The Federal Home Loan Bank System, chartered in 1932, was created to provide a national source of funds for local thrifts. Any thrift could borrow from their FHLB (cooperatively owned by the thrifts) and the FHLBs borrowed collectively in a national market.
Freddie was created as part of the Home Loan Bank System (owned by the Home Loan Banks, which were, in turn, owned by the thrifts) to get into the securitization game. A small thrift couldn't really expand its volume if it had to hold all its loans on balance sheet. But if it could sell them off like the mortgage banks could ...
Sunday, June 28, 2009
Austin Kelly adds to my brief explanation of the origin of Freddie