The Obama administration's proposals to support the development of a covered bond market and limit large bank access to the Federal Home Loan Bank (FHLB) advance window could weaken the FHLB System, according to a new report from Moody's Investors Service.

"The combination of these two factors are credit negative for the FHLBanks because it would reduce the overall footprint and profitability" of the system, Moody's analysts wrote in their "Weekly Credit Outlook" report.

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