![]() ![]() ![]() That being said, how one might change the status quo depends considerably on what one sees as the biggest problem. Add to the mix the tax-exempt nature of the Home Loan banks, their superpriority in getting repaid on any advances to a failed institution, cushy executive compensation and a relatively paltry 10% affordable housing mandate, and it's easy to see how it's time to take the status quo into the shop for a tuneup. That makes the Home Loan banks a famously critical source of liquidity for many institutions, even those with little meaningful interest in the housing market. Yet the Home Loan Bank System still provides liquidity advances to member institutions at variable rates and duration, and on far more favorable terms than the repo market or the Fed's discount window. The distinction between thrifts and banks is essentially nonexistent, and insurance companies, while still relevant to some multifamily housing markets, are not the players in housing that they once were. The Home Loan banks filled that gap by acting as a kind of liquidity spigot for those institutions just as the Federal Reserve's discount window serves as a liquidity spigot for banks.īut, perhaps unsurprisingly, the housing market and the banking landscape have changed dramatically over the course of a century. The Home Loan banks were created in 1932 by President Herbert Hoover at the height of the Great Depression and were conceived as a way of solving a then-pressing problem: Savings & loan companies and insurance companies - then the cornerstones of housing development - needed cash to build and finance homes. There's more that they can do on the mission side in a safe and sound manner."īut to understand what might change about the Home Loan bank status quo, it's important to understand what that status quo is. "It's my job to position the system to be ready for what's to come. "We are dealing with a huge housing supply issue," Thompson continued. That open question got considerably narrower last Friday when FHFA Director Sandra Thompson expounded about the nature of that inquiry at a symposium at the Brookings Institution, saying flatly that "the status quo is not acceptable. But what those recommendations actually amount to at the end of what will surely be a grueling regulatory slog (notwithstanding whatever dim prospect there might be for congressional attention) remains an open question. I had no doubt that the FHFA would issue a fulsome report with many recommendations. ![]() So when the Federal Housing Finance Agency announced last year that it was conducting a review of the Federal Home Loan banks in order to "ensure they remain positioned to meet the needs of today and tomorrow," my expectations were somewhat low. This fact is often cited by conservative-minded organizations - along with harrowing tales of $10,000 toilet seats and $1 million pens - as justification for eliminating those programs, while the government itself tends to study the problem and occasionally do something about it. Government programs are not universally renowned for their efficiency. ![]()
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