Nouriel Roubini on the $51 billion FHLB lifeline to Countrywide Financial

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

Charles Schumer on Countrywide's borrowing from the Atlanta FHLB

Countrywide is treating the Federal Home Loan Bank system like its personal ATM.

~ Senator Charles Schumer, as written in a press release, "Countrywide BorrowingTriggers Call for Review," The Wall Street Journal, November 27, 2007, by James R. Hagerty

(As of Sept. 30, Countrywide Financial owed the Atlanta bank $51.1 billion, 77% more than the $28.8 billion it owed three months earlier. Although it is based in Calabasas, Calif., Countrywide deals with the Atlanta home-loan bank because Countrywide owns a savings bank based in Alexandria, Va., part of the Atlanta bank's territory.)

Michael Feroli on FHLB lending

It is almost like the socialisation of housing finance.

~ Michael Feroli, economist, JP Morgan, Financial Times, December 12, 2007

FHLB's Alfred Dellibovi on Countrywide Financial

Countrywide is a very professional, very well run organization in my judgment, and I think there will always be a role for them. They're a very professional company that's been given a bumpy road.

~ Alfred Dellibovi, president, Federal Home Loan Bank of New York, as appeared on CNBC, September 5, 2007