FHLBanks See End to Refcorp Payments in 2012

Federal Home Loan Banks are on pace to pay off their Resolution Funding Corp. obligations by April 15, 2012, which would free up 20% of their income one year earlier than expected. The FHLBank's Office of Finance made this determination based on the $278 million Refcorp payment the banks made in the second quarter. Since 1989, the 12 FHLBanks have diverted at least $300 million of their income to pay off $30 billion in Refcorp bonds. The federal government sold the 40-year bonds to cover part of the costs of the savings and loan cleanup. American Bankers Association executive vice president Bob Davis noted that the FHLBank System will be more secure once the Refcorp obligations are finally satisfied. "We need to start planning now for how we are going to use those funds. And how some of those funds can be used to make the FHLBank System more competitive and effective in carrying out its mission," Mr. Davis said.