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Federal Home Loan banks’ purpose called into question as advances drop
As banks rack up record levels of deposits, the Federal Home Loan banks’ core business of providing liquidity to member institutions is drying up, leading some critics to question the institutions’ long-term viability. The lifeblood of the Home Loan banks — advances to banks, credit unions and insurance companies — plummeted 20% last year to $350 billion, its lowest level in 15 years. The Home Loan banks say the decline is part of the normal ebb and flow of the market….“The Home Loan banks are very important institutions and they really warrant modern-day scrutiny,” said Karen Petrou, co-founder and managing partner of Federal Financial Analytics. “They’ve always flown under the radar because Fannie and Freddie are huge and take up a lot of bandwidth.”