WASHINGTON, DC – October 12, 2011 – (RealEstateRama) — The American Bankers Association testified today on the importance of a vibrant Federal Home Loan Bank System, whose institutions are critical for allowing community banks to meet the needs of their communities in all economic cycles.
Anthony P. Costa, chairman and co-CEO of Empire State Bank in New York’s Hudson Valley, testified on behalf of ABA before the House Subcommittee on Financial Oversight and Investigations. Costa also serves as chairman of the ABA Federal Home Loan Bank Committee.
Costa testified that Federal Home Loan Banks enable community banks to meet the needs of their communities under all economic conditions.
“The Federal Home Loan Bank System is critical to the day-to-day functioning of many community banks across the country, and plays a pivotal role in providing funding to improve low-and-moderate-income communities,” Costa said. “The FHLBanks have a track record of success even in the face of extreme challenges.”
Costa noted the important role the FHLBank System played during the recent financial crisis, performing exactly as intended because of the flexibility of the structure and membership in the system.
“As the crisis took hold and interbank lending froze, the FHLBanks were the first available source of funding for U.S. financial institutions, preventing far greater losses and potential institutional failures,” Costa said. “As members had more need for liquidity, FHLBanks increased the availability of advances from about $650 billion to over $1 trillion at the peak of the crisis. This proves the flexibility of the system and its ability to withstand crises.”
Costa also testified on the differences between the FHLBank System and Fannie Mae and Freddie Mac, the Government-Sponsored Enterprises (GSEs) that deal directly with secondary mortgage finance.
“The FHLBank System is differentiated from the secondary market GSEs because of its history of financial stability, its higher statutory capital requirements, its mechanisms of joint and several liability among the 12 Federal Home Loan Banks, the cooperative capital structure of almost 8,000 members that is designed to protect taxpayers and the plans recently approved by the Federal Housing Finance Agency to increase capitalization levels significantly above those required by statute,” Costa said.
For a copy of Costa’s full testimony, please click here.
The American Bankers Association represents banks of all sizes and charters and is the voice for the nation’s $13 trillion banking industry and its two million employees. The majority of ABA’s members are banks with less than $165 million in assets. Learn more at aba.com.
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