Joint Hearing of Subcommittees of the House Financial Services Committee on a Review of OFHEO and FHFB - Transcript

HEADLINE: JOINT HEARING OF THE CAPITAL MARKETS, INSURANCE AND GOVERNMENT SPONSORED ENTERPRISES SUBCOMMITTEE AND THE OVERSIGHT AND INVESTIGATIONS SUBCOMMITTEE OF THE HOUSE FINANCIAL SERVICES COMMITTEE

SUBJECT: A REVIEW OF THE OFFICE OF FEDERAL HOUSING ENTERPRISE OVERSIGHT AND FEDERAL HOUSING FINANCE BOARD CHAIRED BY: REPRESENTATIVE SUE W. KELLY (R-NY) AND REPRESENTATIVE RICHARD H. BAKER (R-LA)

WITNESSES:

ARMANDO FALCON, JR., DIRECTOR, THE OFFICE OF FEDERAL HOUSING ENTERPRISE OVERSIGHT;

ALICIA R. CASTANEDA, CHAIRMAN, THE FEDERAL HOUSING FINANCE BOARD

LOCATION: 2128 RAYBURN HOUSE OFFICE BUILDING, WASHINGTON, D.C.

BODY:

REP. SUE W. KELLY (R-NY): This hearing of the Subcommittee on Oversight and Investigations will come to order. I welcome Chairman Baker and as the chairman of the Financial Services Committee-and we are actually holding a joint hearing here. This afternoon the Financial Services Committee continues its series of oversight hearings on the federal agencies within the committee's jurisdiction, by conducting a review of the Office of Federal Housing Enterprise Oversight, the OFHEO, and the Federal Housing Finance Board, the FHFB.

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REP. SHELLEY MOORE CAPITO (R-WV): I have no questions, Madam Chairwoman, thank you. I look forward to the testimony.

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REP. CAPITO: Thank you, Madam Chairwoman. I would like to ask Chairwoman Castaneda a question.

I want to go back to the issue of the multi-district membership. I represent the state of West Virginia and fully one-third of our banking institutions fall-we're covered the Federal Home Loan Bank of Pittsburgh and 35 percent of our market share financial institutions fall within the other jurisdictions of other Federal Home Loan Banks, the largest one being DB&T Bank which is chartered in North Carolina. And it's come to my attention that while this bank has been able to have access to the Affordable Housing Program, there's been no access to the first homebuyers down payment assistance program or the economic development growth enhancement program, and we're concerned about that availability of those funds and the ability for that institution, a large institution in our state, to be able to work with the Federal Home Loan Bank.

You mentioned in your previous statement that they're allowed to offer all products in all service areas of the banks that they're chartered in. Is that correct? Is that --

MS. CASTANEDA: Is that what I-what I say is the Finance Board rules don't prevent the Federal Home Loan Banks for not funding projects outside the district.

REP. CAPITO: Do you have any plans to look in this-look at this issue in any more depth, because 35 percent of our-and in a state like West Virginia you said, well ,it's all going to even out. Well, I don't think that the consolidations and the-are going to occur. They're not going to be consolidating in West Virginia, unfortunately. They're going to be consolidating in New York and other places. How is that going to balance out?

MS. CASTANEDA: Well, again, and I will be also-be delighted to share the data that I was referring earlier. As far as we can tell, the mergers and acquisitions impact on affordable housing funding has not been very significant.

REP. CAPITO: Let me ask just another follow up then. For instance, let's take DB&T for an example. If DB&T as an institution gets the same amount of money under the Affordable Housing Program, do they then decide which areas of the service area it goes to, or does the Federal Home Loan Bank have some jurisdiction over whether some of that funding gets to West Virginia or not?

MS. CASTANEDA: Well, they can request the Federal Home Loan Bank, in this case of Pittsburgh, to forward the funds to a place outside the Pittsburgh district.

REP. CAPITO: Okay. Has there been any investigation into letting larger and consolidated entities have membership in different banks instead of just single membership?

MS. CASTANEDA: The multi-district issue has not been before the board since I came in January, so I don't have the opportunity to study the issue very closely. My understanding is whether-the issue really is whether the Finance Board has the authority to change multi-district rules, at least without being there any specific concerns regarding the safety and soundness of the Federal Home Loan Bank system of any particular bank, or for that matter the housing finance mission. Again, multi-district rules are determined by statute and Congress could certainly make any changes it believes appropriate. What I can tell you also is that Finance Board staff will be available to assist you in this issue either for reviewing the multi-district issue or coming up with any different plans where available.

REP. CAPITO: Thank you, and I look forward to you sharing the data with my office so we can work together on this issue. Thank you.

MS. CASTANEDA: I'll make sure that that happens.

REP. CAPITO: Thank you.

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