YouSaid · the spoken record

Michael Ericson

lines on the record: 111
first: 2023-08-18
most recent: 2023-08-18
sittings or episodes: 1
sources: podcast

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“And would it be fair to say that when banks require a lot of advances as they did in March, April, and May of 2023, that can indicate some financial stress within the banking system? And the opposite, when banks pay down some of their advances as they did in late 2020 and 2021, that's a period of relaxation within the banking stress this banking system.”
2023-08-18 · Forward Guidance · The Banking System's Guardian Angel You've Never Heard Of | Michael Ericson & Dan Siciliano on Federal Home Loan Banks · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, so what I would add to that is we are self-capitalizing. And so the first thing is as members borrow from the federal home loan banks, they would have to buy additional stock in order to support the activity that they do with the bank. So the advances themselves are self-capitalizing in that way. And then in order to meet the funding demands of our members, we have access to the debt market. So we will issue debt on a daily basis to fund the liquidity and funding needs of”
2023-08-18 · Forward Guidance · The Banking System's Guardian Angel You've Never Heard Of | Michael Ericson & Dan Siciliano on Federal Home Loan Banks · IDENTIFIED FROM THE TRANSCRIPT
“And other financial institutions. And then in turn, if they ever exit, by the way, and this is sort of relevant, all they get back is that stock at par value. And I point this out because there's a legitimate concern, I think, if you have a GSE, a government-sponsored enterprise that also is tied somehow to a publicly traded enterprise that has stock that can go up and down and fluctuates because there's a lot of things that can go right and wrong in that story. And the federal home loan banks are different because the banks themselves are just co-ops where the private capital goes in and no one can make money off of the change in that stock price because it doesn't change. It always just is exchanged embodying at par value. But let me stop there because your description about the bond function at the global level, I think is the heart of the operations. And Michael's the expert on that.”
2023-08-18 · Forward Guidance · The Banking System's Guardian Angel You've Never Heard Of | Michael Ericson & Dan Siciliano on Federal Home Loan Banks · IDENTIFIED FROM THE TRANSCRIPT
“I have Michael expand on kind of the process of doing that because we do that through the Office of Finance, and he's on that board and very, you know, familiar with it. I will mention one thing that you left out, but you're probably going to get to it. And that is that the banks themselves, 11 banks, are essentially co-ops that each of the members, so the members are defined by regions and by eligible financial institution types, right? Each of the members buy in and have to put private capital to buy stock. And that stock is held. So the federal home loan banks themselves are capitalized with the money of banks.”
2023-08-18 · Forward Guidance · The Banking System's Guardian Angel You've Never Heard Of | Michael Ericson & Dan Siciliano on Federal Home Loan Banks · IDENTIFIED FROM THE TRANSCRIPT
“And so let me say how I understand a federal home loan bank and the system is the federal home loan banks fund themselves by issuing bonds, so the short term discounts or longer-term bonds, and they use that to fund advances to fund the banking system. So when banks make new loans or when bank deposits leave a particular bank, banks can tap a federal home loan bank and secure financing and then that federal home loan bank finance itself by issuing bonds to the public. So it's an intermediary between the banking system and the investing public. Dan, would you add anything to that? What did I miss?”
2023-08-18 · Forward Guidance · The Banking System's Guardian Angel You've Never Heard Of | Michael Ericson & Dan Siciliano on Federal Home Loan Banks · IDENTIFIED FROM THE TRANSCRIPT
“Directly give home loans. And in a traditional sense of thinking, we're not really a bank, but for San Francisco, we do point out we're located in San Francisco. So that part's correct. But yeah, that's what I think the biggest misunderstanding is like, what are we really? And we can talk more about that, but we are a private capital co-op that since we're a GSE, you should pay a lot of attention to at a regulatory level, which happens, so a regulated agency”
2023-08-18 · Forward Guidance · The Banking System's Guardian Angel You've Never Heard Of | Michael Ericson & Dan Siciliano on Federal Home Loan Banks · IDENTIFIED FROM THE TRANSCRIPT
