The Federal Home Loan Bank Board Should Require Organizers of Mutual Associations To Pledge More Savings When the Association's Likelihood for Success Is Questionable

GGD-81-92: Published: Sep 18, 1981. Publicly Released: Sep 18, 1981.

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Arthur R. Goldbeck
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A review was conducted to assess the Federal Home Loan Bank Board's (FHLBB) examination and supervisory functions. The review addressed the FHLBB requirements for chartering mutual associations, the Office of Industry Development's (OID) and the District banks' analyses of charter applications, the Board's decisionmaking process for chartering new mutual savings and loan associations, the FHLBB minimum financial requirements for organizers of new mutual associations, and the extent to which the financial requirements reflect the associations' potential for success.

The review showed that FHLBB: (1) frequently approved applications to organize mutual associations when there was disagreement between the OID and the district bank about the associations' ability to succeed; and (2) has not required new mutual associations to pledge savings higher than the minimum, although the supervisory agents recommended such action or disapproval of the application.

Recommendation for Executive Action

  1. Status: Closed - Not Implemented

    Comments: It is apparent that FHLBB will not adopt the recommendation because it is unwilling to alter its policies. In addition, subsequent to the GAO audit the FHLBB actions appear to have been somewhat consistent to the recommendation. Continued monitoring of this recommendation is not necessary.

    Recommendation: FHLBB should require organizers of new mutual associations it charters to pledge accounts in amounts greater than the minimum requirement when a district bank and OID disagree about the likelihood of an association's success.

    Agency Affected: Federal Home Loan Bank Board


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