When it comes to the NCUA adding Federal Home Loan Banks to its final emergency liquidity rule, credit union lobbyist and consultant Geoff Bacino said the banks’ so-called “super lien” is a disadvantage.
Bacino, who has served on the boards of both the NCUA and the Federal Housing Finance Agency – the FHFA regulates the FHLBs – said “regulators hate” the FHLBs’ superior lien position on collateral pledged against borrowings.
“When an institution fails, the home loan banks are first in line,” he said. The FHLB’s position is superior to the insurer and insured depositors. Bacino said the position even earned him a call from Sheila Bair in 2008, who was FDIC chairman at the time.
The former NCUA Board member, who was appointed during a congressional recess in late December, 2000, said he can see both sides of the issue. He said he understands why the credit union regulator has previously said it does not consider the Federal Home Loan Banks to be an appropriate emergency liquidity provider, and can also appreciate the banks’ position that they are.
“I could make some arguments that they are. For example, when the housing crisis started in 2007, the Federal Home Loan Bank system carried the brunt of (the liquidity shortage),” he said. “But, the Fed is set up to be the lender of last resort and Federal Home Loan Banks aren’t.”