Four of the nation’s largest banks, led by JPMorgan Chase & Co., are driving a surge in borrowing from the Federal Home Loan Bank system as they raise funds to buy assets that meet new liquidity requirements.
The Federal Home Loan Banks, the government-chartered cooperatives owned by U.S. financial companies, are selling $500 million of securities linked to mortgage-bond prepayments, the system's first offering of such debt in almost two years.
JPMorgan Chase & Co., the biggest U.S. bank, is using cheap funding from government-chartered institutions to meet new regulations designed to ensure it won’t need a taxpayer bailout in any future crisis.
Never underestimate the government’s capacity for incompetence when it comes to overseeing large financial institutions. The latest example: an ill-advised consulting contract between Freddie Mac’s outside auditor and the federal agency in charge of running the company.
The Federal Home Loan Banks plan to set aside some earnings to supplement their normal capital once payments they’ve been making to offset the cost of the savings- and-loan crisis of the 1980s are no longer required.
The U.S. Federal Home Loan Banks’ unsecured lending to foreign institutions skyrocketed last year as the European sovereign debt crisis intensified, raising concerns about their risk management, an auditor’s report said today.