Press Release

WASHINGTON—Dean Schultz, president and CEO of the Federal Home Loan Bank of San Francisco, today urged Congress to consolidate regulation of the housing Government Sponsored Enterprises (GSEs) under one regulatory body at the Treasury Department.

Testifying before the House Committee on Financial Services, Schultz said his bank supports the Treasury Department's initiative to create a single regulator for the housing GSEs. Further, Schultz said the lack of a unanimous position among the 12 Federal Home Loan Banks can be overcome, and their differences should not prevent good public policy. Schultz noted, for instance, that the 12 banks did not all agree on the landmark banking reform legislation, but it was good policy and went forward.

"This would provide consistent, enhanced and vigorous regulation for all housing GSEs, and would be a strong statement in the marketplace that regulation of housing GSEs is a priority of the Congress and the Administration,'' Schultz said, noting that an "independent regulator'' would also assure an "apolitical framework.''

However, Schultz also noted that the Federal Home Loan Bank of San Francisco supports the legislation with certain conditions. For instance, it must:

• Affirm the FHLBanks' housing finance mission and preserve the cooperative structure of the FHLBanks.
• Continue the FHLBanks' market-driven debt issuance structures to ensure continuously available, low-cost mortgage credit through federally insured housing lenders that enable the FHLBanks to achieve their housing finance mission.
• Establish a strong and independent new agency or bureau under the Treasury Department containing a separate regulatory structure within the agency for the FHLBanks that is funded by assessments on the FHLBanks.
• Ensures that the director of the agency is obligated to make independent decisions on supervisory and regulatory matters without interference from the Treasury Department.

Schultz noted that the General Accounting Office (GAO) stated in a July 1997 report to Congress that a single regulator for the GSEs would have several advantages, repeating the same conclusion it reached previously. "The GAO indicated that a single regulatory agency would best fit its criteria of being: (1) independent and objective; (2) prominent in government; (3) economically efficient; and (4) consistent in its approach to regulation,'' Schultz said. "GAO indicated in 1997 that it found no evidence that would cause it to alter its previous positions...It went on to say that a single regulator would create valuable synergies among regulatory staff, even if as GAO suggested, the regulation of the two entities be separated within a single regulator.''

Schultz recommended a similar approach.

"To recognize and preserve the separate statutory structures and operations of the Federal Home Loan Banks and Fannie Mae and Freddie Mac, we recommend that Congress establish the new independent agency under Treasury with two deputy directors: one for the cooperatively-owned regional Federal Home Loan Banks; and one for the publicly-held Fannie Mae and Freddie Mac,'' Schultz said. "The deputy director for the Federal Home Loan Banks would implement and enforce the Federal Home Loan Bank Act, and the deputy director for Fannie Mae and Freddie Mac would implement and enforce the Federal Housing Enterprise Financial Safety and Soundness Act.''

Schultz also reiterated that aligning with Treasury, the principal advocate for the Administration's financial policies and its primary link to the financial markets, "would deliver a strong message to the financial markets that the new agency will provide enhanced, vigorous regulation of the housing GSEs. Such legislation would also make the new agency a peer of other financial institution regulators, especially the Office of Thrift Supervision and the Office of the Comptroller of the Currency, both independent agencies under Treasury.''

About the Federal Home Loan Bank of San Francisco

The Federal Home Loan Bank of San Francisco delivers low-cost funding and other services that help member financial institutions make home mortgages to people of all income levels and provide credit that supports neighborhoods and communities. The Bank also funds community investment programs that help members create affordable housing and promote community economic development. The Bank serves and is owned by 351 commercial bank, savings institution, credit union, thrift and loan, and insurance company members headquartered in Arizona, California, and Nevada.

Contact:
Amy Stewart, (415) 616-2605
stewarta@fhlbsf.com

Dwight Alexander, (202) 872-0223
alexandd@fhlbsf.com

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