The once-powerful S&L lobby, which retreated into the background for more than a decade after the financial debacle of the 1990s, is flexing some of its lobbying might these days and has convinced Congress to weigh in on the controversial proposal to raise capital at the Federal Home Loan Banks.
Both the top Republican and Democrat on the House Financial Services Committee called on the Federal Housing Finance Board for a public accounting of the reasons for the new capital proposal, which has been overwhelmingly opposed by the S&Ls, which make up the majority of the FHLBs' 9,000 member institutions.
In a letter sent to Ronald Rosenfeld, chairman of the FHFB, which regulates the 12 regional FHLBs, Rep. Michael Oxley, the Republican Chairman of Financial Services, and Rep. Barney Frank, the top ranking Democrat, said the committee will hold hearings on the proposal and top FHFB representatives should be prepared to testify."The fact that the proposal has been criticized by the leadership of all 12 (FHLB) Banks and key industry trade groups indicates to us a need for a pause," said the letter.
The proposal would limit the amount of excess stock an FHLB can have outstanding; prohibit an FHLB from selling excess stock to its members; or restrict an FHLB's ability to pay dividends when its retained earnings are below the prescribed minimum. FHLB dividends, some which have risen to 5% or more for the second quarter, are among the best available investments for member institutions, including the 1,000 credit union members.
The FHLB Atlanta, for example, said it expects to pay a 5.6% dividend for the second quarter. The San Francisco FHLB is projecting a 5.08% payout. And the Dallas Bank will pay a 4.91% dividend.
Both CUNA and NAFCU have also weighed in against the proposal. In a rare joint letter to the Finance Board, the two trade groups said the proposal is "so significant, and possible detrimental to the FHLB members.