The Seattle Federal Home Loan Bank has problems.
The Federal Home Loan Bank of Seattle joined its San Francisco counterpart in suspending dividends and “excess” stock repurchases, after devalued mortgage bonds dropped its capital below a regulatory requirement.
The likely shortfall on Dec. 31 was caused by “unrealized market value losses” on home-loan securities without government backing, the Seattle bank cooperative said in a filing with the U.S. Securities and Exchange Commission today.
[T]he widespread use of the FHLB system to provide liquidity – but more clearly bail out insolvent mortgage lenders – has been outright reckless. … A system that usually provides a lending stock of about $150 billion has forked out loans amounting to over $750 billion in the last year with very little oversight of such staggering lending. The risk that this stealth bailout of many insolvent mortgage lenders will end up costing massive amounts of public money is now rising.
So as state and local governments struggle with the crashing economy, and individuals struggle with uncertainty, unemployment, the loss of homes and debt, we still don’t really know the extent of the damage by this insane financial disaster.
It’s like the car has gone off a cliff and we’re somehow going to suspend it in mid-air by giving people $500. Folks may like the money, and the very serious people who have been wrong about everything for eight years will insist the car can be suspended, but most folks won’t have much time to enjoy the dough. The ground is coming up at them too fast.