Federal Home Loan Banks FHLBanks

As the Depression crushed the housing market, President Herbert Hoover signed the Federal Home Loan Bank Act on July 22, 1932, creating a system of regional banks to provide steady funding to savings and loan associations that made home loans. The Federal Home Loan Banks are government-sponsored enterprises owned cooperatively by their members, and since 2008 they have been regulated by the Federal Housing Finance Agency. After a 2015 merger there are eleven regional banks, which borrow jointly in the bond markets through a shared Office of Finance.

Thousands of commercial banks, savings institutions, credit unions, and insurance companies are members. The banks make secured loans called advances to members, backed mainly by mortgages and other high-quality collateral, giving them a reliable source of funding for home loans and other lending. By law each bank must set aside a share of its net income, at least 10 percent, for an Affordable Housing Program that funds low-income housing. Because their debt is seen as backed by the government, the banks borrow cheaply, and they are exempt from most taxes.

The system has been called a lender of next-to-last resort because members can borrow from it quickly during stress. In March 2023, several of the regional banks that later failed, including Silicon Valley Bank, had borrowed heavily from it in the weeks before they collapsed, raising questions about its role. A 2023 FHFA review called for refocusing the banks on housing and community development and increasing their affordable housing contributions. Supporters say the banks provide stable funding for community lenders through every cycle, while critics argue they subsidize large financial institutions with little public benefit.