FT Alphaville has maintained a somewhat skeptical stance as far as the 12 Federal Home Loan Banks (FHLBs) are concerned. The FHLBs are major sources of funding for a slew of US financial companies, as Bloomberg pointed out on Friday:
The regional Federal Home Loan Banks, or FHLBs, provide low-cost financing to more than 8,000 member savings and loans, credit unions, insurers and commercial banks at below-market rates, mainly to finance mortgage holdings. The 12 banks, whose biggest customers include JPMorgan Chase & Co. and Bank of America Corp., also buy and hold mortgage-related assets.
Here’s another scary fact: they are, collectively, the largest US borrowers after the federal government.
Importantly, as we’ve noted repeatedly, they’re not performing particularly well. Consider their latest results, via Bloomberg (our emphasis):
The Federal Home Loan Bank system, the 12 government-chartered cooperatives owned by U.S. financial companies, lost $165 million in the third quarter after taking a $1.04 billion charge related to mortgage assets.
The combined net loss compares with a profit of $506 million in the same period last year, the system’s Reston, Virginia-based finance office said in a statement today.
…
Most of the system’s losses stem from so-called other-than- temporary impairments on private-label securities, which aren’t backed by Fannie Mae, Freddie Mac or government mortgage-bond insurer Ginnie Mae. The banks expect little relief from record defaults and to recover less on foreclosures, the office said.
“Several factors contributed to the increases in projected losses, including lower forecasted housing prices followed by slower housing-price recovery, continued rising unemployment and limited refinancing opportunities for borrowers whose houses are now worth less than the balances of their mortgages,” the office said.
The FHLBs of Boston, Chicago, Pittsburgh and Seattle posted losses for the third quarter, according to the statement.
(Worth pointing out here that regulators classified the Seattle FHLB as “undercapitalized” for the first quarter of 2009)
The system has recognized $8.4 billion in other-than- temporary impairments for the 9 months ended Sept. 30.
What is it with these F’d organisations – sharing a common first initial? Think Fannie, Freddie, FDIC, FHA.
(No ‘FT’ gags please)
Related links:
For FHLB’s sake – FT Alphaville
FHLBs, you shan’t go to the securitisation ball – FT Alphaville
FHLB, the ‘B’ stands for Bowsher – FT Alphaville
FHLB, the ‘L’ stands for Libor – FT Alphaville