I promised a deep dive into the FHLBanks’ business to better assess how much money there is. And I may still do that, but not today. It simply does not require that much analysis.
One chart tells it all – since 2006, through good times and bad times, with times of growth and times of shrinkage, housing market meltdowns, a pandemic, a normal business cycle, the FHLBanks have been able to pay members a very healthy dividend and keep a good amount of profits for themselves in the form of retained earnings.
So members not only get to borrow money whenever they want at very attractive rates (see my first blog), they get a very attractive return on their capital stock with dividend rates way in excess of low risk investment returns and then the FHLBanks still add to their savings – Retained Earnings.
I won’t repeat myself a third time – there is a lot of money available, and the pittance currently provided to affordable housing initiatives barely registers.
More to follow – but if you can’t wait – the story is told in more detail here and alternatively here. Or the picture below tells it all.
One Response
Appreciate this insightful analysis and the chart. FHLBanks leadership must be forced to invest deeply in housing supply and financing.