Trade Groups Rebel Against Cap Rule

The Federal Housing Finance Board should withdraw a proposed rule that would require the Federal Home Loan Banks to increase retained earnings and buy back excess stock, according to six financial services trade groups.The capital proposal could cause "irreparable harm" to the FHLBank System and would negate a multiyear effort by the 12 FHLBanks to convert to a risk-based capital system mandated by the 1999 Gramm-Leach-Bliley Act, according to a joint letter to the regulator. "We are not trying to take them on and just say no," said Joe Pigg, senior counsel for the American Bankers Association. "We're trying to engage them and say we want to work constructively to address concerns they have raised about retained earnings and the whole capital structure." The ABA, America's Community Bankers, the Consumer Bankers Association, the Financial Services Roundtable, the Independent Community Bankers of America, and the Mortgage Bankers Association signed the June 16 letter.