Washington, DC – A new report by the Congressional Budget Office (CBO) has brought to light significant concerns regarding the balance between the public subsidies received by Federal Home Loan Banks (FHLBanks) and the public benefits they claim to offer.

The Congressional Budget Office is a non-partisan agency within the U.S. Congress that provides objective budgetary and economic information. Their report puts a dollar amount on the estimated government subsidies that the FHLBank system receives as a Government-Sponsored Enterprise (GSE). The FHLBank system comprises 11 regional banks that extend cheap advances to their membership of banks, credit unions, and insurance companies with the intended purpose of supporting housing and community development. As a GSE, this system receives special benefits (including exemption from taxes) in exchange for providing public benefits such as helping meet unmet credit needs, facilitating financial products for underserved groups, and supporting community development.

“The new Congressional Budget Office report put a number – to the tune of $7.3 billion a year – to the public subsidies that FHLBanks receive,” Sharon Cornelissen explains, who is the chair of the Coalition of FHLBank Reform and the Director of Housing at the Consumer Federation of America. “The bulk of these billions in public funds subsidize corporate profits rather than Americans’ ability to afford a house. Consumers deserve much more from the FHLBanks, especially as we find ourselves in the middle of a national affordable housing crisis.”

Key highlights from the report include:

1. Multi-billion Dollar Subsidy. The CBO estimates that in fiscal year 2024, the FHLBank system will receive a total gross government subsidy of $7.3 billion.
2. These Subsidies Mostly Support Profits Rather Than Offer Public Benefits. The Congressionally-mandated 10% of FHLBank net income toward Affordable Housing Programs, which support affordable housing construction and downpayment assistance across the nation, is tiny compared to the profits realized by the Banks and their members. In 2023, FHLBanks paid $355 million to Affordable Housing Programs (AHP) but paid out $3.4 billion to members as dividends. Through these payouts, the FHLBanks are distributing a public subsidy as profit to banks and insurance companies.
3. CBO Questions “Trickle-Down Economics” Model of FHLBanks in Today’s Mortgage Markets. The CBO report also raises serious questions about the extent to which this public subsidy gets passed on to the public through other indirect benefits that FHLBanks provide, questioning whether consumers see lower mortgage rates as a result of FHLBank subsidies. Over 40% of members of FHLBanks have not originated a single mortgage over the last five years.

George Collins, an advisor for the Coalition for FHLBank Reform and former executive vice president and chief risk officer at the Federal Home Loan Bank of Boston, noted: “Our Coalition’s initial impetus was the skewed and unfair distribution of the FHLBank profits. This report affirms our concerns and further energizes our efforts.”

For more information or inquiries, contact:

Sharon Cornelissen at scornelissen@consumerfed.org

George Collins at ghcoll25@gmail.com

About the Coalition for Federal Home Loan Bank Reform:

The Coalition for Federal Home Loan Bank Reform is a non-partisan organization dedicated to bringing together a wide variety of stakeholders to discuss, educate and shape reforms aimed at enhancing the ability of the FHLB system to address the nation’s unmet housing and community development needs.