1.2.2.1 The Federal Home Loan Bank System
1.2.2.1 The Federal Home Loan Bank System
Among the many tragic consequences of the Great Depression was the widespread foreclosure of many home mortgages. Early attempts to resolve foreclosures focused on encouraging banks and homeowners to renegotiate loan terms through mediation boards and other voluntary arrangements.19 Like similar efforts after the collapse of 2007, these attempts proved grossly inadequate.20
One of first steps Congress took to address the housing crisis was to enact the Federal Home Loan Bank Act of 1932.21 This established the Federal Home Loan Bank System, a network of cooperatively owned wholesale banks22 coordinated by the Federal Home Loan Bank Board.23 The federal home loan banks (FHLBanks24) were intended to restore liquidity to the home financing system by making advances to member banks and by directly originating home loans.25 But, due to structural and other reasons, the system proved unable to meet expectations and conditions worsened.26
Footnotes
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19 {19} David C. Wheelock, Fed. Reserve Bank of St. Louis, Working Paper No. 2008-038A, Government Response to Home Mortgage Distress: Lessons from the Great Depression 4 (Oct. 2008).
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20 {20} See Alys Cohen, Arielle Cohen, & Diane Thompson, Nat’l Consumer Law Ctr., At a Crossroads: Lessons Learned From the Home Affordable Modification Program (HAMP) 13 (Jan. 15, 2013), available at www.nclc.org.
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21 {21} Act of July 22, 1932, ch. 522, 47 Stat. 725.
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22 {22} Mark J. Flannery & W. Scott Frame, Fed. Reserve Bank of Atlanta, The Federal Home Loan Bank System: The “Other” Housing GSE, Econ. Rev. 33 (3d Qtr. 2006), available at https://www.frbatlanta.org.
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23 {23} Act of July 22, 1932, ch. 522, § 17, 47 Stat. 725, 736–737.
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24 {24} FHLBanks is now their favored acronym. See the Council of FHLBanks website, www.fhlbanks.com.
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25 {25} Daniel K. Maloney & James B. Thomson, Fed. Reserve Bank of Cleveland, The Evolving Role of the Federal Home Loan Banks in Mortgage Markets 1 (June 2003), available at https://www.clevelandfed.org.
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26 {26} C. Lowell Harriss, History and Policies of the Home Owners’ Loan Corporation 8 (1951), available at www.nber.org; Peter M. Carrozzo, A New Deal for the American Mortgage: The Home Owners’ Loan Corporation, the National Housing Act and the Birth of the National Mortgage Market, 17 U. Miami Bus. L. Rev. 1, 9 (2008) (discussing reasons).