Following the increase in interest rates, some representatives of the home-building and finance industries are urging the Federal Home Loan Banks to play a more significant role in financing mortgages.

By competing more directly with Fannie Mae and Freddie Mac, according to officials of the National Association of Home Builders and the Mortgage Bankers Association, the 12 regional banks could manage to keep consumers’ borrowing costs at a maximum low level. But these statements are uttered at the moment when the banks known as "Flubs" are discussing their strategy and are under ivestigation of their regulator. The Flubs are preoccupied with defining their exact role.

The Flubs were created by Congress in 1932 in order to provide low-cost funding for thrift institutions racked by the Depression. That is partly because some Flubs see no reason for major change.

The Flubs make loans, called "advances," to their members. In effect, they deliver these loans at low costs using the nation’s credit rating. These advances, secured by such collateral as homes and farm equipment, are a lifeline to many small banks that find it hard on their own to get access to cheap funds, according to the Wall Street Journal. Though big banks can also be Flub members and make profits from the same subsidy.

Responsing to this subsidy, the Flubs are obliged to help pay debts of Resolution Funding Corp., funded in the late 1980s to save the thrift industry, and to devote 10% of their profits to projects taking care on low-income people providing them with housing.

In the past decade, the Flubs have tried to find new ways for their development. The results have turned out to be unsatisfactory. In 2003, for example, the New York Flub took heavy losses on investments in securities supported by mortgages on mobile homes.

For now, Congress is debating over legislation on creation of a new regulator to oversee Fannie, Freddie and the Flubs. That new regulator may put en end to a longtime debates whether the Flubs should take on Fannie and Freddie in mortgage finance.