Vultures Circle Over WoundedFHLB

SEATTLE - (04/20/05) -- At least two other Federal Home LoanBanks are said to be watching the financial troubles at the FHLB ofSeattle in hopes that the Seattle bank will be dissolved and theassets will be awarded neighboring FHLBs, according to sources. TheSeattle bank reported last week that it is sitting on $260 millionin unrealized investment losses and expects to pay minimal or nodividends on its stock while it implements a new capital plan overthe next few years. One source said the FHLB of San Francisco isthe likely recipient of some of the Seattle bank's assets if thetrouble institution is dissolved. There is a distant precedent fordissolution of an FHLB as financial difficulties forced regulatorsto liquidate the FHLB of Los Angeles in 1945, which, ironically,led to the creation of the Seattle bank. The Seattle bank is ownedby its 375 financial institution members, including 79 creditunions.