In April, we alerted you to a Cleveland Fed study arguing that the GSEs, especially the Home Loan Banks, fuel billions in profitable arbitrage trading by foreign banks.  A new Fed staff study uses confidential data to reach a still more damning conclusion.  The Fed can’t do much about GSE lending, but it sure can do something about foreign-bank demand for it.  If it does, the FHLBs will need a new gig.

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