Reform of the nation’s mortgage finance system is inevitable. It is likely that legislation will establish new structures and mechanisms for delivering housing finance in the future. It is equally as likely that issues will arise from this legislation that could potentially impact the operations of the FHLBank System – including the Federal Home Loan Bank of Des Moines.
FHLB Des Moines is working to make sure that Members of Congress from our district, covering 13 states and three Pacific Islands, understand the Des Moines Bank’s mission and support legislation that ensures we can continue to accomplish our mission. It is our hope that when Congress or our regulators take action that the things that are working well, like the FHLBank System, are not hurt in the process.
We encourage Members of Congress, the Administration and our regulator to preserve the following:
Cooperative ownership structure of the Federal Home Loan Bank System
Members are both customers and stockholders, so the FHLBanks conservatively balance managing their assets with creating a return. Due to this cooperative structure, the FHLBanks do not have to continuously increase profits to meet the demands of stockholders. As a result, the FHLBanks are able to provide various structures of funding and expand and contract in response to member demand while maintaining their safety and soundness.
Current form of the Bank’s district membership
The regional form of the FHLBank System has served its membership and communities extremely well for the better part of a century. The present structure of 11 separate Banks has made the affordable housing and community investment programs exceptionally effective in targeting the needs of local communities and allowed the Banks to be responsive to the specific community credit needs throughout its district.
Affordable Housing Program
The FHLBank System’s Affordable Housing Program (AHP) is one of the most successful grant programs created by Congress and the largest private source of funds for affordable housing in the country. Each FHLBank funds their own AHP with 10 percent of their net earnings, not taxpayer dollars. Since the program’s inception in 1990, over $4.0 billion has been used to subsidize the construction, purchase and/or rehabilitation of more than 740,000 owner-occupied and rental housing units for very low-, low- and-moderate income households across the nation.
Banks' investment authority
The Banks invest prudently within a limited scope of securities to make sure they remain a reliable source of liquidity for their members. Demand for advances adjusts cyclically but the fixed costs of doing business rise every year, so these investments allow the Banks to balance earnings and scale business to the changing demands for advances. The System’s cooperative structure builds in a strong aversion to excessive risk taking when making these investments.
Equal access to low-cost funding by all creditworthy members
The FHLBanks bring Wall Street to Main Street for thousands of lenders. Using the collective size and strength of the System, the Des Moines Bank is able to support a continuous flow of funds, called advances, to nearly 1,500 members in our district. We obtain access to the global capital markets and provide liquidity and credit products to members of all sizes at very low rates. Many smaller financial institutions would not have a reliable, low-cost source of funding available to them to support their local communities without the FHLBanks. All advances are fully collateralized.