Amid continued weakness for the Federal Home Loan Bank System (FHLBank), its chief regulator said it is committed to getting the regional GSEs back to their core mission of lending to members.

"A key objective of" the Federal Housing Finance Agency (FHFA) "is to return the focus of FHLBank operations to providing advances to member institutions and to establish stability at each FHLBank to permit repurchases and redemptions of member stock at par," the agency said in its 2010 Performance and Accountability Report.

The FHFA said the system had another poor performance in the fiscal fourth quarter as advances dropped to $500 billion, compared with $1 trillion in October 2008. Asset declines have also made it harder for the banks to pay dividends.

The 98-page report also discussed how the system could be affected by the policy debate over the future of U.S. housing finance, a debate that has focused largely on government-sponsored enterprises Fannie Mae and Freddie Mac.

"As with the enterprises, the FHLBanks will be challenged with maintaining ongoing operations as policy discussions about the FHLBank System take place," the report said.

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