Housing and Insurance Subcommittee Examines the Federal Home Loan Bank System

Today, the Housing and Insurance Subcommittee, led by Chairman Mike Flood (NE-01), held a hearing to explore the structure, operations, and mission of the Federal Home Loan Bank System.

On Supporting Local Lending and Community Banks:

Subcommittee Chairman Flood said, “… when I learned more about the Federal Home Loan Bank of Topeka's programs, I found them to be much more efficient in getting results. In Cuming County, Nebraska, we were able to work through a local community bank to get seniors on fixed incomes upgrades to their homes that will make it easier for them to make it through the winter. I'm talking better windows to keep the warm air inside and the cold air outside. I know they've done projects like helping make it wheelchair accessible to get into your house. Improvements like these make a difference for real people. And when you have the local banker assisting, they're looking for fraud. They're making sure that the people that are getting these dollars are the ones that truly need them.”

Rep. Troy Downing (MT-02) said, “The Federal Home Loan Bank system plays an important role in providing liquidity to rural banks to make it easier for them to lend to their communities. And I know many of the financial institutions in Montana have been very pleased with the Des Moines FHLB.”

Rep. William Timmons (SC-04) said, “For decades, the Federal Home Loan Bank system has served as a reliable source of liquidity for small community banks, credit unions, and insurance companies across our districts. By ensuring these institutions have dependable access to funding, the system has helped support local lending and expand access to credit for families, businesses, and communities.”

Rep. Monica De La Cruz (TX-15) said, “I introduced legislation, the Bringing the Discount Window into the 21st Century Act, which passed the House of Representatives and, among other provisions, this bill directs the Board of Governors to examine how the discount window interacts with other sources of liquidity, including the Federal Home Loan Bank System.”

On Strengthening Financial Stability: 

Committee on Homeland Security Chairman Andrew Garbarino (NY-02) said, “Congress created the Federal Home Loan Banks during the Great Depression to provide stable funding sources for savings and loans and support the 30-year home mortgage. Since then, the system's liquidity mission has helped stabilize financial markets during the 2008 financial crisis, the COVID-19 pandemic, and, according to the GAO, the 2023 regional banking turmoil following the failure of Silicon Valley Bank. During that episode, the Federal Home Loan Banks provided significant funding in a single day to more than 20 of the nation's largest community banks, helping stabilize the financial system and prevent broader market disruption.”

Witnesses on the Federal Home Loan Bank System’s Mission:

Ms. Jill Naamane, Director, U.S. Government Accountability Office, said, “Timely coordination between FHLBanks and Federal Reserve Banks is critical when a bank is at risk. This coordination must negotiate overlap in membership between the two systems. The March 2023 bank failures revealed such coordination challenges. After March 2023, the FHLBanks and Federal Reserve System initiated two efforts to improve coordination during periods of stress: (1) increasing engagement between FHLBanks and Federal Reserve Banks and (2) establishing a working group to improve interoperability. These efforts are intended to address the coordination challenges experienced during the March 2023 bank failures and are consistent with federal internal control standards related to control activities and information and communication.”

Mr. Ryan Donovan, President and Chief Executive Officer, Council of Federal Home Loan Banks, said, “The Federal Home Loan Banks remain a vital source of strength for the country's financial and housing finance infrastructure. It is a century-old cooperative model that continues to provide reliable liquidity through banks, thrifts, credit unions, insurance companies, CDFIs, and housing associates. They support housing and community investment across every congressional district and help local lenders serve their communities in all market conditions. Congress should resist efforts to weaken the liquidity mission or reduce the FHLBanks to a single metric, and instead preserve what is working while adopting focused adjustments that improve mission delivery, clarify supervisory boundaries, and strengthen the housing finance system the FHLBanks help support.”

Mr. Barry Lockard, President and Chief Executive Officer, Cornhusker Bank, on behalf of Federal Home Loan Bank of Topeka, said, “Lenders can, should, and often do obtain wholesale liquidity and funding from a variety of sources. However, if ongoing access to FHLBank funding is perceived to be conditional, unreliable, or simply uncompetitive, the market will migrate. This would directly reduce the resources FHLBanks have to dedicate to growing communities while driving local lenders to utilize other wholesale liquidity sources which have no equivalent obligation to support housing and community development in such a granular and informed way.”

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