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.
And/or
Neil Cotiaux, FHLBank Pittsburgh
Phone: 412-335-9488
