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Source: Council of Federal Home Loan Banks

Federal Home Loan Banks' Financial Strength Continues to Lend Stability to U.S. Banking System

WASHINGTON, DC,, Feb. 21, 2014 (GLOBE NEWSWIRE) -- The Federal Home Loan Banks (FHLBanks) today reported strong profits in their preliminary unaudited year-end 2013 combined operating highlights. Profitability means the FHLBanks' cooperative business model is working for the nation's housing finance system and FHLBank member financial institutions, according to John von Seggern, President and CEO of the Council of FHLBanks.

"The FHLBanks' financial strength is important to the U.S. banking system because they play an essential role helping member institutions, big and small, meet housing finance and credit needs across the country in all economic cycles," said von Seggern. "Without the FHLBanks' relationships with their members, credit to consumers and businesses would be tighter and more expensive."

The 12 FHLBanks are regional wholesale banks privately owned by commercial banks, credit unions and other financial institutions. They receive no congressional appropriations. Raising money by selling bonds to institutional investors worldwide places them second to the U.S. Treasury in issuing debt. They funnel those funds to approximately 7,500 member financial institutions in the form of secured loans which they call "advances."

The FHLBanks are member-capitalized, meaning that members are required to maintain sufficient capital to support its advances made by the FHLBank.

"This is one of the primary features of their member-owned business model that assures that the FHLBanks have adequate capital, which translates into safety and soundness for the entire financial system," von Seggern said. "During the financial crisis, FHLBanks needed no taxpayer assistance. In the early days of the crisis, the FHLBanks were the only source of liquidity in the U.S. banking system. That helped provide enormous economic stability to the nation."

"The FHLBanks are owned by financial institutions of all sizes and many types. Their structure provides members more reliable access to funding from the global credit markets," von Seggern added. "Their mortgage programs and funding activities help financial institutions, especially smaller lenders, serve local housing markets."

David Jeffers
(202) 955-6411