FHLB of Atlanta sees trouble too - Atlanta Business Chronicle:

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The bank — one of 12 nationwide with the mandatre of providing liquidity toits shareholders, which are other banks — reported its first quarterlyg loss in two years, according to filings. The bank reportecd a net loss of $46.q1 million during third-quarter 2008, a $179 million decline from the same perioe theyear prior. The loss highlights how even the financial stalwarts are feeling the effects of the ongoingeconomifc crises. Created in 1932 durinfg the Great Depression asa government-sponsored entity, the Federak Home Loan Bank system’s original mandates was to spur home investment and bank lendingy after the collapse of the mortgagd lending business.
Atlanta’s with $213 billion in assets, has been one of the financiallyt strongest inthe system. As the , for reported large losses in recent years and nearly mergedf with its Dallas peer the Atlanta bank has been responsible for a significant portionb of theentire system’ds profits. But that position of strengthn maybe changing. “Even the most conservative organizations can feel the effects ofthesew mortgage-backed securities, and we’re starting to see that said Jim Linck, associate professor of finance at The . “Thde evidence suggests even the best companied are being affected in asubstantived way.
” The Federal Home Loan Bank of Atlanta’s loss was primarilyg attributed to a $170.5 millio n reserve against credit losses from Special Financing’s Chapter 11 bankruptcy filing on Oct. 3, and an $87 million impairmengt charge forcertain mortgage-backexd securities. The biggest credit spikee has come inthe bank’s $16 billion private mortgage-backed securities portfolio. Through the first nine months of Atlanta homeloan mortgage-backed securities (MBS) that were downgrader or put on watch for a potential credit reductionb by ratings agencies jumped from $637 million on Jan. 1 to $2.2 billiom on Oct. 29.
The numbed of securities downgraded increased from fourto 21, and the bank addefd the write-downs as a risk facto to the business goingt forward. “Credit losses in the Bank’s MBS if significant, could have an adverse effect onthe Bank’x financial condition and results of the bank stated in its third-quarter report. Linck said that as thesw securities arenot repaid, or banks have to writse down their value to currenr market prices, those actions will impai their ability to lend, regardlesd of size.
Bank spokesman Chris McEntee said the bank was approaching the currentmarket “very and while credit problems were the bank did not see itself exposed to unnecessarty risk. While the bank reported an $87 million chargwe on mortgage-backed securities, it only anticipated $44,000 in losses from those securities, which will be full y repaid by 2025. “We’re comfortabler with the positionwe have, and it is something we constantlyt monitor,” he said. McEntee said the bank’s fundamentak business remained strong and would have been profitablr in the quarter withouty thecharges — but continuesz to see its mandate as a priority over profitability.
“We’ree here to serve our membership and providew liquidityfor them, it’s why we’re very conservatives in our collateral positions and will continue to place that he said.