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A bipartisan group of 68 House members, echoing concerns aired by NAFCU, yesterday told Federal Housing Finance Agency Director Mel Watt that his agency's proposal to revise Federal Home Loan Bank membership criteria could jeopardize the banks' liquidity functions for credit unions and community banks.

Spencer Bachus	David Scott

"The FHLBanks serve as a critical source of liquidity for community banks, credit unions and their various other members, as witnessed by the crucial role the FHLBanks played during the financial crisis," the lawmakers, led by Reps. Spencer Bachus, R-Ala., and David Scott, D-Ga., wrote. "The Banks also serve as an important conduit to the secondary markets for community financial institutions."

They said Congress has retained authority to determine the scope and nature of FHLB membership eligibility. "As recently as four years ago, Congress adjusted FHLBank membership rules and did not choose to narrow eligibility for participation in the system, making its intent clear."

They urged that Watt "reconsider this proposal and begin a dialogue with Congress, where these important policy decisions should be made."

NAFCU is reviewing FHFA's membership criteria proposal. Comments were originally due Nov. 12, but Watt pushed that to Jan. 12 following a request from NAFCU President and CEO Dan Berger and another from Senate Banking leaders.

NAFCU has discussed the proposed rule with FHFA representatives, noting some of the proposed revisions could persuade some credit unions to cease FHLB membership and discourage others from applying.

Watt is set to testify during an oversight hearing tomorrow by the Senate Banking Committee.