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  • Comment Detail

  • Date: 10/27/14
    First Name: David
    Last Name: Bohmer
    Organization: Bonanza Valley State Bank
    City: N/A
    State: N/A
    Attachment: N/A
    Number: RIN-2590-AA39

  • Comment

    Alfred M. Pollard, General Counsel
    Attention: Comments/RIN 2590-AA39
    Federal Housing Finance Agency
    400 Seventh Street SW
    Washington, D.C. 20024

    Re: Notice of Proposed Rulemaking and Request for Comments- Members of the FHLBanks (RIN 2590-AA39)

    Dear Mr. Pollard:

    I am writing to express my concerns about the notice of proposed rulemaking regarding membership eligibility in Federal Home Loan Bank (FHLBanks) put forward by the Federal Housing Finance Agency (FHFA). The proposed rule includes significant and unnecessary changes to long-standing membership rules for the FHLBank system. The proposed changes are inconsistent with Congressional intent and the Federal Home Loan Bank Act (FHLBank Act). For these reasons Bonanza Valley State Bank vehemently opposes this proposed rule.

    I am David W. Bohmer, President/CEO of Bonanza Valley State Bank. Our institution provides lending across all of our small community with a focus on agriculture. FHLBDM is one of our key sources of funding and allows us to offer long-term loans to our farmers. It also allows us to offer long-term funding to many of our local homeowners who often have homes that don’t qualify for conventional loans. Since both the volume of home loans and the value of homes in this area are quite low, we will have difficulty meeting retention requirements proposed for retain our FHLB membership: This rule will adversely affect our ability to help local homeowners.
    It is also crucial to point out that more than 25 years ago, Congress made it clear that community financial institutions (CFIs) such as my bank may use advances for purposes other than residential housing finance. It remains the intent of Congress today that CFIs may utilize FHLBank liquidity for commercial real estate, small business, agricultural real estate and agricultural operating loans. This fact alone highlights how this proposed rule runs counter to existing federal statute.
    Broadly speaking, the FHLB Des Moines serves as a critical source of liquidity for financial institutions in Iowa, Minnesota, Missouri, North and South Dakota. They have proven to be a reliable and competitive source of liquidity for all of our financing needs in all economic environments. This rule, if adopted, would remove the certainty that the FHLB Des Moines can be counted on to be a reliable source of liquidity in all market conditions.
    The on-going mortgage asset test requirements will artificially distort balance sheet management practices, decreasing the flexibility of community banks, credit unions and insurance companies to manage their balance sheets in response to changing market conditions.
    Your agency’s proposed rules could fundamentally change how, or even whether, a depository financial institution such as ours could remain a member of a FHLB Des Moines. This is enormously disturbing. Confidence trust and reliability comprise the bedrock upon which our long-time FHLB membership is built. We need to know that the FHLB Des Moines can provide funding on a moment’s notice as it did in the recent financial crisis.
    Access to advances is critically important to our bank because FHLBank liquidity allows us to offer competitive rates to our members that we might not otherwise be able to offer. This is our main liquidity source in times of need. Additionally, having a credit line and borrowing capacity with FHLB Des Moines promotes the safe and sound management of our institution.
    Because the proposals would harm FHLBank members and hurt housing, credit and economic growth, we ask that the FHFA withdraw the new membership rules contained in its September 12, 2014 Notice of Proposed Rulemaking and work with FHLB members to preserve the FHLBs as a reliable partner of its members that benefits local lending institutions, communities, housing, homeownership and the nation’s economy.
    Without access to our FHLBank, the credit available to communities in our region will be unnecessarily impacted. We believe this proposed rule is a solution in search of a problem. Because the proposed rule outlines no safety and soundness concerns-and because there is no legitimate public policy goal of the proposed rule- Bonanza Valley State Bank strongly recommends that you withdraw the proposed rule. Thanks for taking our comments into consideration.

    Sincerely,

    David W. Bohmer
    President/CEO
    Bonanza Valley State Bank
    Brooten,MN