The Federal Home Loan Bank System: A Chronological Review and Discussion of Key Issues

The Federal Home Loan Bank system has been a core fixture of US support for housing and home finance since its creation in 1932.  Originally established as 12 (now 11) regional banks, the system has used its special charter and implicit federal guarantee of its debt to increase and sustain its members’ liquidity and ability to lend.  While the system’s original focus was home finance, Congress over the intervening decades has expanded its mission to include other liquidity objectives. The system’s membership also has grown, from institutions primarily serving home finance to a much larger universe of the nation’s lending institutions.

The federal government’s appropriate role in supporting home finance and financial institutions in general has generated serious debate since the financial crisis began in 2008.  The other entities with special charters to support housing finance – Fannie Mae and Freddie Mac – were taken into conservatorship then and remain there today.  Congress has considered but not moved forward on any legislation to move them out of conservatorship, though the new Administration and several leading members of Congress have indicated it is a priority they plan to pursue.

In this context of potential far reaching changes in the federal government’s support for housing and home finance, CFA commissioned this extensive summary of the Federal Home Loan Banks and their evolving mission and membership.  Prepared by George Gaberlavage, Principal  at Orleans Street Policy Works, LLC and former Policy Integration Director at AARP, it is meant to provide consumers, elected and appointed officials with a comprehensive review of the system.  We hope it will help inform all those involved in considering the future of such support.

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