What if the Federal Home Loan Banks pull back from stressed members?
The FHLB system pulling advances from stressed members removes the lender-of-next-to-last-resort, pushing weak banks toward the discount window's stigma and forcing asset sales. Rhymes with 2023, when FHLB advances surged to ~$1tn as SVB-era banks scrambled, then concentration risk became the worry. Skeptic's note: FHLB is structurally senior and rarely cuts good collateral — the trade is the specific stressed members and regional-bank credit, not a broad crisis; the cascade overstates the systemic beta.
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The butterfly cascade
How this trigger trickles across markets, left → right — the root shock, its first‑order moves, then the ripple effects. Drag any node; tap a market for its real price history.
Resolution timeline — how this probability is moving
Our model's odds (electric blue) over time vs the market's (Polymarket, amber), from the past toward the 6–18 months horizon. Each dot is a real macro event that nudged the probability — green pushed it up, red pushed it down. Tap a dot for the source. Loading the probability audit trail…
What it would mean
If this plays out, it is a risk-off shock. The Federal Home Loan Bank system pulls back lending to a cluster of stressed members, removing the lender-of-next-to-last-resort backstop. The trigger decomposes into signed root‑shocks — Credit spreads ▲ · Financial conditions ▲ · Risk appetite ▼ — which propagate through our causal graph to the markets below.