Monday, January 19, 2009

Now Federal Home Loan Banks Want Bailout Too?

Similar to Fannie Mae and Freddie Mac, Federal Home Loan Banks, are in financial trouble because their investments will not keep them solvent. So now, like Fannie and Freddie, they are looking for taxpayer bailout. Where and when will it stop?

The 12 home loan banks are collectives chartered by the federal government and owned by member financial companies. The government's sponsorship allows the collectives to borrow money at low cost, which they lend to banks of all sizes. Nearly all U.S. banks are members of at least one of the collectives. The collectives got in trouble by investing $76 billion in private mortgage securities, packages of mortgages not guaranteed by Fannie or Freddie, when their market value dropped. The collectives are regulated by the Federal Housing Financing Agency. (The Washington Post, 1/17/09)

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