Metro IAF
By David K. Brawley, Joseph Daniels, Lionel Edmonds, and Michael Gecan
for the New York Daily News
Published: December 4, 2024
When the famed Depression-era criminal, Willie Sutton, was asked why he robbed banks, he replied, “Because that’s where the money is.” Nearly a century later, that’s still true, although modern technology has created new options for depositors. Likewise, modern bank robbers are as likely to be hackers hiding behind digital masks as stick-up crews armed with weapons.
But banks remain places where massive amounts of money are held. The problem is that some banks have become so remote and insulated that they are operating like Willie Sutton in reverse: withholding money from those who have a rightful claim to its uses. This is a form of robbery, and it is not a victimless crime.
Take, for example, the nation’s Federal Home Loan Bank system—a network of 11 regional banks founded in 1932. Its stated mission was to assist other member financial institutions so they could invest responsibly in housing and community development efforts. The Federal Home Loan Banks offered lower-cost financing to its members, saving them billions in the process.
As the decades passed, the system grew—now reporting approximately $1.7 trillion in assets. While it boasts of being a kind of co-op, benefiting its members and paying large dividends to its shareholders, it downplays the fact that it was, and still is, a government-sponsored entity receiving significant subsidies to this day.
Last year, it received $7.3 billion in subsidies, according to the Congressional Budget Office. During that same period, it dedicated only $752 million to an affordable housing program mandated by statute. Additionally, it served the needs of many member institutions that failed to originate a single mortgage in the past five years. In fact, 40% of those institutions did nothing to make homeownership more accessible.
The U.S. Air Force has a phrase for a self-perpetuating system with no purpose other than to sustain itself: a “self-licking ice cream cone.”
This self-licking ice cream cone paid out $3.4 billion in dividends to its member banks but spent less than a quarter of that on its housing obligation.
We would argue, in all seriousness, that the behavior of the Federal Home Loan Banks robs America’s cities and counties of desperately needed dollars that could stimulate the expansion of all forms of new housing. It leads to intense and costly competition among those of us who have built affordable housing but could build much more if additional funding were available. It slows the production of housing, enriching those who already own homes while burdening everyone else with high costs.
It also delays the time when people can buy their first homes. The average age of homebuyers is currently an astonishingly high 56 years old. This traps hardworking Americans of all races, in all communities, and in congregations of all faiths, in cramped, unhealthy, and sometimes dangerous housing.
So, here’s what the current president should do in his remaining weeks in office—or what the newly elected president should do on Day One:
Demand that the banks increase their commitment to affordable housing from 10% (yielding $752 million) to 30% (which would generate $2.25 billion) per year. When pressed recently by the Treasury Department to increase this commitment, the banks’ representatives claimed it was unreasonable and would undermine their stability. That’s an odd claim to make, given that for 22 years—from 1989 to 2011—the banks actually committed 30% of their profits to both housing and repaying the federally subsidized bailout in the aftermath of the savings and loan debacle.
The president should also demand that the banks stop providing low-cost capital and large dividends to members that do nothing to improve housing conditions in the country.
We live and work in a world where these resources, if properly redeployed, professionally managed, and fairly distributed, could make a real difference.
It’s time to end the government-subsidized, tax-free ride that has benefited the Federal Home Loan Banks and their members, but not most Americans. There is enough money to address the nation’s housing crisis. It’s just being hoarded by those who control it—engaging in robbery on a scale that Willie Sutton could only dream of.
Brawley, Edmonds, and Daniels are pastors and leaders in Metro IAF affiliates in New York City and Washington, D.C.