Federal Home Loan Bank of Chicago 8K FHLBC Fall Member Meetings | SEC 13 Nov 08

FHLBC Fall Member Meetings

Welcome

Exhibit 99.1

This presentation contains forward-looking statements which are based upon

our current expectations and speak only as of the date hereof. These

statements may use forward-looking terms, such as “anticipates,”

“believes,”

“expects,”

“could,”

“plans,”

“estimates,”

“may,”

“should,”

“will,”

or their

negatives or other variations on these terms. The Bank cautions that, by their

nature, forward-looking statements involve risk or uncertainty, that actual

results could differ materially from those expressed or implied in these

forward-looking statements, and that actual events 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, instability in the credit and debt markets, deterioration of the

overall economy and the risk factors set forth in the Bank’s periodic filings

with the Securities and Exchange Commission, which are available

on the

Bank’s Web site at www.fhlbc.com. The Bank assumes no obligation to

update any forward-looking statements made in this presentation. “Mortgage

Partnership Finance”

and “MPF”

are registered trademarks of the Federal

Home Loan Bank of Chicago. MPF Xtra™

is a trademark of the Federal

Home Loan Bank of Chicago.

Forward-Looking Statements

Matt Feldman

President and CEO

When Last We Met: Priorities

–

Identify MPF

alternative

–

Expand borrowing options

–

Revise market risk practices and policies

–

Enhance communications

–

Reduce non-interest expense

–

Stabilize capital

What We Have Done

–

Identify MPF alternative

Discontinued purchase of MPF loans

for balance sheet

Rolled out MPF Xtra™

Product

Additional products in development

What We Have Done

–

Expand borrowing options

Merged Banking and Advances groups to

enhance products and support available to

members

Evaluated methods to expand collateral

Licensed system for implementation in Q1 09

Disclosed credit ratings to members

Enhanced dialogue with primary regulators

What We Have Done

–

Revise market risk policies and practices

Substantial changes in balance sheet

management

Impact visible in Q3 results

Obtained approval from Finance Agency

for temporary changes to regulatory

limits

What We Have Done

–

Revise market risk policies and practices

Increased authority to purchase agency

mortgage-backed securities

•

Increase net interest income

Market risk policies developed with the

support of leading market professionals

Review to be completed with new

regulator

What We Have Done

–

Enhance Communications

Improved information flow to

members

•

Member letters

•

SEC disclosures

•

Disclosure of credit ratings and

collateral management practices

•

More frequent member meetings

•

Regional meetings

•

White paper on Bank stock

What We Have Done

–

Enhance Communications

Improved communications and

cooperation with primary regulators

Initiated calling program with

accounting firms

What We Have Done

–

Non-interest expense

Reduced people expense through

elimination of executive positions

Promoted from within

Completed consulting studies

Progressed on implementation of core

systems

What We Have Done

–

Stabilize capital

Redemptions for activity-based stock

purchases

•

Approved by Finance Board

•

Improved by Finance Agency

Progress has laid a foundation to

obtain approval of capital plan from

Finance Agency next year

What We Plan to Do

–

Stabilize capital

Convert stock as soon as permitted

next year

Restore dividends while continuing

to build retained earnings

New Developments

–

Passage of Housing and

Economic Recovery Act (HERA)

and establishment of Federal

Housing Finance Agency

–

Conservatorships for Fannie and

Freddie

New Developments

–

Credit Crisis

Viability of counterparties

Massive Treasury issuances

Proliferation of government

guarantees

Likelihood of major changes in

2009

The Plan

–

Build ROE

to level sufficient to pay

appropriate dividend while

building/maintaining retained earnings

–

Address roll-off of subordinated debt by

building capital base

of Bank

–

Navigate through market, legislative, and

regulatory environment to maximize value

to members

–

Develop operationally excellent

capabilities

marked by ease of use and

efficiency of operations

Chad Brandt

SVP, Member Banking and

Advance Products

“May you live in interesting times.”

