The FHLBs: beyond Countrywide

The enormous $51B advance the FHLBs made to Countrywide has received a lot of press: see here for Bloomberg and here for comment from Naked Capitalism. What I had not realised, though, is the extent to which this goes beyond Countrywide. Sizing the issue is difficult as the various sources use different dates: CNN reports that in Q3 2007 FHLB loans to member banks were $822B, while Bloomberg says that institutions borrowed a record $163 billion from the 12 Federal Home Loan Banks in August and September 2007 alone.

Basically the 12 FHLBs are standing in for ABCP and securitisation buyers. Compare this with the FT's assertion that the FHLB's never used to lend more than $150B in a year and we can see that the FHLB system is basically acting as another FED window, and perhaps a wider one than the central bank has itself.