The Federal Housing Finance Agency last week issued a final rule regarding the FHLBanks which limits the Banks’ mortgage-backed securities holdings, especially non-agency MBS. In its notice, published in the May 20 Federal Register, the FHFA said it is re-organizing and re-adopting existing investment regulations that were previously issued by the Federal Housing Finance Board. The final rule will retain the Finance Board’s Financial Management Policy provision limiting MBS holdings to 300 percent of a Bank’s capital. “Contrary to suggestions that the 300 percent of capital limit was inflexible and outdated, FHFA believes the limit reasonably serves to control Bank investment activity that does not...