On April 15, 2008 the Federal Deposit Insurance Company (FDIC) adopted an Interim Final Policy Statement on Covered Bonds, and solicited public comment on the their treatment. While covered bonds do not directly impact Federal Home Loan Banks (FHL Banks), the Statement also solicited public comments on two issues impacting "secured liabilities." FHL Bank advances (or loans to our members) could be considered "secured liabilities." The FDIC asked:

1. “Whether an institution’s percentage of secured liabilities to total liabilities should be factored into an institution’s insurance
assessment rate or whether the total secured liabilities should be
included in the assessment base.”

2. “Whether ... there should be an overall cap for secured
liabilities.”

In short, the FDIC is suggesting that use of FHL Bank advances should either be capped or become a factor in determining how much a local bank pays for FDIC insurance. Such a regulation would increase costs for FHL Bank members, reduce liquidity for community lending and affordable housing and have a serious impact on affordable housing grants. This is because any reduction in FHL Bank business in the form of advances will reduce FHL Bank profitability which is the sources of funding the AHP.

Cordially,

Robert B. Epps
ABR,CIPS,CRB,CIPS,GRI
Broker/Owner