From the WSJ:
Countrywide Borrowing Triggers Call for Review
Senator Says Lender Uses Home-Loan Bank ‘Like Its Personal ATM’
By JAMES R. HAGERTY
November 27, 2007; Page C2
Sen. Charles Schumer, a New York Democrat, urged regulators to examine potential risks posed by a rapid increase in lending by the Federal Home Loan Bank of Atlanta to Countrywide Financial Corp., the nation’s biggest mortgage lender by volume.
In a letter sent yesterday to Ronald Rosenfeld, chairman of the Federal Housing Finance Board, which regulates the 12 regional home-loan banks, Sen. Schumer said he is concerned that mortgages pledged by Countrywide to secure its borrowings “may pose a risk to the safety and soundness of the FHLB system as a whole.” He called for a review of the Atlanta bank’s policies for evaluating collateral and of the loans pledged by Countrywide to secure its advances.
The home-loan banks were created by Congress in 1932 to prop up failing banks and provide money for housing. They borrow money through global bond issues on the strength of investors’ belief that the U.S. government would rescue them in a crisis. The banks have taken on a larger-than-usual role over the past few months in providing funds for mortgages. They have stepped up their secured loans, known as advances, to mortgage lenders to fill a void created in August, when investors’ fears of default shut off mortgage lenders’ ability to raise money through commercial paper or other short-term borrowings.
As of Sept. 30, Countrywide owed the Atlanta bank $51.1 billion, 77% more than the $28.8 billion it owed three months earlier. Although it is based in Calabasas, Calif., Countrywide deals with the Atlanta home-loan bank because Countrywide owns a savings bank based in Alexandria, Va., part of the Atlanta bank’s territory.
“Countrywide is treating the Federal Home Loan Bank system like its personal ATM,” Sen. Schumer wrote in a press release.