CUNA Regulatory Comment Call

April 26, 2006

Federal Housing Finance Board Proposal on the Election of
Federal Home Loan Bank Directors

EXECUTIVE SUMMARY

• The Federal Housing Finance Board (Board) has issued a proposal to amend its rules to assist each Federal Home Loan Bank (Bank) to maintain a board comprised of directors that possess the skills and experience needed to administer the affairs of the Bank.

• The proposal is intended to enhance the corporate governance of each Bank by matching the experience and skills of individuals with the expertise needed in order to provide effective board management of each Bank. This will be accomplished primarily by allowing the Banks to provide more information about the experience and skills of directors as part of the election process in which the members of each Bank vote for the directors. These directors are comprised of officers and directors of the member institutions, which include credit unions, thrifts and banks.

• Comments in response to the proposed rule are due by June 2, 2006. Please submit your comments to CUNA by May 24, 2006.

Please feel free to fax your responses to CUNA at 202-638-7052; e-mail them to Senior Vice President and Associate General Counsel Mary Dunn at mdunn@cuna.coop and to Senior Assistant General Counsel Jeff Bloch jbloch@cuna.coop; or mail them to Mary and Jeff in c/o CUNA’s Regulatory Advocacy Department, 601 Pennsylvania Avenue, NW, South Building, Suite 600, Washington, DC 20004-2601. You may also contact us at 800-356-9655, ext. 6732, if you have questions or would like a copy of the proposed rule. You may also access a copy of the proposed rule at the following address:

a257.g.akamaitech.net/7/257/2422/01jan20061800/edocket.access.gpo.gov/2006/pdf/06-3690.pdf

BACKGROUND

Prior to the Federal Home Loan Bank System Modernization Act of 1999, the Board was involved in the corporate governance practices of the Banks. The Act eliminated the Board’s responsibilities in this area, but provided the Board with the authority to issue rules “necessary and appropriate for the nomination and election of the directors of the [Banks],” which is in addition to the Board’s primary mandate of ensuring that the Banks operate in a safe and sound manner. The Board has decided to issue this proposal under these authorities, which will authorize the Banks to play a more active role in the process of nominating and electing well-qualified directors.

BRIEF DESCRIPTION OF THE PROPOSED RULE

The members of each Bank vote for the Bank’s board of directors, who must be directors or officers of the member institutions, which include credit unions, banks and thrifts. This process begins when the members receive a written notice of an election that invites the members to nominate candidates for the board. The proposed rule will now provide each Bank with the option to include with that notice a brief statement describing the skills and experience that the Bank believes will likely benefit the board of directors.

The intent of this change is to provide additional information that will enable the members to nominate candidates they believe will have the qualities that match the needs of the Bank. Members will still have the ability to nominate any candidate who they want. The Bank will not have the ability to exclude any nominee based on any perception as to whether the candidate does or does not have the skills or experience that is described in the notice.

The proposed rule will also provide each Bank with the option to include additional information on the ballots that briefly describes the skills and experience of each individual who has been nominated to the board of directors. The proposal will also allow each Bank to include with the ballot a brief statement describing the skills and experience that the Bank has determined will most likely add strength to the board of directors. The Board believes these changes will result in members being better informed when making their voting decisions.

Outside of the election process, the proposed rule will also now allow each Bank the option to conduct an annual assessment of the skills and experience that new directors should have that would enhance the capabilities of the board of directors. This includes skills and experience in areas such as financial management, financial accounting, hedging, risk management, capital markets, securities disclosures, and housing finance. It is these particular skills and experiences that would be disclosed to the members as part of the election process, as described above.

QUESTIONS TO CONSIDER REGARDING THE FEDERAL HOUSING FINANCE BOARD’S PROPOSAL ON THE ELECTION OF FEDERAL HOME LOAN BANK DIRECTORS

  1. Do you believe that the changes in this proposal will facilitate the election of credit union representatives to these Bank boards of directors? What other changes would facilitate more credit union representation?
















  2. Should this new information about these desired director qualifications be included in these election notices and ballots or should it be provided at some other time and manner?
















  3. Should the new information that will be provided pursuant to this proposal be mandatory, as opposed to being provided at the option of each Bank? Should each Bank be allowed to do more in the election process than would be authorized by the proposed rule?
















  4. Other comments?
















Eric Richard • General Counsel • (202) 508-6742 • erichard@cuna.com
Mary Mitchell Dunn • SVP & Associate General Counsel • (202) 508-6736 • mdunn@cuna.com
Jeffrey Bloch • Assistant General Counsel • (202) 508-6732 • jbloch@cuna.com
Lilly Thomas • Assistant General Counsel • (202) 508-6733 • lthomas@cuna.com
Catherine Orr • Senior Regulatory Counsel • (202) 508-6743 • corr@cuna.com