The Federal Home Loan Bank (FHLB) of Seattle said it didn’t meet a regulatory capital requirement at the end of last month because of the declining value of mortgage-backed securities.
The FHLB of Seattle, a government-chartered cooperative, said in a statement Monday that because of the capital deficiency it is disallowed from paying a dividend or repurchasing capital stock.
The Seattle bank in January became the second FHLB, after San Francisco, to warn of a potential capital shortage and take steps to guard reserves. As many as eight of the 12 banks may fall short of capital requirements after writing down holdings of so-called nonagency mortgage securities, Moody’s Investors Service predicted.
As Atrios relays:
Awhile back I met someone in the mortgage broker business who had, unsurprisingly, seen his business decline and seen many of his coworkers laid off. At the time he told me, ominously, that all the action had just moved to the FHLB system…
Round and round it goes.