President's Report

May 27, 2009

Member Letter from the Chairman and President of the FHLBNY

Dear Community Member Lender:

"Directors Are Faulted at the Home Loan Banks," reads the headline on page A3 of the May 23, 2009, Wall Street Journal.  The article describes how "a plunge in the value of mortgage securities bought by several of the regional home-loan banks has forced them to halt dividends and curtail funding for local housing projects.  An annual report issued by the banks' regulator (FHFA) this past week says some of them "paid insufficient attention to credit risks . . . ."  We write to assure you that the Federal Home Loan Bank of New York is not one of those FHLBanks.

The Board of Directors and management recognize the importance of and keep a risk profile commensurate with a triple-A-focused organization.  The Bank recognized and learned this lesson in 2003 when the AAA-rated manufactured housing bonds held by the Bank were downgraded.  That was a difficult year.  But the Bank, under the direction of the Board of Directors, moved swiftly to address those difficulties.  We sold those bonds in question, put in place and still have in place strict risk management policies, practices, and procedures, and established a conservative retained earnings policy to help safeguard our members' investment.  These actions have produced today’s stronger institution with a solid record of performance.

To be more specific, with regard to the mortgage securities held in portfolio, the Bank has a small, seasoned private-label MBS portfolio.  The overwhelming majority of the MBS in our portfolio consists of Fannie Mae and Freddie Mac issues.  The Board of Directors has had an ongoing involvement with the development and continual assessment of the Bank's risk management policies.  And it is fully expected that the Bank’s exposure to investment risk will be managed to levels such that credit events will not materially impact the Bank’s financial condition or the Bank’s ability to execute its strategic business plan.

In March of 2004, the Board of Directors unanimously adopted a retained earnings and dividend policy.  The purpose of the policy is to:  (1) establish a process to assess the adequacy of retained earnings in view of the Bank’s assessment of the financial, economic, and business risks inherent in its operations; (2) establish the priority of contributions to retained earnings relative to other distributions of income; (3) establish a target level of retained earnings and a timeline to achieve the target; and (4) establish a process to ensure maintenance of appropriate levels of retained earnings.  To execute the policy, management developed and is applying a comprehensive statistical methodology to determine the level of retained earnings adequate to absorb potential losses commensurate to the low-risk profile of the Bank during normal operating conditions.  The Board reviewed and approved the methodology.  And since April 2004, retained earnings have grown from $125 million to $412 million.  Accordingly, the Bank continues to:  provide affordable housing grants; meet all capital requirements; redeem excess capital stock each day; and have the ability and intent to continue paying dividends — the most recent dividend being 5.60% for the first quarter of 2009, distributed on May 26, 2009.

Your Board of Directors fully understands our responsibility and acts in concert with management to establish and maintain Bank policies and philosophy that set the risk profile of the cooperative.  The Board of Directors and the management of the Home Loan Bank are fully committed to controlling and minimizing risks, maintaining a high-quality investment portfolio, and continuing our vital mission:  to advance housing opportunities and local community development by maximizing the capacity of our community-based member lenders to serve their markets.



Michael M. Horn
Chairman of the Board

Alfred A. DelliBovi
President & CEO



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Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995
This report may contain forward-looking statements within the meaning of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. These statements are based upon our current expectations and speak only as of the date hereof. These statements may use forward-looking terms, such as “projected,” “expects,” “may,” or their negatives or other variations of these terms. The Bank cautions that, by their nature, forward-looking statements involve risk or uncertainty and that actual results could differ materially from those expressed or implied in these forward-looking statements or could affect the extent to which a particular objective, projection, estimate, or prediction is realized. These forward-looking statements involve risks and uncertainties including, but not limited to, regulatory and accounting rule adjustments or requirements, changes in interest rates, changes in projected business volumes, changes in prepayment speeds on mortgage assets, the cost of our funding, changes in our membership profile, the withdrawal of one or more large members, competitive pressures, shifts in demand for our products, and general economic conditions. We undertake no obligation to revise or update publicly any forward-looking statements for any reason.

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