The Next Bank Bailout

With financial stocks sliding as fears grow that more major banks may fail, it’s easy to overlook the problems at the Federal Home Loan Banks, a group of 12 regional institutions that play a crucial role in providing banks around the country with money for mortgage lending.

But that would be a mistake. The banks served as a lender of last resort as the credit crunch tightened, propping up other banks that now have gone under. The crisis now facing them exemplifies the regulatory and other weaknesses in the financial system that have led to the worsening banking crisis, analysts say - sloppy accounting, a lack of transparency, lax oversight, and the trend toward “scheming” a way out of the credit crunch. Wall Street is nervous because it can’t determine the true extent of problems at the banks. And, once again, taxpayers may end up picking up the tab.