The Federal Home Loan Bank System: The Lender of Next-to-Last Resort?

FRB of New York Staff Report No. 357

Federal Reserve Bank of Atlanta Working Paper No. 2009-4

48 Pages Posted: 2 Dec 2008

See all articles by Adam B. Ashcraft

Adam B. Ashcraft

Federal Reserve Bank of New York

Morten L. Bech

Bank for International Settlements (BIS) - Committee on Payments and Market Infrastructures

W. Scott Frame

Federal Reserve Bank of Dallas

Date Written: November 2008

Abstract

The Federal Home Loan Bank (FHLB) System is a large, complex, and understudied government-sponsored liquidity facility that currently has more than $1 trillion in secured loans outstanding, mostly to commercial banks and thrifts. In this paper, we document the significant role played by the FHLB System at the onset of the ongoing financial crises and then provide evidence on the uses of these funds by the System's bank and thrift members. Next, we identify the trade-offs faced by member-borrowers when choosing between accessing the FHLB System or the Federal Reserve's Discount Window during the crisis period. We conclude by describing the fragmented U.S. lender-of-last-resort framework and finding that additional clarity about the respective roles of the various liquidity facilities would be helpful.

Keywords: Federal Home Loan Bank, government-sponsored enterprise, lender of last resort, liquidity

JEL Classification: E40, E59, G21, G28

Suggested Citation

Ashcraft, Adam B. and Bech, Morten L. and Frame, W. Scott, The Federal Home Loan Bank System: The Lender of Next-to-Last Resort? (November 2008). FRB of New York Staff Report No. 357. Available at SSRN: https://ssrn.com/abstract=1310281 or http://dx.doi.org/10.2139/ssrn.1310281

Adam B. Ashcraft (Contact Author)

Federal Reserve Bank of New York ( email )

33 Liberty Street
New York, NY 10045-0001
United States
212-720-1617 (Phone)
212-720-8363 (Fax)

Morten L. Bech

Bank for International Settlements (BIS) - Committee on Payments and Market Infrastructures ( email )

Centralbahnplatz 2
Basel, Basel-Stadt 4002
Switzerland
41612808923 (Phone)

W. Scott Frame

Federal Reserve Bank of Dallas ( email )

2200 N Pearl Street
Dallas, TX 75201
United States
214-922-6984 (Phone)

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