All 12 Federal Home Loan Banks have now reported their earnings for the fourth quarter of 2008, and the results aren't exactly pretty: a combined net loss of $672 million for the quarter, compared to net earnings of $846 million in the year-ago period. The culprit? Private-label MBS, which many FHLBs used in recent year to juice reported yields; many of these securities, even AAA-rated material, have seen a significant drop in value as the nation's housing and credit mess has rolled onward. When banks take loans from a Home Loan bank, besides paying interest, they also have to buy a percentage of FHLB-restricted and non-public stock, based on how much they borrowed and the credit quality of the collateral they posted. The system was set up as a way to basically help support the FHLBs’ capital as banks borrow against it. When a member first signs on, the Home Loan bank sets up a clearing account that works like a check book; when member banks borrow money, the FHLB takes cash out of this account and in return gives the borrowing bank stock that pays a dividend. As a bank pays off the loan, the FHLB credits back their cash account by repurchasing the stock. But as the value of MBS holdings have plummeted, some Home Loan banks have said that they will not pay dividends and will stop buying back the excess FHLB stock members hold. HousingWire's Teri Buhl broke the story on this issue in early January. Read the coverage here. Moody’s Investors Service has said that the Federal Home Loan Bank System’s $76.2 billion private-label MBS portfolio contained $13.5 billion in unrealized losses by the end of Q3; values have likely fallen further since that time. The FHLBs held total capital of $51.4 billion as of Dec. 31, in aggregate, according to their reported results. Demand for FHLB advances has fallen, as the Home Loan banks have had to charge more to offer the advances and the Federal Deposit Insurance Corp. has said it will look to charge higher deposit insurance fees to those banks that rely heavily on the FHLB to meet funding needs. FHLB advances outstanding fell to $929 billion in Q4, after reaching above $1 trillion in Q3. Write to Paul Jackson at