Legal Definitions - Federal Home Loan Bank Board

The Federal Home Loan Bank Board (FHLBB) was a United States federal agency established in 1932 during the Great Depression. Its primary role was to regulate and supervise savings and loan associations, which were specialized financial institutions focused on residential mortgages. The FHLBB also oversaw the twelve regional Federal Home Loan Banks, which provided liquidity and financial support to their member savings and loan institutions.

The FHLBB was dissolved in 1989 by the Financial Institutions Reform, Recovery, and Enforcement Act (FIRREA) in response to the savings and loan crisis. Its regulatory functions were largely transferred to other agencies, including the Office of Thrift Supervision (OTS), and its oversight of the Federal Home Loan Banks was transferred to the newly created Federal Housing Finance Board (FHFB). The FHFB itself was later merged into the Federal Housing Finance Agency (FHFA) in 2008.

Here are some examples illustrating the historical role of the Federal Home Loan Bank Board:

• Example 1: Setting Lending Standards

  In the 1970s, a local savings and loan association in Ohio wanted to offer a new type of adjustable-rate mortgage product to its customers. Before launching this product, the savings and loan would have needed to submit its proposal to the Federal Home Loan Bank Board for review and approval. The FHLBB would assess whether the proposed mortgage terms complied with federal regulations designed to protect consumers and ensure the financial stability of the institution. This demonstrates the FHLBB's role in regulating the types of financial products and lending practices offered by savings and loans.

• Example 2: Providing Emergency Funding

  During a period of economic downturn, a savings and loan in California experienced a sudden increase in customer withdrawals, putting a strain on its cash reserves. To prevent a liquidity crisis, the savings and loan could apply for a loan from its regional Federal Home Loan Bank. The Federal Home Loan Bank Board, as the overarching regulator, would have established the policies and conditions under which these regional banks could provide such emergency funding to their member institutions, ensuring the stability of the housing finance system.

• Example 3: Responding to Financial Distress

  In the mid-1980s, as many savings and loan institutions began to face severe financial difficulties due to risky investments and rising interest rates, the Federal Home Loan Bank Board was responsible for identifying troubled institutions, imposing supervisory actions, and, in some cases, arranging for their merger or closure. For instance, if an institution was found to be insolvent, the FHLBB would initiate proceedings to take control of the institution and protect depositors, illustrating its critical role in overseeing the health and stability of the savings and loan industry.