The Federal Home Loan Banks may see substantial impairment in the value of their $76.2 billion of private-label MBS, according to Moody's Investors Service.

Under a "worst case" scenario, Moody's estimated that the impairment would be so great that only four of the 12 FHLBanks would remain above regulatory capital minimums, though Moody's said this degree of impairment is unlikely.

Under a "base case" scenario, the writedowns could still be "material to the banks' capital bases," Moody's said in a report.

The degree of impact depends upon whether the banks must report the writedowns as "other than temporary impairment," which would significantly affect capital levels, according to the rating agency. In related news, the Federal Home Loan Bank of Boston president and chief executive, Michael  Jessee, will be retiring from the Bank effective April 30, 2009.

Jessee has agreed to remain in his current executive capacity during the next four months to ensure a smooth transition.

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