FHLB Directors To Reverse InsiderTrades

SEATTLE - (05/13/05) -- Two of three member banks of theFederal Home Loan Bank of Seattle have agreed to buy back sharesthey sold in the financially ailing FHLB while possessing insideinformation of the bank's declining financial situation. Theregional FHLB said Thursday that the two banks, Bank of Hawaii andWashington Federal, which had representatives sitting on theSeattle bank's board of directors at the time, sold a total of$63.4 million in stock while the bad financial news with pending"without a conscious motivation to harm anyone," but agreed therewas an appearance of impropriety in the insider stock sales. As aresult of the incident, the two banks' representatives have agreedto resign from the board, though they deny wrongdoing. An internalinvestigation also found the third insider seller, WashingtonMutual, which also had a representative on the board, did notengage in any wrongdoing or appearance of impropriety, as it hadalready expressed an intention to sell $229 million worth of itsshares before learning of the declining financials. While FHLBshares are not publicly traded, the news of that the bank wassitting on unrealized losses of $260 million and does not plan topay a dividend for up to three years would reduce the value and theexpected payout for the bank's 372 other members, including 79credit unions.