The Federal Home Loan Bank (FHLB) System is a government-sponsored enterprise consisting of twelve cooperatively owned institutions that are regulated by the Federal Housing Finance Board. Shares in the individual FHLBs are owned exclusively by banks, savings institutions, credit unions, and insurance companies. Like Fannie Mae and Freddie Mac, FHLB...

The domination of the secondary mortgage market, the largest in the world, byFannie Maeand Freddie Mac enables them to obtain substantial monopoly profits for the benefit of their stockholders and management.

The FHLBs are now profitable and expanding their lending within current constraints. There is no financial need for any expansion of their role.

WhileCongress need not makeurgent changes in the FHLB system, the system's lack of rationale could lead to substantial restraints on its growth--and possibly its eventual decline.

The turmoil at Fannie Mae signals it is time for Congress to reconsider the structure of the federally chartered Government Sponsored Enterprises.

The housing GSEs have experienced rapid growth and an ever-expanding range of activities, and their unique status as agents mixes public purposes and funding guarantees with private ownership.

The author recommends structural and regulatory requirements to ensure that competition is enhanced with regulation, with improvement of the American mortgage-finance system.

By considering three government-sponsored enterprises together, we can see how developing a common regulatory framework for them could be the basis for developing a competitive market.