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A klein bottle:

“From the archives: how to fix a liquidity crisis (13 Dec ‘07)”—that is, in 2007—quoted the FT as saying:

The latest Fed flow of funds data shows that FHLBs [Federal Home Loan Banks, "a little-known network of government-sponsored bank co-operatives founded during the Great Depression"] issued new loans at an unprecedented annualised rate of $746bn (EU508bn, UKP366bn) in the third quarter, up from practically nothing in the second quarter.

Where’d they get the money? MBSes. Sunlight Projects:

The problem is that over the last few years, some of the FHLBs invested heavily in private mortgage-backed securities—the same types of investments that lost much of their value during the housing crisis. The FHLBs invested in very few securities backed by subprime loans—the so-called toxic assets we’ve heard so much about of late. Nonetheless, the values of some of the FHLB investments have plunged—and fast. In the space of just two months, for example, the ratings of about $1.4 billion of the Seattle bank’s investments were downgraded from AAA to junk status. That doesn’t mean they’re now worthless, but it certainly increases the chances that they won’t recover their full value. What’s more, the Seattle bank was only holding about $1.7 billion in capital on December 31, 2008; that capital is meant to protect it against losses.

Better still:

Because the banks believe these losses are temporary, they don’t have to be recognized on their accounting statements. [...] Home loan bank representatives say the setbacks are merely temporary because they intend to hold the securities to maturity. By then, they predict, the economy will have improved and these holdings will have recovered their value.

Go team.

See also: “No one saw it coming (Citibank edition).”