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Politics : Ask Michael Burke -- Ignore unavailable to you. Want to Upgrade?

To: Thomas M. who wrote (80254)	4/29/2000 11:36:00 AM
From: Mike M2	Read Replies (1) \| Respond to of 132070

Thomas, TANKS! HO HO HO Mike

To: Thomas M. who wrote (80254)	4/29/2000 4:35:00 PM
From: Knighty Tin	Read Replies (1) \| Respond to of 132070

TM, Must reading for those who don't get the newsletter.

To: Thomas M. who wrote (80254)	4/30/2000 7:33:00 PM
From: Cynic 2005	Read Replies (1) \| Respond to of 132070

Thomas, remember the quote (I am paraphrasing) "We ignore all rumors until they have been officially denied. Here we go: ------- (From Barron's Mailbag) No Problems? To the Editor Both Alan Abelson and his friend Charlie Peabody, a bank analyst for Mitchell Securities, can take a deep, cleansing breath and relax. The demons tormenting them within the Federal Home Loan Bank system (Up & Down Wall Street, April 3) simply don't exist. The $410 billion in derivatives they kvetched about? Those are interest-rate risk hedges, not speculative investments. The FHLB system is required to provide members with mortgage liquidity, the lowest possible rates and protection against interest-rate risk. Consequently, concern over our use of this common risk-reduction tool is baffling. In fact, we'd be remiss if we didn't employ derivative hedges. And that 21-to-1 leverage that Alan and Charlie are losing sleep over? Rest easy. If anything, we're over-collateralized and hold twice the capital of Fannie Mae and Freddie Mac, in addition to being one of a handful of institutions in the world that qualifies for a triple-A credit rating. They were right about one thing. Our margins are thin. And they're going to stay that way. A 7% or 8% return on equity suits us just fine because, as a cooperative, we focus on benefiting our members through products and services rather than on enriching shareholders. Charlie needn't worry either about the fact that the Federal Home Loan Banks borrow short and sell long in the form of consolidated obligations, primarily overnight funds. The banks are heavily regulated entities that must conform to strict interest-rate risk requirements set by the Federal Home Finance Board. Our liabilities reflect our assets, including the advances our members use to minimize their own interest rate risk. The FHLB system intermediates on behalf of our members to reduce term-mismatch risk and provide liquidity. We're not the only prominent financial institution that operates this way. The U.S. Treasury does, too. Finally, their point about the lag time between FHLB system annual reports would have been valid about 12 months ago. But times change. The 1999 report was released on March 28 this year, before Abelson's column even came out. The bottom line is that the FHLB system is in great shape. JOHN VON SEGGERN Executive Vice President Council of Federal Home Loan Banks Washington