5min chapter

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The Little-Known Entity That’s Lent Over $1 Trillion To U.S. Banks (10x The Fed!) | Professor Kathryn Judge on The Federal Home Loan Bank (FHLB) System

Forward Guidance

CHAPTER

The Problem Lender of Second to Last Resort

The Federal Home Loan Bank system made a lot of sense when it was set up. But after the SNL debacle in 1989, Congress didn't really want to have to pay that through normal mechanisms because they were trying to hit deficit reduction targets. Instead, we did just the opposite and allowed commercial banks as long as they did a modest amount of home loans. And so instead of focusing on helping people finance more affordable homes, it became much bigger than its original intent.

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