Sen. Brown questions Federal Home Loan Banks’ role in bank closures

Senate Banking Committee Chairman Sherrod Brown (D-Ohio) today urged the Federal Housing Finance Agency to study what role the Federal Home Loan Bank system might have played in response to recent bank failures. In a letter to the agency, Brown said the FHLBs were not structured to be a lender of last resort to struggling financial institutions.

“In the months leading up to the failures of Silvergate, Silicon Valley Bank and Signature Bank, all three banks significantly increased their borrowings from their FHLBank,” Brown said. “Two of the banks had not been among the top borrowers in their FHLBank in 2021, but became the first and sixth largest borrowers from their FHLBank in 2022.”

FHFA is currently conducting a review of the FHLB system. “As part of your assessment, please review the frequency and timeliness of communications and data shared between the FHLBanks, FHFA and prudential banking regulators, both in regional offices and in Washington, D.C., and whether all parties had the best available information and were acting in coordination to ensure the stability of the FHLBanks and the financial system,” Brown said.