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Robert E. Feldman
RE: FDIC RIN 3064-AD34 (Treatment of Certain Claims On, or Guaranteed By, Fannie Mae and Freddie Mac)
This letter is a comment in response to the publication of a proposed rule by the Office of the Comptroller of the Currency, the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation and the Office of Thrift Supervision (collectively, the Agencies) to allow a banking organization to assign a 10 percent risk weight to claims on, and the portion of claims guaranteed by, Fannie Mae or Freddie Mac. The Agencies have requested comment on the potential effects of this proposal on other banking organization claims on GSEs, such as debt issued by the Federal Home Loan Banks (FHLBanks), which are currently assigned a risk weight of 20 percent. We believe that any final rule adopted by the Agencies should afford similar treatment for obligations issued by the FHLBanks. Otherwise, the proposal may have unintended adverse consequences for the banking system during this time of economic stress.
are concerned that the proposed rule suggests that the
Our primary concern is that this proposal will result in increases in the cost of borrowing for the FHLBanks and, consequently, in advances available from the FHLBanks. Thousands of local banks depend upon access to low-cost liquidity from the FHLBanks. We believe it would be counterproductive to adopt any proposal that would have the effect of raising the cost of funds for banks in this troubled market. If investors believe that the Agencies view FHLBanks as posing greater risk than Fannie Mae and Freddie Mac, they will demand higher yields to purchase FHLBank bonds, resulting in higher advance rates during a period when the banking industry is faced with the challenge of supporting housing finance and economic growth under very difficult circumstances in the credit markets.
We strongly urge the Agencies to afford the same treatment to the debt securities of all housing GSEs under the risk-based capital rules. We believe this course of action reflects the parity that Congress intended for the housing GSEs.
C. Richard Miller,
|Last Updated 11/06/2008||Regs@fdic.gov|