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Loan danger

As US Federal Home Loan Bank balance sheets have grown, so have concerns that they have assumed a role they are ill-suited to play. At times, FHLB loans have made up a substantial chunk of big banks’ total long-term funding, excluding deposits: at year-end 2016, FHLB advances accounted for 24% of such funding at JP Morgan, 30% at Wells Fargo and 11% at Citi. In the period 2010 to 2016, JP Morgan increased its borrowings by 216% – or more than $54 billion; and Wells Fargo by 874%, from $7.9 billion to $77 billion. As of the end of the third quarter 2017, FHLB advances outstanding with commercial banks stood at more than $465 billion – up from $263 billion at year-end 2010.

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