Enterprise Resource Bank Act

Pursuant to a congressional request, GAO reviewed proposed legislation that would amend the Federal Home Loan Bank Act and expand the Federal Home Loan Bank (FHLB) System's mission. GAO found that: (1) the proposed legislation's potential improvements include changing the current method by which Resolution Funding Corporation obligations are allocated, making the basis for system membership voluntary, strengthening the Federal Housing Finance Board's (FHFB) role as a regulator by enhancing its enforcement authority, and eliminating the FHFB role in FHLB governance; (2) taxpayers could face increased risks because the legislation would to expand the system's mission, membership, and the types of collateral eligible for advances; (3) because the system's new mission would not be well-defined under the proposed legislation, enterprise resource banks (ERB) may not significantly increase the amount of credit available to community developers; (4) other persistent problems with the legislation include the lack of ERB expertise, regulators' roles in the pricing of FHLB products and services, increased competition between ERB subsidiaries and their members, the risks that FHLB advances would pose to Federal Deposit Insurance Corporation insurance funds, and the limited role that the Treasury would have in managing the ensuing debt; and (5) options so that the system could meet its new mission include creating a special-purpose finance corporation, designating advances to institutions for community development lending, and eliminating federal system sponsorship.