Home-Loan Banks Struggle to Maintain Capital

The Wall Street Journal ^ | 2009-01-21

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BY JAMES R. HAGERTY

The Federal Home Loan Banks, which have thrived on obscurity for more than seven decades, are moving uncomfortably into the spotlight as souring mortgage investments threaten to leave some of them below their capital requirements.

The 12 regional home-loan banks are a major source of funding for thousands of commercial banks, thrifts and credit unions across the country. As other sources of credit dried up, they increased their lending to financial institutions to about $1 trillion as of Sept. 30 from $641 billion at the end of 2006. In recent weeks, however, several of the home-loan banks have suspended dividends or warned that they may fall short of capital requirements.

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[Peanut Gallery]

ping

[Outland]

Just out of curiosity, why is it that I don’t hear anything about Capital One? Or have I missed something?

[allmost]

You are officially eliminated by the ....

[April Lexington]

well... THIS is a surprise!

NOT!

[Jubal Madison]

I know the economy is a really complex situation, but if govt. backed away, wouldn’t things eventually straighten themselves out? Am I being to simplistic? It is becoming apparent to me that no one in govt. knows how to handle the current crisis. Anybody got any answers?

[ex-Texan]

' Home-loan banks are a major source of funding for thousands of commercial banks, thrifts and credit unions across the country. As other sources of credit dried up, they increased their lending to financial institutions to about $1 trillion as of Sept. 30 from $641 billion at the end of 2006 . . .'

All those mountains of forged mortgage documents and bogus credit derivatives have a huge cost. Chickens coming home to roost without a home roost within; Chickens without any feed to eat will eat their originators in the end. Arrest all the bank officers who got millions in bonuses. In a more sane world we would line them up and shoot them down.

Just joking, people. LOL, LOL !

Nothing to see here. Time to move on. The crooks will walk away leaving others to clean up their mess.

[dennisw]

Just out of curiosity, why is it that I don’t hear anything about Capital One? Or have I missed something?
________________________

Not much detail but CapitalOne got some bailout money too and bought Chevy Chase bank with is. So it seems

[dennisw]

Other Voices: Bailout
The Union of Grass Valley, CA - Dec 31, 2008
Further, Richard D. Fairbanks, chairman of Capital One Financial Corporation, which got $3.56 billion in bailout money, gave up $1 million in compensation ...

[vetvetdoug]

My local bank, owned by locals, is doing just fine. The Bank owners consciously stayed away from government assistance and arm twisting. The Bank is not allied with any larger banking system other than the FDIC. They make loans based upon solid reasoning and know to whom they are loaning the money. Most of the members say that if the one’s asking for a loan are from a family that pays their debts, the loan is good the majority of the time and will take a risk. If the family is not trustworthy they make the loans accordingly. Once Banks got so big they didn't know to whom they were loaning or the people they served, it was only a matter of time before the system was perverted.

[randita]

I know the economy is a really complex situation, but if govt. backed away, wouldn’t things eventually straighten themselves out? Am I being to simplistic?

No, you're not being simplistic. You are correct, with one caveat. Banking regulations already on the books need to be enforced and laws regulating over leveraging and credit default swaps need to be enacted.

The government is throwing good money after bad in a no win situation.

See:

http://market-ticker.denninger.net/archives/735-Ready-To-Do-It-Right-Yet.html