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  • Comment Detail

  • Date: 05/17/24
    First Name: Keith
    Last Name: Bernard
    Email: kaebernard2822@outlook.com
    Organization Type: other
    Organization: Concern Citizen

  • Comment

    2822 Mott Avenue
    Far Rockaway, NY,11691
    kaebernard2822@outlook.com
    Tel# (718)4716145
    5/17/2024

    Sandra L. Thompson
    Director
    Federal Housing Finance Agency
    400 7th Street, SW
    Washington, D.C. 20219

    Dear Director Thompson,

    Subject: Need for Material Revision of the Federal Home Loan Banks' Role and Mission Statements

    I am writing to urge the Federal Housing Finance Agency (FHFA) to consider a material revision of the Federal Home Loan Banks' (FHLBanks) role and mission statements. The current structure allowing member banks access to inexpensive financing poses significant risks, including the promotion of moral hazard associated with risky lending practices.
    The FHLBanks' provision of low-cost funding to member institutions, intended to enhance liquidity and support housing finance, inadvertently encourages risk-taking. When banks have access to cheap finance, they may be incentivized to engage in high-risk lending, knowing that the cost of funds is minimal and that losses can potentially be offset by the broader safety net provided by the FHLBanks. This scenario undermines financial stability and contradicts prudent risk management principles.

    Historical evidence suggests that moral hazard is not merely a theoretical concern. The 2008 financial crisis exemplified how access to low-cost financing can contribute to excessive risk-taking and ultimately precipitate systemic failures. To prevent a recurrence, it is imperative that the FHLBanks' role be recalibrated to prioritize financial stability and risk mitigation.

    Revising the FHLBanks' mission statements to explicitly discourage risky lending practices will align their objectives with broader economic stability goals. This could involve implementing stricter eligibility criteria for accessing low-cost funds, enhancing oversight and accountability mechanisms, and promoting transparency in lending practices.
    By realigning the FHLBanks' mission with a stronger emphasis on risk management and prudent lending, the FHFA can ensure that these institutions contribute to a more stable and resilient financial system. I strongly advocate for this revision to safeguard against the detrimental effects of moral hazard and to promote a sound banking environment.
    Thank you for considering this important issue. I look forward to the FHFA's proactive steps in addressing these concerns.

    Sincerely,

    Keith Bernard
    Risk Analyst