Comment Detail

Comment

I would like to briefly comment on the topic of "negative tangible equity" and the FHLB's position not to renew or extend new advances to its member banks with "negative tangible equity". I realize that this position is based on 12 CFR 1266.4. I'm not going to get too deep in the weeds here but I would suggest that the FHFA ask for a congressional suspension of FHFA’s adherence to 12 CFR 1266.4 which prohibits FHL Banks from offering or renewing advances to banks with “negative tangible capital”… essentially defined as capital adjusted for any loss attached to the Available For Sale component of a bank’s investment portfolio. To look at just one particular component of a bank’s balance sheet (just because it's value can be easily attained through a Bloomberg terminal) and ignore other equally real embedded/inherent gains and losses in other parts of the balance sheet in determining “tangible capital” seems unfair, capricious, arbitrary and actually could compound a liquidity/banking crisis, not prevent it. Further, these are properly margined COLLATERALIZED advances... whether a bank has negative net worth is moot if there are marketable securities assigned as collateral and attached to the advances. To think and suggest that any regulatory agency would provide a "note from mom" comfort letter as a condition for the FHLB to provide additional/continued funding on FHLB advances is at the very least naive about how the real world actually works and at the worst, absolutely disingenuous.