Past, Present Test Seattle Home Loan Bank

By Steven Sloan



As the Federal Home Loan Bank of Seattle works to dig out of the current financial turmoil, the bank and its regulator must also contend with the aftermath of past crises.  At the end of 2004, as it struggled with the size of its mortgage purchase program, the Seattle Home Loan bank said members who wish to redeem their stock must wait five years before receiving their money.  But as the five-year mark approaches, sources — many of whom requested anonymity to speak freely — said the Federal Housing Finance Agency might not want the bank to redeem the stock, which would have the effect of lowering the capital base. The bank held $1.9 billion worth of capital stock on Sept. 30, and some observers said it would be difficult for the Finance Agency to justify allowing capital to walk out the door. “The bank remains undercapitalized,” said Karen Shaw Petrou, the managing director of Federal Financial Analytics, Inc. “Stock redemptions while a bank remains undercapitalized is a very difficult situation. The whole focus needs to be on restoring its capital.”