Federal Home Loan Bank Act


The Federal Home Loan Bank Act, is a United States federal law passed under President Herbert Hoover in order to lower the cost of home ownership. It established the Federal Home Loan Bank Board to charter and supervise federal savings and loan institutions. It also created the Federal Home Loan Banks which lend to building and loan associations, cooperative banks, homestead associations, insurance companies, savings banks, community development financial institutions, and insured depository institutions in order to finance home mortgages.

Federal Home Loan Bank Act

What is ‘Federal Home Loan Bank Act’

An act passed by the Hoover administration in 1932 that was designed to encourage home ownership by providing a source of low-cost funds for member banks to extend mortgage loans. The Federal Home Loan Bank Act was the first in a series of bills that sought to make home ownership an achievable goal for more Americans.

Explaining ‘Federal Home Loan Bank Act’

Proponents of these measures argue that home ownership is an essential part of the American dream and that home ownership results in stronger local communities and a higher overall quality of living. However, critics claim that this long tradition of federal subsidies for mortgage loans distorted the housing market, culminating in overly lax lending standards and unnaturally high housing prices.

Further Reading

  • Federal Home Loan Bank Lending to Community Banks: Are Targeted Subsidies Desirable? – link.springer.com [PDF]
  • Do Federal Home Loan Bank membership and advances increase bank risk-taking? – www.sciencedirect.com [PDF]
  • Federal Home Loan Bank mortgage purchases: Implications for mortgage markets – search.proquest.com [PDF]
  • Federal home loan bank advances and commercial bank portfolio composition – onlinelibrary.wiley.com [PDF]
  • Federal Home Loan Bank Advances and Commercial Bank Portfolio Composition – papers.ssrn.com [PDF]
  • Federal Home Loan Bank Lending to Community Banks: Are Targeted Subsidies Necessary? – papers.ssrn.com [PDF]
  • Should the FDIC worry about the FHLB? The impact of Federal Home Loan Bank advances on the Bank Insurance Fund – papers.ssrn.com [PDF]