Short and curvies

26 May 2016 By Antony Currie, Gina Chon Follow @AntonyMCurrie

The Federal Home Loan Banks, which fund private-sector banks’ housing lending, now rely on short-term borrowing for over half their debt. That may boost the profitability of their nearly $1 trln of assets. But as the 2008 crisis taught regular banks, it also increases risk.

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The Federal Home Loan Banks relied on short-term funding for 54 percent of their total debt at the end of 2015, Federal Housing Finance Agency Director Mel Watt said on May 24. The figure has increased from 43 percent at the end of 2014 and 39 percent at the end of 2013, Watt told attendees at the FHLB Directors’ conference in Washington, D.C.

In addition, he noted that the top four lenders borrowing from the FHLB system accounted for 24 percent of loans.

The FHLB system comprises government-sponsored enterprises which provide low-cost funding for banks to finance housing, infrastructure, economic development and jobs. It reported combined assets of $961 billion at March 31.

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