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Housing Stimulus Legislation Signed Today Has
Added Bonus: New FHLBank Powers to Boost Low-cost Financing
of Public Projects- The housing stimulus legislation signed into law today by President Bush
contains a little-mentioned but significant provision to assist public projects
across the Mountain State.
 Washington, DC, July 30, 2008 – The housing
stimulus legislation signed into law today by President Bush contains a
little-mentioned but significant provision to assist public projects across the
Mountain State.
A variety of municipal projects now on hold or
becoming more expensive will receive relief due to a provision introduced in the
Senate by Sen. John D. (Jay) Rockefeller IV (D-WV), the original sponsor of the
measure allowing the nation’s twelve Federal Home Loan Banks to issue letters of
credit in support of tax-exempt bond issues, making stalled projects viable. The
provision, which ultimately became part of the housing stimulus legislation,
empowers the FHLBanks to fill a void created by the year-long credit crunch and
the downgrading of municipal bond insurers. It was supported by dozens of
national, state and local organizations concerned with the continued viability
of public mission projects including the West Virginia Municipal League, West
Virginia Economic Development Authority, West Virginia Hospital Association,
West Virginia Bankers Association, West Virginia Association of Community
Bankers and Home Builders Association of West Virginia.
“We are genuinely appreciative of the tireless
efforts that Senator Rockefeller made to see that this important bill became
law,” said John R. Price, president and CEO of FHLBank Pittsburgh and Chair of
the FHLBank system’s Bank Presidents’ Conference. “This important new power will
allow the FHLBanks to help local governments, educational authorities, medical
institutions and other public-mission organizations raise cost-effective funds
for projects such as roads, bridges, water and sewer, wastewater treatment,
medical clinics, fire stations, libraries and a host of other needed
infrastructure.
“Insurers today are not as willing to engage in
small-scale deals in support of municipal projects,” Price added. “Injecting
additional competition into the market through FHLBank guarantees will keep
projects moving while holding down costs for local taxpayers.”
Going forward, local financial institutions that
are members of their district FHLBank will determine the creditworthiness of a
tax-exempt bond issue in need of support. They will put their own letter of
credit on the bond. In turn, the district FHLBank will extend its own guarantee
to the bond issue using its strong credit rating. Financing for the project can
then occur at a lower interest rate or under more flexible terms – a major
victory for municipalities and other organizations that want to upgrade their
infrastructure.
“The FHLBanks encourage local civic leaders to
learn more about their newfound ability to tap guaranteed, lower-cost municipal
financing for the common good. FHLBank Pittsburgh will also be hosting seminars
for community financial institutions that may be interested in learning more
about this opportunity,” Price concluded.
Chartered by Congress in 1932, the Federal Home
Loan Bank system ensures the flow of credit and other services for housing,
community and economic development to more than 8,100 financial institutions
throughout the country. This liquidity serves the public by enhancing the
availability of residential mortgage and community investment funds. As
cooperatives, the FHLBanks seek to maintain a balance between their public
policy mission and their obligation to provide adequate returns on the capital
supplied by members. The FHLBanks achieve this balance by delivering low-cost
financing, and providing members with a viable alternative to the secondary
mortgage market via their mortgage loan programs, while paying a dividend. The
FHLBanks also help members with other local housing and community development
needs. At June 30, 2008, the nation’s FHLBanks had combined total assets of
approximately $1.34 trillion.
Media Contact:
Steven Broderick, for Sen. Rockefeller
Phone: 202-224-6101
Email: Steven_broderick@rockefeller.senate.gov
And/or
Neil Cotiaux, FHLBank Pittsburgh
Phone: 412-335-9488
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