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Two more federal home loan banks warned of losses in the third quarter due hits to their investment portfolios.

Following the New York Home Loan Bank announcement that it will swing to a third quarter loss and suspend its dividend, the Atlanta and Pittsburgh banks said that they expect losses of $9 million and $7 million, respectively.

The losses are due to declines in the value of asset-backed securities that the banks were forced to sell to maintain a triple-a S&P rating on their overall portfolios.

It is commonly believed that the federal home loan banks -- like

Fannie Mae

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and

Freddie Mac

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-- operate with an implicit government guarantee, though no such guarantee actually exists in their congressional charter. The Federal Home Loan Bank System is a government-sponsored enterprise chartered by Congress in 1932 to provide money to member financial institutions. The FHLBs currently makes loans to over 8,000 member institutions -- mostly small banks and S&Ls. It has been aggressive in ridding its portfolio of any securities that may put its credit rating at risk.

While it is unclear what the federal government would do in the case of massive default on GSE debt, the government is not required to guarantee FHLB, Freddie Mac or Fannie Mae debt.

The FHLB office of finance said in a statement that it still expects the 12 combined federal home loan banks to be profitable for the third quarter.