SIC 6019

This classification includes central reserve depository institutions, other than federal reserve banks, primarily engaged in providing credit to and holding deposits and reserves for their member commercial banks, thrift and loan associations, credit unions, insurance companies, and other federally-insured financial institutions who hold at least 10 percent of their assets in residential mortgage loans.

NAICS Code(s)

522320 (Financial Transactions Processing, Reserve, and Clearing House Activities)

The Federal Home Loan Bank System (FHLB System) was established by Congress in 1932 with the passage of the Federal Home Loan Bank Act. The FHLB System's intended role was to provide readily available, low-cost funds to federally insured savings institutions.

As it was originally constituted, the FHLB System acted as regulator and supervisor of federally chartered savings institutions and federally insured state-chartered savings institutions.

Coming on the heels of the savings and loan debacle of the 1980s was the creation of The Financial Institutions Reform, Recovery and Enforcement Act of 1989 (FIRREA) and the dissolution of the Federal Home Loan Bank Board (FHLBB).

FIRREA eliminated the FHLBB and transferred those powers to the Federal Housing Finance Board (FHFB). Thrift institutions that were members of the FHLB System continued, as before, to be regulated by the Office of Thrift Supervision, which is part of the U.S. Treasury.

FIRREA simultaneously expanded member eligibility in the FHLB System to include commercial banks, credit unions, thrift and loan associations, and other federally-insured financial institutions.

Since the dismantling of the FHLBB, the 12 regional governing banks in the system now act as wholesale banks only, providing their shareholders with an important link to the U.S. capital markets. By the late 1990s, more than 7,200 member banks composed the FHLB System.

It is the banks' mission is to provide access to housing for all Americans and to improve the quality of credit by raising funds for their lender institutions/shareholders through the Office of Finance which, in turn, issues and services debt for the banks — the FHLB System is one of the three largest issuers of debt in the world. The system's consolidated debt rating is the highest rating available from Standard and Poor's and Moody's rating services. The United States Government is neither responsible for nor guarantees these obligations.

The FHFB has regulatory authority and supervisory oversight responsibility for the 12 FHLB banks and the Office of Finance. According to its Web site, the finance board "ensures the safety and soundness of the Bank System, establishes policy for the Community Investment Cash Advances programs (including the Affordable Housing and Community Investment programs), oversees the Banks' financial performance and operations and evaluates their attainment of public policy mission as a government-sponsored enterprise (GSE)."

The FHLB System is regulated by the FHFB, an independent agency of the executive branch responsible for ensuring that the banks carry out their housing finance mission, remain adequately capitalized, raise funds in capital markets and be fiscally solvent. The finance board also establishes policies and regulations governing the operations of the banks.

The FHFB is comprised of a five-director board, one of whom is the secretary of housing and urban development. The four other directors are appointed by the president and are subject to senate confirmation. The FHFB's directors are chosen from a pool of people who have extensive experience in housing and community development finance or with a commitment to representing consumer or community interest in services, credit needs, housing, or consumer protection.

The FHFB is supported by assessments from the 12 FHLB banks. The banks finance their own operations through investments, the sale of collateralized obligations, and by charging for credit products and services they provide to member institutions. No tax dollars or other appropriations are used to support the operations of the FHFB or the bank system.

Further Reading

Federal Home Loan Finance Board, 12 February 2000. Available from .

Office of Finance, 12 February 2000. Available from .

1998 Annual Report of the Federal Home Loan Bank of San Francisco, 12 February 2000. Available from .

Federal Home Loan Banks System, 12 February 2000. Available from .

Office of Thrift and Supervision, Department of Treasury, 12 February 2000. Available from .

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