Seattle FHLB Tries To Dig Out Of DeepHole

SEATTLE - (04/11/05) -- The Federal Home Loan Bank ofSeattle revealed last week it was sitting on $260 million ofunrealized losses on its hedging portfolio at the end of lastwyear, raising speculation that the bank may be merged into one ofthe 11 other regional FHLBs. If the losses are realized it wouldwipe out 13% of the Seattle bank's $2 billion in capital, which isalready operating under a supervisory agreement with its federalregulator, the Federal Housing Finance Board. In its disclosurelast week the Seattle bank said it will earn minimal net income andpossible lose money over the next "few years." The revelations comeat a time when Congress is debating a new regulatory scheme for theFHLBs, along with the Fannie Mae and Freddie Mac, the two majorplayers in the secondary mortgage market. The Seattle bank is ownedby its 375 financial institution members, including 79 creditunions.