FHLBs Sue Lehman over Interest Rate Swaps

Two Federal Home Loan Banks with multiple interest rate swap transactions with a Lehman Brothers unit are suing the bankrupt investment bank to recover $220 million in collateral. The Atlanta FHLB is suing Lehman for the return of $179 million in excess collateral and the Pittsburgh FHLB is suing for the return of $41 million in cash. Lehman Brothers Special Financing Inc. filed for bankruptcy in early October. "At this early stage of the bankruptcy proceedings, the Bank is unable to predict whether, and to what extent, it will be able to recover the claimed amounts," the FHLB Atlanta said in a public filing. The bank said it is analyzing the impact to its financial statements of the Lehman and LBSF bankruptcy filings, including any necessary loss contingencies, "which could be significant." The 12 FHLBs have aggregated credit exposure to Lehman entities of approximately $260 million, according to the Office of Finance, which issues consolidated debt securities for the FHLB system.