Federal Home Loan Banks

The FHLBanks were established during the Great Depression by the Federal Home Loan Bank Board (FHLBB) pursuant to the Federal Home Loan Bank Act of 1932. After signing the Federal Home Loan Bank Act, President Herbert Hoover gave a statement describing the purpose of the FHLBank System:The purpose of the system is both to meet the present emergency and to build up homeownership on more favorable terms than exist today. The immediate credit situation has for the time being in many parts of the country restricted the activities of building and loan associations, savings banks, and other institutions making loans for home purposes, in such fashion that they are not only unable to extend credit for the acquirement of new homes, but in thousands of instances they have been unable to renew existing mortgages with resultant foreclosures and great hardships.The FHLBank System was roughly structured as a Federal Reserve system for thrifts. At the time, thrifts could not join the Federal Reserve and access emergency lending through the discount window, explaining why the FHLBanks were initially needed to address emergency needs of the Great Depression. Initially, the FHLBanks made direct loans to homeowners, but the Home Owners’ Loan Act of 1933 transferred this responsibility to the newly established Home Owners' Loan Corporation and authorized the FHLBB to charter and regulate federal thrifts. In 1937, the FHLBank System issues its first consolidated obligations.

Statutory and regulatory changes

The Emergency Home Finance Act of 1970 provided the FHLBank System with $250 million to subsidize interest rates on home construction advances. In 1982, the Garn St. Germain Depository Institutions Act eliminates restrictions on collateral FHLBanks can accept.

In response to the savings and loan crisis of 1986-1995, the Financial Institutions Reform, Recovery and Enforcement Act of 1989 (FIRREA) abolished the FHLBB and transferred oversight responsibility of the FHLBanks to the Federal Housing Finance Board (FHFB) and regulatory responsibility to the Office of Thrift Supervision (OTS) in the Department of the Treasury. FIRREA also made commercial banks and credit unions eligible to be members of FHLBanks if 10% of their assets were in residential mortgages.

Due to the 2008 financial crisis and the Great Recession, the Housing and Economic Recovery Act of 2008 (HERA) replaced the FHFB with the Federal Housing Finance Agency (FHFA). The Secretary of the Treasury was authorized to purchase FHLBank debt securities in any amount through December 31, 2009, after which the limit would return to the original $4 billion. HERA also made community development financial institutions (CDFIs) eligible to be FHLBank members.

Mergers and splits

In 1946, the FHLBank of Los Angeles and FHLBank of Portland were merged to create the FHLBank of San Francisco, which was subsequently split into the FHLBank of San Francisco and FHLBank of Spokane (later Seattle) in 1963. In 2015, the FHLBank of Seattle and FHLBank of Des Moines voluntarily merged.