Federal Home Loan Bank System A system created by the Federal Home Loan Bank Act of 1932 to provide for a central reserve credit system for savings institutions engaged in home mortgage finance (predominantly savings and loans). The system is divided into 12 federal home loan bank districts with an FHLB in each district. The FHLBs maintain a permanent pool of credit to maintain liquidity of members or to provide means for mortgage lending when local funds are insufficient. Three sources of funds are available for the operation of the FHLB: (1) capital stock, (2) deposits of member institutions, and (3) consolidated obligations sold on the market. When member associations need funds, they obtain money by borrowing from FHLB. The FHLB Board supervises the system. The board is composed of three members appointed by the president of the United States with the advice and consent of the Senate.