2:30pm | Since the implosion of the national economy in late 2008, a lot of people–in comments here and just about everywhere else–have been critical of the federal government for pumping huge amounts of taxpayer funds into the banking system to stave off a feared collapse.
  
A common criticism goes something like this: “Why are my tax dollars being used to bail out private banks?”
  
Without arguing the pluses and minuses of these actions, here is a bit of information gleaned from the city’s latest investment portfolio report to the City Council. You can file it under “why national bank issues are local bank issues.”
  
Like most other cities, Long Beach maintains a fairly sizable investment portfolio–as of March 31, 2010 the city’s investment portfolio had a market value of $1.72 billion.
  
These funds are split among three pools based on when the investments within mature, or more directly, when the city can spend the funds without penalty.
  
The $1.72 billion is split up this way: $650 million in short-term (average maturity in about 4 months); $668 million in intermediate-term (average maturity in about eight months), and $404 million in long-term (average maturity in about 20 months).
  
The short-term pool investments are split between $240 million worth of paper in four national banks, $263 million in U.S Treasury securities (either notes or bills), and $147 million in cash or equivalents.
  
The intermediate-term pool investments are split between $311 million worth of paper in the same four national banks and $353 million in U.S Treasury securities (either notes or bills).
  
The long-term pool investments are split between $308 million worth of paper in the same four national banks and $84 million in U.S Treasury notes.
  
The four federally-approved or operated national banks are the Federal Farm Credit Bank, the Federal Home Loan Bank, the Federal National Mortgage Association (Fannie Mae), and the Federal Home Loan Mortgage Corp (Freddie Mac).
  
The Farm Credit Banks are six regional federally-chartered banks that lend to agricultural producers, rural homeowners, farm-related businesses, and agricultural, aquatic, and public utility cooperatives in the United States.
  
The Federal Home Loan Banks are 12 banks that comprise the FHLBank System. They are owned by over 8,100 regulated financial institutions from all 50 states, U.S. possessions, and territories. They exist to loan money between banks and are backed by secured loans to network members, federal funds sold, commercial paper, mortgage-backed securities, and government-sponsored enterprise securities.
  
Freddie and Fannie are government-sponsored enterprises set up to insure that funds are available to banks to make mortgage loans. They do this by purchasing mortgages on the secondary market, pooling or bundling them, and selling them as a mortgage-backed securities to investors on the open market. Freddie Mac and Fannie Mae, since teetering in late 2008, are both currently under the conservatorship of the Federal Housing Finance Agency.
  
It is worth noting that each of these public-sector entities operates to some large degree through the private-sector banking system, either as a backer of loans or as a provider of funds for loans. In other words, even these federal government-supported entities can rise or fall on the success or failure of the private-sector banking industry.
  
And with the City of Long Beach maintaining a total of about $860 million invested with these four entities, remember that these funds are tied to the health of the overall banking system.
  
As mentioned above, this is not to advocate one way or the other on bank bailouts or taxpayer dollars used to shore up financial institutions, but the next time you hear news regarding such efforts, keep in mind that just like all news is local news, it is also true that all banking is local banking.