The Federal Home Loan Bank of Chicago said Thursday it expects to record a loss of $150 million for the third quarter, in the latest sign of strain on some of the 12 regional banks.

The Chicago bank blamed writedowns of $169 million on private-label mortgage securities and losses on derivative contracts and hedging of $114 million in the quarter. In the year-earlier quarter, the bank had net income of $33 million.

Private-label mortgage securities, which generally were packaged and sold by Wall Street firms, aren't backed by any U.S. government entity. Some of the home loan banks invested heavily in such securities during the housing boom, partly to increase their interest income. In recent quarters, these banks have repeatedly had to write down the value of such securities as mortgage defaults and foreclosures surge.

The Chicago bank said it is trying to generate consistent earnings, build up retained earnings and restore "at least a nominal dividend."

Earlier Thursday, the home loan bank of Cincinnati, which generally shunned private-label mortgage securities, said its net income in the third quarter was $61 million, down from $66 million a year earlier.

The home loan banks, created by Congress in 1932 to support the housing market, are cooperatives owned by more than 8,000 banks, thrifts, credit unions and insurers. Because investors believe the federal government would rescue them in a crisis, the banks can borrow at relatively low rates in the bond market. They use the proceeds mainly to make loans, known as "advances," to their owners, or "members." The home loan banks also earn fees by providing guarantees on the financing of municipal projects, such as hospitals.

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