The U.S. Financial Services Committee’s Housing and Insurance Subcommittee held a hearing on the structure, operations and mission of the Federal Home Loan Bank System, with members and witnesses centering on its role as a liquidity source for community-based lenders and as a stabilizing funding channel during market stress. Discussion focused on how the system supports local lending through community banks, credit unions, insurance companies and other members, and on whether its liquidity function should be preserved as a core part of housing finance and community investment. Lawmakers highlighted the system’s use by rural and community institutions and referred to its role in prior periods of stress, including the 2023 regional banking turmoil. Testimony from the U.S. Government Accountability Office pointed to coordination problems between the Federal Home Loan Banks and Federal Reserve Banks during the March 2023 bank failures, while noting that both systems later started two efforts to address them through stronger engagement and a working group on interoperability. Industry witnesses argued against weakening the Federal Home Loan Banks’ liquidity mission, called for targeted adjustments on mission delivery and supervisory boundaries, and warned that if access to Federal Home Loan Bank funding becomes conditional, unreliable or uncompetitive, lenders could shift to other wholesale funding sources that do not carry comparable housing and community development obligations.

Original source Back to tracker