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shaft6969 t1_j008k3v wrote

Reply to comment by ImDaChineze in I’m Cornelius Hurley, academic, lawyer, 14-year director of a Federal Home Loan Bank. Ask me anything about the FHLBs. by ProfBU

Fair. But they allege they've never suffered a loss. So if that $200 never happens, then what?

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ImDaChineze t1_j0099es wrote

Over enough observations, the odds of it never hitting becomes exponentially less likely.

At 300 ball pulls, the odds that not a single black ball is pulled is less than 5% At 500 ball pulls, the odds are less than 0.7% At 1000 ball pulls, the odds are 0.004%

And at every single one of those pulls, the nice person subsidized you with what is known as expected value. It might not have hit, but the fact that they were willing to take the hit if it did has se value to it.

You might not get in a car crash every day, might not even get in one in a decade. But having coverage to cover the damages from accidents had value in terms of car insurance

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ProfBU OP t1_j0ezg3f wrote

Their claim that they never suffered a loss is a ruse. They lend to banks. If the bank fails the FHLB gets to collect AHEAD if the FDIC, in effect sticking the taxpayer with the loss.

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