Housing Stimulus Legislation Signed Today Has Added Bonus: New FHLBank Powers to Boost Low-Cost Financing of Public Projects
WASHINGTON--(Business Wire)--
The housing stimulus legislation that President Bush signed into
law today contains a little-mentioned but significant provision that
goes beyond assistance for homeowners.
A variety of public projects now on hold or becoming more
expensive will receive relief due to a provision 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 by keeping
low-cost financing flowing. The provision empowering the FHLBanks to
fill a void created by the year-long credit crunch and the downgrading
of municipal bond insurers was supported by dozens of national, state
and local organizations concerned with the continued viability of
public mission projects.
"We are tremendously pleased that the President has signed into
law historic legislation that empowers the nation's FHLBanks to do
even more on behalf of community and economic development," 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.
FHLBank Pittsburgh
Neil Cotiaux, 412-335-9488
Copyright Business Wire 2008
