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 ...
Richard Green is a professor in the Sol Price School of Public Policy and the Marshall School of Business at the University of Southern California. This blog will feature commentary on the current state of housing, commercial real estate, mortgage finance, and urban development around the world. It may also at times have ruminations about graduate business education.
Sunday, June 28, 2009
Austin Kelly adds to my brief explanation of the origin of Freddie
He writes:
Hi!
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A small thrift couldn't really expand its volume if it had to hold all its loans on balance sheet.
ReplyDeleteKelly Austin was born and raised in the Santa Cruz Mountains of central
ReplyDeleteCalifornia. There she enjoyed a childhood filled with hiking, camping, and exploring in
the redwoods and large oaks with her parents and beloved dog, Roxy.