ProfBU OP t1_j0f0q5r wrote

The value of the government guarantee of the FHLBs' debt is at least 50 basis points. 50bps X $1 trillion = $5 billion/year. According to the Congressional Budget Office, the value of the FHLBs' tax exemption is $1.3 billion/year. $5 billion + $1.3 billion = $6.3 billion. Helpful?.


ProfBU OP t1_izy64tk wrote

Only members of FHLBs can borrow from FHLBs. In this sense, it's a very exclusive "club". Borrowing rates from the FHLBs are subsidized by you and me as taxpayers.

The question is, "What benefit do we as taxpayers get in return for our subsidization of the FHLBs?" Currently the answer to that question is, "Nothing".


ProfBU OP t1_izxyh1q wrote

Totally get it! It was tough enough before the spike in mortgage rates. Increasing the FHLBs affordable housing quota to 50% would help but it would still be a drop in the bucket. Here's a suggestion for 45 million people who are struggling with the overhang of student debt...allow them to discharge that debt in bankruptcy. student debt is the only debt that is not dischargeable this way. This is before Congress now. Tell Sen. Durbin and Schumer to get off their a...s.


ProfBU OP t1_izxxk8u wrote

The 11 FHLB CEOs take home from $2-3 million a year. These are essentially government positions. For example, the CEOs of the 12 Federal Reserve Banks earn less than $500K. Regarding "mission" part of the problem is that advances to members is considered part of their mission. However, the proceeds of the advances can be used for ANYTHING whether or not it is mission related.


ProfBU OP t1_izxwu0q wrote

Thanks for this excellent question about affordable housing.

Here's the issue. Congress has mandated 10% of net income for affordable housing. FHLBs treat that at a ceiling rather than a floor. In this public/private partnership why not require 50% of net income for affordable housing? Part of the problem too is the conflict of interest between the member banks that benefit from robust dividends. Also, every dollar of CEO and C-suite compensation undercuts their contribution to affordable housing. All the incentives need to be realigned. Thanks again.


ProfBU OP t1_izxvdpp wrote

Great question.

FHLBs are a great business model that happens to have gone off the rails.

Redeeming qualities are its structure (not to be confused with current governance), access to funding. Its regulator has asked that its mission be reconsidered. So many parts of the economy could benefit from this funding source. Think housing SUPPLY, climate remediation, infrastructure, and more.


ProfBU OP t1_izxtfdt wrote

I advocated fro change from the beginning. Their irrelevance became apparent to me when members ceased taking advances and their AHP numbers plummeted. Along the way I asked, "How is the FHLB of Boston promoting housing?" The answer from management was unsatisfactory.