The Home Loan Bank Is the Lender of Next to Last Resort

The Home Loan Bank system has been called the lender of next to last resort because folks do this. WAMU, IndyMac, all these folks ran to the Home Loan Bank in 2007 as their mortgage business was imploding. A year later, they're the number one borrower with $20 billion. So within a year, they've gone and put at least $20 billion of these mortgage-backed securities to the home loan bank for cash. When equity is in trouble, it makes riskier and riskier bets to double down Because if it wins, it wins. It can't lose below zero.