Federal Home Loan Banks

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The Federal Home Loan Banks provide stable, on-demand, low-cost funding to American financial institutions for home mortgage loans, small business, rural, agricultural, and economic development lending. With their members, the FHLBank System represents the largest collective source of home mortgage and community credit in the United States. The banks do not provide loans directly to individuals, only to other banks.

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[edit] Ownership

The 12 banks of the FHLBank System are owned by over 8,100 financial institutions from all 50 states, U.S. possessions, and territories. Equity in the FHLBanks is held by these owner/members and is not publicly traded. Institutions must purchase stock in order to become a member. In return, members obtain access to low-cost funding, and also receive dividends based on their stock ownership. FHLBanks are exempt from state and local income taxes, but are subject to property taxes. The mission of the FHLBanks reflects a public purpose (increase access to housing and aid communities by extending credit to member financial institutions), but all 12 are privately capitalized and, apart from the tax privileges, do not receive taxpayer assistance.

[edit] Financial Results and Condition

On February 26, 2007, the FHLBanks Office of Finance published preliminary combined operating highlights for 2006. As of year-end, the combined assets of the 12 Federal Home Loan Banks were approximately $1.02 trillion. Of this total, secured loans (known within the Bank System as advances) equaled $641 billion, or about 63% of assets. Investments were the second largest component at $271 billion, or 26.6% of assets. Member mortgage assets were $98 billion, or 9.6% of assets. Combined net income in 2006 was $2.6 billion, and capital equaled $45 billion. The FHLBanks made affordable housing contributions of $295 million in 2006. Compared to year-end 2005, secured loans, investments, net income, capital and affordable housing contributions increased, while member mortgage assets decreased.

The principal investments of the FHLBanks are in advances to members secured by mortgage loans, Federal funds sold, commercial paper, mortgage-backed securities, and GSE securities. The FHLBanks finance these investments primarily by issuing callable and noncallable bonds. The liabilities of each FHLBank are guaranteed by all of the other FHLBanks. All 12 Banks were registered with the United States Securities and Exchange Commission and all financial statements and other filings are available to the public at the SEC web site. (See external links)

[edit] History

Congress passed the Federal Home Loan Bank Act, which established the FHLBank System, in 1932, during the Great Depression. This was in order to provide funds to savings and loan (thrift) institutions to make mortgages more affordable. The Financial Institutions Reform, Recovery and Enforcement Act of 1989 (FIRREA) abolished the Federal Home Loan Bank Board and transferred responsibility for oversight of the Federal Home Loan Banks to the Federal Housing Finance Board. At that time the Bank Board’s previous supervisory and regulatory responsibilities with respect to thrift institutions and their holding companies were transferred to the newly created Office of Thrift Supervision, under the U.S. Department of the Treasury. FIRREA also allowed all federally insured depository institutions to join the FHLBank System, including commercial banks and credit unions.

[edit] See also

[edit] External links

[edit] Banks