S&P Eyeing Chicago FHLBank

Standard & Poor's Ratings Services has placed the Federal Home Loan Bank of Chicago's counterparty credit rating (AA-plus/A-1-plus) on CreditWatch with negative implications following the recent termination of its merger discussions with the Dallas FHLBank. "The development heightens our concerns regarding the strategic direction and financial condition" of the FHLBank, which is projecting a net loss for 2008, S&P said. As part of its review, S&P said it will consider the FHLBank's "need to name a new president and chart a new course under leadership of a new executive." S&P said the bank's deteriorating profitability has been attributed to hedging losses related to mortgage assets in its Mortgage Partnership Finance program and other hedging adjustments that will hurt future earnings. S&P also recently announced the affirmation of its AAA long-term counterparty credit rating on the FHLBank of Des Moines, and the revision of its outlook from negative to stable. S&P can be found online at http://www.standardandpoors.com.