further prod, each FHLB was to publish an annual AHP implementation plan indicating how it
intended to fulfill the new mandates.
These structural changes were important in the shift toward the housing and community
development mission. But before we discuss how they worked out in implementation, we take
up the question of why Congress opted to make them.
Why Did Congress Make These Changes?
Thinking in terms of the principal-agent model highlights the institutional mechanisms
that Congress devised to deliberately direct FHLBs’ new focus, but it does not illuminate why
Congress chose to redirect FHLBs in this way. It is not at all obvious why Congress would look
to the FHLB System as the institutional home for new housing and community development
programs. In crafting FIRREA, legislators (and the administration) were centrally concerned
with resolving the crisis in the savings and loan industry. A considerable proportion of the S&Ls
that constituted the bulk of FHLB membership were failing, and the federal guarantee of their
deposit insurance was having a significant impact on the federal budget. Legislators’ focus was
on structuring new agencies to resolve failed thrifts (Resolution Trust Corporation), insure S&L
deposits (the Savings Association Insurance Fund) and regulate S&Ls (Office of Thrift
Supervision). Federal Home Loan Banks were a side show: it was not clear that they would
survive the S&L crisis as more than a thousand of their members went into receivership (Litan
1990).
To probe why and how the mechanical provisions addressing housing and community
development made their way into FIRREA, we conducted targeted supplemental interviews with
people who were involved with the change process – congressional staffers and administrative
officials – and exploited contemporary documentary sources including congressional hearings,
scholarly and banking trade publications, and popular periodicals such as newspapers and news
16
Convention