The widespread use of the FHLB system to provide liquidity — but more clearly bail out insolvent mortgage lenders — has been outright reckless. Countrywide alone — the poster child of the last decade of reckless and predatory lending practices — received a $51 billion loan from this semi-public system; in the absence of this public bailout Countrywide would have ended up where it should, i.e. into outright bankruptcy. And the largesse of the FHLB system does not stop at Countrywide. A system that usually provides a lending stock of about $150 billion has forked out loans amounting to over $750 billion in the last year with very little oversight of such staggering lending. The risk that this stealth bailout of many insolvent mortgage lenders will end up costing massive amounts of public money is now rising.
~ Nouriel Roubini, New York University economist, "Roubini: FHLB Lending ‘Reckless’," WSJ Economics blog, February 27, 2008