHLBank members and non-profit sponsors were grateful for the access to their Federal Home Loan Bank. Always, I hear "This couldn't have been done without the help of the Federal Home Loan Bank." For this reason, I believe the combined regulation of the mission and safety and soundness of the Federal Home Loan Bank System that we have today is effective in meeting its public purpose. In other words, if it isn't broken, don't fix it.
Furthermore, I believe creating a single GSE violates the GAO's criterion of the separation of the primary and secondary market regulation. There is a separation of public missions between servicing the secondary market through Fannie Mae and Freddie Mac, and servicing the primary market needs through the Federal Home Loan Bank System. Keeping the oversight of these public missions separate is a healthy goal to maintain for effective regulation.
In conclusion, although I believe the GAO is the appropriate investigative body to propose solutions to government problems, I am not convinced a problem exists. I view the GAO's recommendations regarding the Federal Home Loan Bank System as a solution in search of a problem.
Thank you.
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