FHLBS


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Federal Home Loan Bank System

A system of 12 American banks whose purpose is to provide low-cost loans for mortgages, businesses, and urban and rural economic development. The FHLB is not publicly traded, but rather is owned by several thousand banks and other financial institutions. These institutions buy stock in the system in order to become eligible for subsidized loans, which they then make to high-risk customers. Established in 1932 during the Great Depression, the FHLB largely succeeded in its original purposes of putting people in affordable homes. However, in the late 2000s, the FHLB began to have cash flow problems due in part to overexposure to the housing bubble and became the largest borrower from the United States government.

FHLBS

See Federal Home Loan Bank System.
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If an FHLBank is perceived as entering a period of financial distress, members of that FHLBank would clearly have an incentive to request redemption of their shares, and it would be politically difficult for the FHLBS to deny such redemption.
Consequently, an FHLBank could experience a "run" on its shares, and that could be contagious across the entire FHLBS.
The FHLBS was created during the Great Depression with a mission of enhancing liquidity for residential mortgage lenders by providing a ready source of advances to members of each FHLBank.
Financial Deja vu? The Farm Credit System's past woes could strike the Federal Home Loan Bank System. (Banking & Finance)

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