Tuesday, November 27, 2007

Charles Schumer Concerned Over FHLB Lending To Countrywide

After a news story in the Wall Street Journal detailing Countrywide’s increased borrowing from FHLB, Senator Charles Schumer urged the Federal Housing Finance Board to probe the funding. The Federal Home Loan Bank of Atlanta [FHLB] has extended more than $50 billion to Countrywide Financial, and Schumer is concerned that the collateral the loan is secured against is somewhat shaky. The advances made to Countrywide make up 37% of the bank’s total outstanding loans, which makes Countrywide its largest borrower. Schumer considers FHLB’s exposure to Countrywide “an unreasonable risk”, because of the lender’s current weakness. However, FHLB said in a September SEC filing that its exposure to subprime is “minimal”. According to the Wall Street Journal, Countrywide has secured the $51 billion in advances with $62 billion in collateral. Shares of Countrywide dropped more than 10% to $8.64 on Monday.

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