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U.S. watchdog warns about big banks’ use of government-affiliated loans

U.S. watchdog warns about big banks’ use of government-affiliated loans

A U.S. government watchdog on Wednesday warned that big banks have dramatically boosted their borrowing from a federal housing finance program, a move that could pose risks to the government-sponsored system if a big borrower defaulted.

The Federal Housing Finance Agency’s (FHFA) inspector general also noted that some firms appear to be using funds from the program to meet liquidity standards designed to make banks more stable in a crisis.

The watchdog said in the report on Wednesday that loans to banks by government-sponsored entities that support mortgage and small-business lending jumped in 2013 after declining in the wake of the housing crisis.

That was largely because the four biggest members of the Federal Home Loan Banks system – JPMorgan Chase (>> JPMorgan Chase & Co.), Bank of America (>> Bank of America Corp), Citigroup (>> Citigroup Inc) and Wells Fargo (>> Wells Fargo & Co) – increased borrowing by 158 percent from March 2012 to December 2013, the report said.

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