FHFB Cap Proposal Stirs Controversy

House Financial Services Committee Chairman Michael Oxley, R-Ohio, says proposed capital changes could "actually harm" the Federal Home Loan Banks, and he has announced plans to hold a hearing on the Federal Housing Finance Board proposal in September.The committee's ranking Democrat, Rep. Barney Frank (Mass.), joined Rep. Oxley in raising concerns about the proposed rule, which would require the FHLBanks to increase their retained earnings and buy back excess stock. "We are concerned that the proposed changes may go too far and actually harm the FHLBank System more than protect it," Reps. Oxley and Frank say in a letter to Finance Board Chairman Ronald Rosenfeld. The June 30 letter poses seven questions the congressmen expect the regulator to answer when the committee holds the hearing. "The fact that the proposal has been criticized by the leadership of all 12 FHLBanks and key industry trade groups indicates to us a need for a pause," the two ranking committee members say.