federal home loan banks and the secondary mortgage market

the most recent entrant into the secondary mortgage market market is an institution that does back to the 1930s.Originally, the system of 12 Federal Home Loan bank(FHLBs) was created to provide liquidity to savings and loan associations. they are privately owned by their members (originally,thrift institution) and.like the GSEs, borrow as if they were backed by the U.S. government. Thus, they enjoy a low cost of funds. moreover, since their stock is not publicly traded, they do not need the same level of earnings as the GSEs. As the savings and loan industry receded, the FHLB System was reconstituted to serve as the "wholesale" lender (i.e., provider of liquidity)to all thrifts, banks who elect to become members,insurance companies , and credit unions. In the late 1990s, the FHLBs developed a secondary mortgage market operation. while still small in 2003, this program has the possibility of growing into a competitor of the two GSEs, for the business of its members.