The Federal Home Loan Bank of Pittsburgh expects to take additional writedowns on its $2.73 billion portfolio of private label mortgage-backed securities in the fourth quarter, a move that could make the GSE undercapitalized and endanger its shareholders — banks and thrifts primarily. In a new filing with the Securities and Exchange Commission, the government sponsored enterprise admits that it will not complete an analysis of its private label holdings until late in the first quarter.

At Dec. 31, the Pittsburgh bank held $2.43 billion in alt-A bonds with an "unrealized" loss of $847 million. Its $20 billion subprime portfolio is now valued at $15 billion.

The bank said that at the time it bought into these bonds all were rated triple-A. About 10 days ago the FHLB-Seattle told members it may not meet its risk-based capital requirement for the period ending Dec. 31, blaming accounting rules that affect the value of its investment in private label mortgage-backed securities.

Seattle holds roughly $4.52 billion in alt-A private label securities that have declined in value steadily since the second-half of 2007. One executive, who works for a depository, told MortgageWire that if banks and thrifts are forced to write down the value of their FHLB stock investments similar to the way they wrote down their Fannie Mae/Freddie Mac stock, "we're going to need the second half of that TARP money fast."

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