The Federal Home Loan Bank System and U.S. Housing Finance

W. Scott Frame

Working Paper 2016-2
January 2016

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This paper examines the role of the Federal Home Loan Bank (FHLB) System in the U.S. housing finance system. This cooperatively owned government-sponsored enterprise has changed markedly over the past 25 years as a result of membership liberalization and the demise of thrift institutions. Today, despite its name, size, and principal activities, the FHLB System actually provides little targeted support to the housing sector. Instead, recent research highlights the role of the FHLB System as a provider of subsidized general liquidity to its members, including the very largest commercial banking organizations. This role was especially pronounced during the onset of the recent financial crisis and gave rise to the perception of the FHLB System as having become the "lender of next-to-last-resort."

JEL classification: G21; G28

Key words: residential mortgages, government-sponsored enterprises, liquidity

The author thanks Edward DeMarco and Joseph Tracy for comments and Pam Frisbee for research assistance. Much of this chapter is based on his prior research, especially Flannery and Frame (2006); Ashcraft, Bech, and Frame (2010); and Frame, Hancock, and Passmore (2012). The views expressed here are the author's and not necessarily those of the Federal Reserve Bank of Atlanta or any other entity within the Federal Reserve System. Any remaining errors are the author's responsibility.
Please address questions regarding content to W. Scott Frame, Senior Policy Adviser, Research Department, Federal Reserve Bank of Atlanta, 1000 Peachtree Street NE, Atlanta, GA 30309-4470, 404-498-8783,
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