The Federal Home Loan Bank System:The Lender of Next-to-Last Resort?
Revised: November 2008
JEL classification: E40, E59, G21, G28
Adam B. Ashcraft,
Morten L. Bech, and
W. Scott Frame
The Federal Home Loan Bank (FHLB) System is a large, complex, and understudied government-sponsored liquidity facility that currently has more than $1 trillion in secured loans outstanding, mostly to commercial banks and thrifts. In this paper, we document the significant role played by the FHLB System at the onset of the ongoing financial crises and then provide evidence on the uses of these funds by the System’s bank and thrift members. Next, we identify the trade-offs faced by member-borrowers when choosing between accessing the FHLB System or the Federal Reserve’s Discount Window during the crisis period. We conclude by describing the fragmented U.S. lender-of-last-resort framework and finding that additional clarity about the respective roles of the various liquidity facilities would be helpful.
For a published version of this report, see Adam B. Ashcraft, Morten L. Bech, and W. Scott Frame, "The Federal Home Loan Bank System: The Lender of Next-to-Last Resort?" Journal of Money, Credit, and Banking 42, no. 4 (June 2010): 551-83.