Comment Detail

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 James P Cravens, President of Sanborn Savings Bank in Sanborn, Iowa. We are a small rural community bank located in a town of 1,400 in Northwest Iowa. We are a single location institution dedicated to serving our community and its various financial needs. Approximately 30% of our loan portfolio is Agricultural operating lending; another 30% of our loans are first mortgage residential loans within our community. The remainder of our portfolio is a mix of ag real estate, commercial loans for local businesses providing services to agriculture and consumer loans to individuals within our community. Because of the cyclical nature of the market we serve funds management is a challenge and a priority. Access to the various funding options provided by the FHLB-DM is an important part of our funds management model and our interest rate risk practices.
The proposed regulation on FHLB membership creates many concerns for our bank. Our bank should be free to manage our balance sheets in light of what’s best for us, not the demands of a regulator.
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. It is also important to note that these very purposes are how we used the funds obtained from FHLB-DM
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 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.
¬¬¬It also seems incredibly disingenuous to eliminate captive insurance companies from FHLB membership at a time when housing finance is at risk with only a small private secondary market and Fannie and Freddie in conservatorship. This is the time to encourage the development of additional markets for both single and multifamily mortgages. Financial institutions are being discouraged from holding mortgages meaning that we need to see the development of new outlets. The FHLBanks are a logical place to create these new models. Why would you eliminate opportunities rather than work with us to develop new systems of finance?
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-Sanborn Savings Bank strongly recommends that you withdraw the proposed rule. Thanks for taking our comments into consideration.
Sincerely,

James P Cravens
President
Sanborn Savings Bank
Sanborn, Iowa 51248
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