Part 1: What are the Federal Home Loan Banks?

The US has thousands of 'Community lending institutions,' including small and medium-sized community banks, credit unions, state-chartered savings institutions, larger regional banks, insurance companies, and Community Development Financial Institutions (CDFIs). These are broadly referred to as Community Financial Institutions.

Federal Home Loan Banks (FHLBanks) are often misunderstood. Despite 'Federal' in their name, they are privately owned and do not receive federal appropriations. While related to housing finance, their impact extends beyond home loans, and they function differently from typical banks. There are 12 FHLBanks across the country.

FHLBanks act as a significant, albeit behind-the-scenes, player in the financial system. They primarily provide much of the money that local banks then lend out to consumers and businesses. When a local bank lends money for a house or car, it often originates from an FHLBank.

The majority of these Community Financial Institutions belong to at least one Federal Home Loan Bank. 'Belong' means they are members who actually own the FHLBank they are associated with. This structure makes each FHLBank a cooperative, an organization owned by the people who use its services, typically within their own region.