Serious cracks are showing in the nation’s Federal Home Loan Bank system, and it now appears as if member banks are being forced to take at least some of the hit for it. Various banking industry sources suggested Friday afternoon that some Home Loan banks are squeezing the liquidity faucet, and refusing to pay banks back for FHLB stock they purchased.This is a big story.
When banks take loans from a Home Loan bank, besides paying interest, they also have to buy a percentage of FHLB-restricted and non-public stock, based on how much they borrowed and the credit quality of the collateral they posted. The system was set up as a way to basically help support the FHLBs’ capital as banks borrow against it
Sunday, January 11, 2009
Banks May Take Hit on FHLB Stock Holdings
Housing Wire reports: