GSE Credit Facility Also Open to FHLBanks

An emergency credit facility that will give Fannie Mae and Freddie Mac access to short-term loans of seven to 30 days is also open to the 12 Federal Home Loans Banks, even though the banks are unlikely to need it, according to a GSE regulator. "The Federal Home Loan Banks have performed remarkably well over the last year," Federal Housing Finance Agency Director James Lockhart said. All but one is profitable, and "therefore it is very unlikely that they will use the facility," he added. The Chicago FHLBank posted a $74 million loss in the second quarter following a $78 million loss in the first quarter. The FHLBanks can put up advances or agency mortgage-backed securities as collateral to borrow at Treasury's credit facility at an interest rate of 50 basis points above the London interbank offered rate. "We can issue [consolidated] debt at much more attractive rates than that," said John Fisk, director of the FHLBank System Office of Finance. However, FHLBank consolidated debt is backed by all 12 FHLBanks. Individual banks can tap Treasury's credit facility. "We are pleased that Treasury has created this liquidity facility as a backstop," Mr. Fisk said. "Treasury created it to ensure stability and market access, and that is a good thing."