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Definition: Federal Home Loan Bank System – FHLB
The FHLB or Federal Home Loan Bank system consists of twelve Federal Home Loan Banks (FHLBs) that are enterprises which are sponsored by the US government which are into housing and economic development of communities. This system had been envisioned and brought up as a response to the depressive financial and economic conditions of the period, which had badly affected the U.S. banking system. The twelve FHLBs are located in: Atlanta, Boston, Chicago, Cincinnati, Dallas, Des Moines, Indianapolis, New York, Pittsburgh, San Francisco, Seattle, and Topeka.
Formed in 1932 by the Federal Home Loan Bank Act, the FHLBs have been providing advances in cash to their above 8,000 members, including community banks, credit unions, thrifts and financial institutions focussing on community development. Members of the FHLB system are allowed to use their reach to FHLB loan facilities to fund housing which is affordable and efforts in economic development in the areas of their service. Economic development of community is promoted using several ways and approaches, which includes the Affordable Housing Program, the Community Investment Cash Advance, the Community Investment Program, and several other grant and loan schemes and programs that promote ownership of homes, economic development and rental housing which can be affordable.
An issue that has developed recently in the consolidated banking industry is that a few of the financial institutions now possess service areas that come within the geographic coverage area of more than one FHLB. A petition has been filed by some members with the Federal Housing Finance Board to be allowed to become members of more than one FHLB. A response is still awaited by the authorities. This is an extremely complicated issue of multiple memberships and lawyers are still working hard to incorporate of the impacts on community development. It continues to have a significant impact on housing and financing for development, offering loans/credits/funds to member institutions at rates which are usually lower than the prices which are commercially available.