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  • Comment Detail

  • Date: 07/15/24
    First Name: Joseph
    Last Name: Witt
    Email: joew@minnbankers.com
    Organization Type: organization
    Organization: Minnesota Bankers Association

  • Comment

    The Honorable Sandra Thompson
    Director
    Federal Housing Finance Agency
    400 7th Street, SW
    Washington, DC 20219

    Re: Federal Home Loan Bank Mission RFI (https://www.fhfa.gov/sites/default/files/2024-05/FHLBank-Mission-RFI-20…)

    Dear Director Thompson:

    The Minnesota Bankers Association (MBA) is pleased to provide this comment to the Federal Housing Finance Agency (FHFA) regarding its work on the mission of the Federal Home Loan Bank (FHLB) system. Thank you for continuing to give stakeholders the opportunity to provide feedback as you consider potential modifications and improvements to the FHLB system. We appreciate that you are taking this kind of thoughtful approach that invites, and considers, the banking industry’s input.

    The MBA is Minnesota’s largest bank trade group. We represent 95% of the Minnesota banks. Our state has the third most bank charters in the country, and every bank chartered here is a community bank. Because the community banks rely so heavily on the FHLB system, any proposal to change the mission of the FHLBs would significantly impact community bank states like ours.

    The FHLBs provide great support to the banking industry. I would argue that among the banking-related federal government agencies and instrumentalities, the FHLB system functions as well as any of them.

    One reason the FHLB system works so well is that its mission is clearly defined, and it is limited. Congress has set the core mission of the FHLBs by statute, and that mission includes just two functions: providing liquidity to the banking system and supporting affordable housing. The FHLBs are successful because they can clearly focus on those two areas, without needing to be all things to everyone. They also do a fine job of balancing those two functions, in good economic times and in more challenging economic times. Having some flexibility within those two critical missions surely helps.

    The FHFA does not have authority to change the FHLB’s mission by regulation. Only Congress can change the mission, by legislation amending the applicable statutes.

    The FHFA could, of course, request that Congress change the mission of the FHLB system. If the agency has policy reasons that support a change, it would be appropriate for the agency to explain those policy reasons and help the members of Congress understand why the change is important and necessary. Banks and their trade groups, and other stakeholders, could agree or disagree with those proposed changes, and they could lobby Congress accordingly.

    But it is not appropriate for the FHFA to make a mission change through regulatory action. Doing so would violate the Administrative Procedure Act (APA), the federal law that governs the actions of the federal regulatory agencies. Because Congress did not give the FHFA the authority to amend the FHLB’s mission, the agency would be exceeding its statutory authority if it attempted to do so by regulation. That type of agency action is unlawful under the APA.

    Thank you again for the opportunity to provide comments on this matter and for your attention.