Make an observation and have you respond, when the Federal Home Loan bank makes an advance to a failing bank, it secures a priority claim on high quality assets pledged as collateral. In doing so, it reduces the pool of assets available to the FDIC as receiver and can potentially increase losses to the deposit insurance fund. So to many that feels like an example of moral hazard. Privatizing gains while socializing losses. To put a finer point on it, the FHLB system is all but assured of repayment by its priority lien on pledged capital. (02:54–03:05)
CLAIM
Asserts that the Federal Home Loan Bank's priority claim reduces assets available to the FDIC, potentially increasing deposit insurance fund losses.
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