Today, Congresswoman Maxine Waters (D-CA), the top Democrat on the House Financial Services Committee, released this statement following the Government Accountability Office’s (GAO) recently released report on the Federal Home Loan Banks’ (FHLBs) role in the lead up to the failures of Silicon Valley Bank, Signature Bank, and First Republic. After the bank failures last year, Waters and Chair McHenry sent a joint letter to the GAO requesting an investigation into different aspects of their failures.

“I am pleased that the Government Accountability Office has released its follow up report on its investigation of the failures of Silicon Valley Bank, Signature Bank, and First Republic that both myself and Chair McHenry requested last March. This report focuses on the role the Federal Home Loan Banks played in the lead up to these major failures. FHLBs play an important role in our financial system, however GAO’s findings underscore a concern I have had, which is that FHLBs have strayed from their core mission. The FHLB System was created by Congress more than 90 years ago to support our nation’s housing finance needs, including to promote affordable housing creation and equitable community development. Specifically, GAO found the FHLBs of New York and San Francisco provided significant levels of advances to these banks compared to others, and that Signature Bank used FHLB advances to offset liquidity gaps it experienced related to crypto-related deposits. Meanwhile, SVB was unable to reposition collateral quickly enough from its FHLB to the Fed’s discount window to access emergency liquidity. Instead of propping up failing banks engaged in high-risk activity, FHLBs should focus on carrying out their intended affordable housing and community development mission.

“That’s why I continue to support the Federal Housing Finance Agency’s (FHFA) ongoing regulatory efforts to ensure the FHLB System uses its advances to support affordable housing and community development following its 100-year review of the FHLBs last year. I am also working on legislation to implement many of the Congressional recommendations highlighted in FHFA’s report, including to double the FHLB System’s statutorily required contributions to affordable housing. I also support steps banking regulators are exploring to improve access and functioning of the Fed’s discount window, which should improve the safety and soundness of banks while complimenting FHLB reforms that promote affordable housing and community development.”

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