July, 2010
The Federal Home Loan Bank, the government-chartered cooperatives owned by U.S. financial companies, has cut its outstanding debt by $25.9 billion in June 2010 after increases in the previous 2-months. The Federal Home Loan Bank system is among the largest U.S. borrowers after the federal government.
There was a drop in the system’s bonds and short-term notes to $846.5 billion led by a decrease in its callable debt.
The 12 regional Federal Home Loan Banks lend to more than 8,000 commercial banks, thrifts, credit unions and insurers at below-market rates, mainly to finance mortgage holdings. Government-supported Fannie Mae and Freddie Mac are the other largest sellers.
The Federal Home Loan Banks outstanding debt peaked at $1.33 trillion in October 2008. The borrowing had increased $1.4 billion in April and May after plunging as markets healed.
Among the callable debt from those so-called government- sponsored enterprises, more than two-thirds, or $424 billion, has been redeemed this year up from $348 billion in the same period of last year.
Today, Standard & Poor’s revised the outlook for its AA+ counterparty credit rating on the Federal Home Loan Bank of Seattle to negative. However, the Seattle FHLB’s creditworthiness doesn’t directly affect the system’s debt, which is a joint obligation of all 12 FHLBs and potentially the U.S. government. S&P’s ratings on the Seattle bank, which has $51.8 billion of assets, are three levels higher than they would be if the grader didn’t expect the U.S. to support it if needed, according to the statement. |