Chinese Proverb

•

Markets

•

Liquidity

•

Credit and Collateral

•

Advances

•

Markets

–Credit Crisis

–Timeline of Events

BOJ

cuts

rates

for

the

time since 2001

Fed cuts

by 50

bps

US Tsy gives details

on TARP: $250B to

buy preferred share

in Banks /

guarantee debt; 9

banks agree to

participate

Emerging market countries

solicit emergency aid

packages from IMF

Netherlands

recapitalizes

ING with

€10B

Rescue plan for

Swiss banks

announced –

UBS

and Credit Suisse

Dow down

733

Dow up

936

G7 pledge of no more

failures of systemically

important institutions

Lehman bond auctioned for 8¢

Dow

below

7900

Wachovia Corp to be

acquired by Wells

Fargo without FDCI

guarantee

US Tsy

announces it is

planning to use

TARP to inject

equity into Banks

Dow below

8600 at 5

year low

Fed, ECB,

BOE,BOC,SRB and

SNB simultaneous

50bps cut

Fed announces

Commercial Paper

Funding Facility

BNP takes control of

remaining Fortis

assets

German’s Hypo

deal collapses

Paulson and Bernanke

testify before Congress

on TARP

Credit Crisis –

Timeline of Events September/October

Fannie and Freddie placed into

Conservatorship

US Tsy commits $100B

Lehman

announces it is

seeking a buyer

Stock plunges

BOA drops Lehman and

announces it is acquiring

Merrill Lynch for $50B

Lehman

files for

Chapter 11

Reserve Primary

Money Market Fund

breaks $1 NAV

claiming exposure

to Lehman

$500B

withdrawals

From Money

Market Funds

Wachovia reported to

be in negotiations to be

acquired by Citigroup

Germany announces

plan to rescue Hypo

Dow down 777

banking index -

14%

US House rejects

$700B TARP

Fed injects $105B in liquidity to

avert collapse of Money market

US Tsy offers

temporary insurance

To Money Markets

US Tsy unveils $700B

Troubled Asset Relief

Program (TARP)

O/N Libor rises from

4.70% to 6.88%

Ireland to guarantee all

bank deposits and

debt for 2 years

WAMU seized by FDIC

with $307B in Assets

JPM acquires banking

operations for $1.9B

Benelux’s Fortis

partially nationalized

US Senate passes

$700B TARP +

$100B +$250K

FDIC Deposit

Insurance

US House passes

revised TARP and it

is signed into law

Fortis Netherlands

fully nationalized

Iceland’s Krona falls

by 30% vs Euro

France/ Belgium/

Lux. to rescue Dexia

Wachovia Bank to be

acquired by Citigroup

with partial FDIC

guarantee on assets

Announcement of

France’s €360B,

Germany’s €400B and

Spain’s €100B rescue

plans

UK’s B&B mortgage lender

partly nationalized / sold

to Banco Santander

UK announces £50B

plan to recapitalize

largest banks

Nikkei 225

plummets

to lowest

level since

’82

Moody’s and S&P’s

downgrade AIG

credit

Goldman Sachs and

Morgan Stanley get

approval to convert to

Bank Holding Cos.

AIG rescued by Fed $85B loan in

exchange for 80% equity stake

Barclays to

acquire Lehman

NA operations

10 yr. Swap Rate Daily Changes*

*Source: JP Morgan

100%

75%

64%

25%

13%

400

Moves

Sept./Oct. ’08

(3 % days)

# days (5 years

prior to Sept. ’08)

Daily Swap

Move (bps)

Mortgage OAS Daily Changes*

100%

50%

75%

45%

26%

% Moves

Sept.-Oct. ’08

(3% days)

# Days prior

to Sept. ‘08

Daily OAS

Move (bps)

