Commitments and Contingencies

6 Months Ended

Jun. 30, 2011

Commitments and Contingencies [Abstract]

Commitments and Contingencies

Note 17. Commitments and Contingencies.

Consolidated obligations — Joint and several liability. Although the FHLBNY is primarily liable only for its portion of consolidated obligations (i.e. those consolidated obligations issued on its behalf and those that have been transferred/assumed from other FHLBanks), it is also jointly and severally liable with the other FHLBanks for the payment of principal and interest on all of the consolidated obligations issued by the FHLBanks. The par amounts of the outstanding consolidated obligations of all 12 FHLBanks were $0.7 trillion and $0.8 trillion at June 30, 2011 and December 31, 2010.

As discussed more fully in Note 20 to the audited financial statements in the Bank’s most recent Form 10-K filed on March 25, 2011, the FHLBNY does not believe that it will be called upon to pay the consolidated obligations of another FHLBank in the future. Accordingly, the FHLBNY has not recognized a liability for its joint and several obligations related to other FHLBanks’ consolidated obligations at June 30, 2011 and December 31, 2010.

Standby letters of credit are executed for a fee on behalf of members to facilitate residential housing, community lending, and members’ asset/liability management or to provide liquidity. A standby letter of credit is a financing arrangement between the FHLBNY and its member. Members assume an unconditional obligation to reimburse the FHLBNY for value given by the FHLBNY to the beneficiary under the terms of the standby letter of credit. The FHLBNY may, in its discretion, permit the member to finance repayment of their obligation by receiving a collateralized advance. Outstanding standby letters of credit were approximately $2.3 billion as of June 30, 2011 and December 31, 2010, and had original terms of up to 15 years, with a final expiration in 2019. Standby letters of credit are fully collateralized. Unearned fees on standby letters of credit are recorded in Other liabilities, and were not significant as of June 30, 2011 and December 31, 2010.

MPF Program - Under the MPF program, the Bank was unconditionally obligated to purchase $31.4 million and $30.0 million of mortgage loans at June 30, 2011 and December 31, 2010. Commitments are generally for periods not to exceed 45 business days. Such commitments were recorded as derivatives at their fair value under the accounting standards for derivatives and hedging. In addition, the FHLBNY had entered into conditional agreements under “Master Commitments” with its members in the MPF program to purchase mortgage loans in aggregate of $940.6 million and $630.6 million as of June 30, 2011 and December 31, 2010.

Future benefit payments for the BEP and the postretirement health benefit plan are not considered significant. The Bank expects to fund $9.9 million over the next 12 months towards the Defined Benefit Plan, a non-contributory pension plan.

The following table summarizes contractual obligations and contingencies as of June 30, 2011 (in thousands):

	June 30, 2011
	Payments Due or Expiration Terms by Period
	Less Than		One Year		Greater Than Three		Greater Than
	One Year		to Three Years		Years to Five Years		Five Years		Total
Contractual Obligations
Consolidated obligations-bonds at par 1	$	31,936,145	$	18,654,680	$	7,498,530	$	3,907,165	$	61,996,520
Mandatorily redeemable capital stock 1		37,414		4,509		8		16,290		58,221
Premises (lease obligations) 2		3,060		5,816		4,674		2,921		16,471
Total contractual obligations		31,976,619		18,665,005		7,503,212		3,926,376		62,071,212
Other commitments
Standby letters of credit		2,277,719		13,530		41,886		3,861		2,336,996
Consolidated obligations-bonds/ discount notes traded not settled		2,335,610		—		—		—		2,335,610
Open delivery commitments (MPF)		31,428		—		—		—		31,428
Total other commitments		4,644,757		13,530		41,886		3,861		4,704,034
Total obligations and commitments	$	36,621,376	$	18,678,535	$	7,545,098	$	3,930,237	$	66,775,246

1

Callable bonds contain exercise date or a series of exercise dates that may result in a shorter redemption period. Mandatorily redeemable capital stock is categorized by the dates at which the corresponding advances outstanding mature. Excess capital stock is redeemed at that time, and hence, these dates better represent the related commitments than the put dates associated with capital stock, under which stock may not be redeemed until the later of five years from the date the member becomes a nonmember or the related advance matures.

2

Immaterial amount of commitments for equipment leases are not included.

The FHLBNY does not anticipate any credit losses from its off-balance sheet commitments and accordingly no provision for losses is required.

Impact of the bankruptcy of Lehman Brothers

On September 15, 2008, Lehman Brothers Holdings, Inc. (“LBHI”), the parent company of Lehman Brothers Special Financing, Inc. (“LBSF”) and a guarantor of LBSF’s obligations, filed for protection under Chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court in the Southern District of New York. LBSF filed for protection under Chapter 11 in the same court on October 3, 2008. LBSF was a counterparty to FHLBNY on multiple derivative transactions under an International Swap Dealers Association, Inc. master agreement with a total notional amount of $16.5 billion at the time of termination of the Bank’s derivative transactions with LBSF. The net amount that was due to the Bank after giving effect to obligations that were due to LBSF was approximately $65 million. The FHLBNY filed proofs of claim in the amount of approximately $65 million as creditors of LBSF and LBHI in connection with the bankruptcy proceedings. The Bank fully reserved the LBSF receivables as the bankruptcies of LBHI and LBSF make the timing and the amount of any recovery uncertain.

As previously reported, the Bank received a Derivatives ADR Notice from LBSF dated July 23, 2010 making a Demand as of the date of the Notice of approximately $268 million owed to LBSF by the Bank. Subsequently, in accordance with the Alternative Dispute Resolution Procedure Order entered by the Bankruptcy Court dated September 17, 2009 (“Order”), the Bank responded to LBSF on August 23, 2010, denying LBSF’s Demand. LBSF served a reply on September 7, 2010, effectively reiterating its position. The mediation conducted pursuant to the Order commenced on December 8, 2010 and concluded without settlement on March 17, 2011. Pursuant to the Order, positions taken by the parties in the ADR process are confidential. While the Bank believes that LBSF’s position is without merit, the amount the Bank actually recovers or pays will ultimately be decided in the course of the bankruptcy proceedings.