The Federal Home Loan of Boston has just announced that they have reviewed their budget and will be cutting back 5% of their budget expenses, a savings of $3 Million annually. They will reach this goal with a combination of salary cuts, other expense reductions and also an elimination of 18 employees.
It seems like the 2008 turmoil was decades ago, however the repercussions of that tremendous calamity are still being felt today. FHLB lost over $115 Million in their investment portfolio during the crash of 2008 and their first quarter 2009 numbers were not much better, with a loss of over $84 Million. The FHLB is an essential source of mortgage funding for New England lenders. It’s the bank for banks, if you will. So what effect does this have on the smaller banks, the developers looking for the loans and more importantly the citizens of Boston?
The loss of FHLB has had a significant impact on lending in the city. Many projects have stalled due to lack of funding. Potential jobs from these projects have been thrown by the wayside and of course the revenue that the developments would have brought into the city is now at $0. We are all affected by the FHLB losses. Although the second quarter numbers are much better than that of 2008 or first quarter 2009, with a loss of a little over $4 Million, we are still a ways to go before we see anything above the red line.