“The regulatory supervisor of the federal home loan bank system is reaching the conclusion of a period where it's talking about the 100 years. We're at 90 years, but they're kind of getting ready for the next 100. I think it was also just catchier. But yeah, so it's a good time to talk about it. And I think there are, because of the vacuum of information up until, say, even just two or three years ago, a lot of understandable but sort of misunderstandings about how the federal home loan bank works both on the ground and theoretical. My favorite one is federal. The federal part of the name really sort of haunts us, right? Because the federal reserve is also not quite a federal agency, but our proximity to being a federal agency is much more distant. We're a GSE, a government-sponsored enterprise, and I hope we get to talk about how that really plays out. But we have an old joke, like we're neither federal, you know, and we don't.”
2023-08-18 · Forward Guidance · The Banking System's Guardian Angel You've Never Heard Of | Michael Ericson & Dan Siciliano on Federal Home Loan Banks · IDENTIFIED FROM THE TRANSCRIPT
“Know it doesn't surprise me too much, but I'm super glad that there's a lot underway that is casting a spotlight on the Federal Home Loan Bank system. It's been around since 1932. It's pretty critical, particularly to regional banks. And it's done a lot. One of the features you already highlighted, I think, is an important one to note, which is it has a sort of accordion nature, meaning during certain times it expands. But even during its, you know, not expanded period, you note the $100 billion out by the Fed, the system had well over $100 billion at any given time if you take a snapshot over the last 35 years, because we're kind of there all the time for members. Of course, it does increase in terms of advances during times of stress, but then it very quickly decreases. So it's actually a good time, I think, for people to be paying more attention to the Federal Home Lumbank system, to ask hard questions about like, what does it do? How does it exist? What are the pros and cons? And even the FHFA.”
2023-08-18 · Forward Guidance · The Banking System's Guardian Angel You've Never Heard Of | Michael Ericson & Dan Siciliano on Federal Home Loan Banks · IDENTIFIED FROM THE TRANSCRIPT
“Yes, I think people not inside the banking world, the general investing public, maybe they think of the Federal Reserve as the primary bank regulator or lender to banks, but really I discovered this looking into the weeds that the federal home loan bank lends so much more to banks. I think with the discount window and bank-term funding program, the Federal Reserve has maybe lent a little over $100 billion, whereas just your branch of the Chicago branch has $79 billion of outstanding advances to banks. That was as of June 30th. Maybe it's a little bit lower now. And Dan, you associated with the San Francisco branch of the federal homeland banks. And you have about 70 billion. The entire system now has over a trillion of outstanding advances. Yeah, Dan, does it surprise you that the federal home loan bank is kind of this overlooked corner?”
2023-08-18 · Forward Guidance · The Banking System's Guardian Angel You've Never Heard Of | Michael Ericson & Dan Siciliano on Federal Home Loan Banks · IDENTIFIED FROM THE TRANSCRIPT
“Banks, thrifts, credit unions, insurance companies, community development financial institutions. And we are a stabilizing force in the U.S. financial markets. We are dependable across all economic cycles. We're stable during normal times and certainly provide an essential form of liquidity in times of crisis, which were most pronounced recently back in March, as well as during the COVID pandemic and also back in 2007, 2008, during the financial crisis at that time.”
2023-08-18 · Forward Guidance · The Banking System's Guardian Angel You've Never Heard Of | Michael Ericson & Dan Siciliano on Federal Home Loan Banks · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, so the federal home loan bank, just by way of background, there are 11 federal home loan banks in the federal home loan bank system. The Office of Finances, an administrative agent on behalf of the federal home loan banks that issue debt on behalf of the FHLBs collectively were recognized as the federal home loan bank system. The role that we play is really a critical role in providing funding and liquidity to our member institutions. So as a federal home loan bank, we are member-owned cooperatives. 11 of us each have a defined geographic that we support. So the federal home loan bank in Chicago, we have members who are chartered in the state of Illinois and Wisconsin that could be members of the federal home loan bank of Chicago, for example. And we provide funding liquidity to our member institutions. The member institutions include commercial”
2023-08-18 · Forward Guidance · The Banking System's Guardian Angel You've Never Heard Of | Michael Ericson & Dan Siciliano on Federal Home Loan Banks · IDENTIFIED FROM THE TRANSCRIPT