Thursday, June 28, 2012

Bizarre: U.S. Home Loan Banks Overexposed in Europe

The U.S. Federal Home Loan Banks’ unsecured lending to foreign institutions skyrocketed last year as the European sovereign debt crisis intensified, raising concerns about their risk management, an auditor’s report said today, reports Bloomberg

Several Home Loan Banks last year made short-term loans totaling about $3 billion to two European banks that had received government bailouts and were on a credit watch, according to the report. That's crazy enough.  But, it gets worse.

At the end of 2011, FHLB had $41 billion unsecured lending to foreign banks.

The volume of unsecured lending, particularly to foreign institutions, rose in part to offset a decrease in the Home Loan Banks’ traditional activities providing funding to domestic lenders for home mortgages, according to the report.

What's the FHLB doing lending to foreign banks? Who knows? According to the FHLB web site:
The Federal Home Loan Banks are a mechanism for economic stability. Thousands of community lenders everywhere in America rely on them as a strong source of funds for financing housing, jobs and growth.
 The Federal Home Loan Banks are a group of cooperatives that lending institutions use to finance housing and economic development in local communities.
About 80 percent of U.S. lending institutions rely on the Home Loan Banks for low-cost funds. Because the Home Loan Banks are cooperatives, their low costs are passed on to consumers and communities. They’ve been around for the better part of a century—a fundamental part of the country’s financial system, like the Federal Reserve or federal deposit insurance.
No matter what size lender you see doing business, it’s likely they’re financing much of their community lending through funds provided by a regional Home Loan Bank.
The Home Loan Banks raise billions of dollars in the financial markets so that local lending institutions can get those funds out into their communities. 
Imagine a bank or savings and loan that you’re familiar with. That institution needs to borrow the funds which it lends out. When it comes time to borrow those funds from its Home Loan Bank, the institution puts up collateral. Once the Home Loan Bank approves a loan to the lender, it advances the funds. 
The lender then uses those funds to support home mortgage lending—and other community investments, such as small business and agricultural loans.

 The Home Loan Banks were chartered by Congress in 1932 to provide liquidity to the U.S. mortgage market. In other words, they are another FDR created central banking program that has gone off the rails and is now bailing out global banksters. From the FHLB web site:
There is an important relationship between the federal government and the Home Loan Banks. They have agreements with the Federal Reserve and the U.S. Treasury related to how they operate. 
Congress created them and has worked closely with the Home Loan Banks for eight decades. All their activities fall under federal regulatory oversight that continues to be updated and kept strong. 
These are the things that make Home Loan Banks unique “government-sponsored enterprises.”

And get this FHLB banks are required to put up collateral for money they receive from FHLB , but the banks can then make unsecured European loans. Again from the FHLB web site:
Federal Home Loan Banks require their members to put up collateral against the advances they receive. The collateral always meets or exceeds the value of the loans made to the lenders.
None of this nuttiness and activity that favors global banksters would ever occur in a free market. Indeed, the  private sector is running away from eurozone debt as quickly as it can. The FHLB banks totally bizarre activity can only be understood with an understanding of how banksters work and how desperate they are to keep the crashing global bankster system afloat. Using the FHLB as a propping up measure is really off the charts. It's time to end the Fed, the FHLB and all the other bankster organizations.


  1. All very well until the last sentence. I believe it would make more sense to reform the Fed than end it. The writer should have presented a more constructive argument.

    1. So we can keep having business cycles?

      You don't reform a tumor, you get rid of it.

  2. Good luck on reforming the Fed. Ending it is the constructive argument!

  3. "The writer should have presented a more constructive argument."


  4. is this not a case of history repeating? in Pres. Hoover's biography he mentioned something similar to this as leading to the US bank failures from 1927 to 1931 leading to the depression.

  5. nationalize the fed

    1. It's already nationalised along with the entirety of the banking sector. No, abolish the Fed and central banking.

  6. this country is ending because the people have become so stupid,they have put the very stupidest in the entire population at the top,and can't be shown the error of their ways no matter how hard you try,there incapable of understanding what your trying to show them,this country is ending and it going to be a very harsh ending...................

    1. Those at the top are not stupid. They are blinded by ideology and personal gain and callous towards the masses but not for lack of intellect. It is simply that democratic systems reward the ascent of the most ravenous vultures.

  7. I think that the bank serving home loans to every US citizen should not be utilized outside the territory. Worst case scenario, the citizens will have a hard time loaning in the bank for sure.

  8. The funny thing about this situation is that the governments involved just opted for stop-gap measures and bailouts instead of going for "solid" long-term goals.

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