DISQUS

Banker · 11 months ago

As an ex- bank portfolio manager, I can tell you that I used to borrow from the FHLB using loans and mortgage backed securities as collateral. I am hearing that the FHLB has been looking the other way throughout the entire crisis and hasn't marked to market collateral, worried that some banks might not be able to post more collateral or pay down their debt.

If you borrowed 500mm and at the time posted 550mm in mortgage backed securities (which now are worth 60cents on the dollar or 330mm), you either have to post 220mm of additional collateral or pay down nearly half of the 500mm debt.
Real Estate Raj · 11 months ago

As a banking neophyte this post is a little hard for me to digest, but it appears the FHLB is making high risk loans and hiding it by purposefully not doing their homework. Shocking.