Plagued by operational problems in its fast-growing mortgage partnership finance program, the Federal Home Loan Bank of Chicago has entered into a supervisory agreement with its regulator, agreeing to limit its MPF portfolio growth to just 10% a year.The FHLBank also must submit a business and capital management plan to the Federal Housing Finance Board by the end of August. The disclosure of the supervisory agreement came on the same day that the bank's president, Alex Pollock, officially stepped down. Mr. Pollock announced his resignation on June 8. FHFB examiners concluded that the bank's management systems, controls, record keeping, and audit capacity had not kept pace with the rapid growth of the Mortgage Partnership Finance program, which Mr. Pollock created. Purchases of MPF loans make up more than half the Chicago FHLBank's assets. The regulator also directed the bank to hire consultants to evaluate the deficiencies and recommend improvements. One vendor who works for the FHLBank said top executives at the bank "are really upset right now, especially [regarding] the clause about hiring an outside consultant to evaluate their managers." The vendor, requesting anonymity, said there is a concern at the bank that "a lot of the top guys might be let go."

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