September 24, 2024 — In the last post, I noted both the FHLB Presidents, and the Chairs of the Board of Directors shirked the opportunity to stand up – and instead said no to providing leadership for affordable housing and community development. The Presidents hid behind technicalities while the Chairs, I’m not sure what they did.
As to the Presidents, their response to requests from their regulator – FHFA, the Treasury department and a group of US Senators was: we’re doing a lot but we can’t do more because of barriers you have placed upon us. That requires a bit of analysis.
To be fair, absent any thoughtfulness, there is some truth that to keep doing business exactly as they have always done it, additional latitude might enable incremental business with a small subset of customers. But that was not really the question. Rather each group asked how can the FHLBs do more for affordable housing and community development.
Against that ask, I excerpted a blurb from the existing regulations regarding Core Mission Activity (https://www.ecfr.gov/current/title-12/section-1265.3) – activities that are both allowed and encouraged.
The following Bank activities qualify as core mission activities:
(e) Debt or equity investments:
(1) That primarily benefit households having a targeted income level, a significant proportion of which must benefit households with incomes at or below 80 percent of area median income, or areas targeted for redevelopment by local, state, tribal or Federal government (including Federal Empowerment Zones and Enterprise and Champion Communities), by providing or supporting one or more of the following activities:
(i) Housing;
(ii) Economic development;
(iii) Community services;
(iv) Permanent jobs; or
(v) Area revitalization or stabilization;
That doesn’t sound very constraining, but it can be made constraining to pass the buck, and that was the path taken. Next up – the response from the Chairs of the Boards of Directors