MDB, wanted to make sure you didn't miss this little gem from Barron's this week.
The Federal Home Loan Bank System needs a new Alfonse D'Amato. The soon-to-be-retired New York Republican senator was protector of the 12 Home Loan Banks, which were chartered by Congress during the Great Depression to raise long-term funds for home mortgages. With their political cover gone, they are more vulnerable to attack.
"It's a dumping ground for third-rate Bush appointees," we were told last week by Richard Carnell, Assistant Treasury Secretary for financial institutions. Earlier in the month Carnell gave a speech attacking the system, accusing it of setting up a huge arbitrage operation.
The system borrows from the capital markets at low rates because of its government backing, then invests those sums in higher-yielding investments that Carnell says serve no public purpose. Bank presidents, who are paid about $300,000 in annual salaries, receive five-figure incentive bonuses based in part on the returns of that arbitrage portfolio, which, Carnell says, equals 36% of the system's total assets.
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