FHLB System Term Funding

•

Largely suffered from the effects of

actions, none of which were taken on the

FHLBs

–

Conservatorship of Fannie and Freddie

–

FDIC actions to guarantee bank term debt

•

Debt costs higher nonetheless

Liquidity

•

Continuing access to liquidity

•

System continues to roll over billions

per day

Liquidity

•

Preference would be to fund in term

–

Costly

–

Little member demand due to pricing

…..but

•

No advance has gone unfunded

Liquidity

•

Increased dialogue with your regulators

•

Information sharing agreement with the

OCC a template for

–

other regulators

–

other FHLBs

Liquidity

•

Our objective: to partner with your

regulator in order to continue to

provide liquidity

Credit and Collateral

•

Credit and Collateral Information

–

Ratings system and internal member

ratings

–

Discussions

•

Credit Escalation

–

Greater control over collateral

Advances

•

Term advance rates are high

•

Anticipate that this is a temporary

phenomenon

•

Short remains the sweet spot

Advances

•

Don’t get caught in a liquidity trap

•

Term out into 2009 sooner rather

than later

Roger Lundstrom

Chief Financial Officer

Third Quarter 2008

Performance Review

$ in millions

Third Quarter Current Year versus Prior Year

Difference

3Q 2008

3Q 2007

Net Income

$33

$24

36.8%

Year-to-date Income Statement

$ in millions

YTD

Sep 2008

YTD

Sep 2007

Difference

Net Interest Income

$104

$209

($105)

Derivatives and Hedging Activities

(64)

(28)

(36)

Aggregate Gain/ (Loss) on Securities

(75)

(83)

NII Including Adjustments

(34)

189

(223)

Non-Interest Income

Operating Expenses

Other Expense

Assessments

Net Income Before REFCO & AHP

(119)

103

(223)

REFCO Payments

(19)

AHP Subsidy

(8)

Net Income

(119)

(196)

Hedging Costs

•$18 million of the quarterly net income resulted

from the positive impact of hedging and

derivative gains in the current environment.

•Anticipate that some of the gains in derivative

and hedging activities this quarter may reverse

in subsequent quarters due to extreme levels of

market volatility.

•In Q3, $4 million was reclassified into income

due to non-issuance of 15-year fixed rate

consolidated obligation bonds as a result of

unfavorable market conditions that made

issuance cost prohibitive.

Hedging Costs

$ in millions

Three months ended September 30,

2008

2007

Fair value hedge ineffectiveness

$ 6

$ (6)

Gain (loss) on economic hedges

(15)

Cash flow hedge ineffectiveness

Net gain (loss) on derivatives

and hedging activities

(21)

Nine months ended September 30,

Fair value hedge ineffectiveness

$ (26)

$ (21)

Gain (loss) on economic hedges

(41)

(7)

Cash flow hedge ineffectiveness

Net gain (loss) on derivatives

and hedging activities

(64)

(28)

Non Interest Expenses with Selected Items Removed

$ in millions

1Q 2008

2Q 2008

3Q 2008

2008 Total

Non Interest Expense

31.2

32.9

27.9

92.1

Less FHFB & OF Expenses

1.0

2.0

4.0

Total

30.2

31.9

25.9

88.1

Less Selected Expenses

Severance

1.5

4.6

2.6

8.7

Office Relocation Costs

1.1

Merger Related Professional Costs

0.7

Total

3.3

4.6

2.6

10.6

Non Interest Expense less Selected

26.9

27.3

23.4

77.5

Staffing Analysis

Dec-06

Dec-07

Sep-08

Number of Employees

459

343

316

Quarterly Net Income Excluding

Other-Than-Temporary Impairment

$(50)

$(40)

$(30)

$(20)

$(10)

$10

$20

$30

$40

$50

1Q 2008

2Q 2008

3Q 2008

Net Income

OTTI Charge

OTTI Accretion

Total

(78)

(45)

(74)

(44)

Asset Yield Trends

2.00%

2.50%

3.00%

3.50%

4.00%

4.50%

5.00%

5.50%

6.00%

Long Term Inv

MPF

Advances

Liability Yield Trends

2.00%

2.50%

3.00%

3.50%

4.00%

4.50%

5.00%

5.50%

6.00%

CO Bonds

Discount Notes

Net Spread

-0.25%

0.00%

0.25%

0.50%

0.75%

1.00%

1.25%

1.50%

1.75%

2.00%

Balance Sheet Analysis

Selected Balance Sheet Items

Current Quarter End vs Prior Year Quarter End

$ in millions

9/30/2008

9/30/2007

Difference

ASSETS

Advances

$35,469

$24,531

$10,938

MPF Loans Held In Portfolio

32,841

35,123

(2,282)

Investment Securities

20,513

14,247

6,266

Total Assets

91,369

89,356

2,013

LIABILIT

IES

Total Deposits

1,063

773

290

Consolidated Obligations

83,882

82,053

1,829

Subordinated Notes

1,000

Mandatorily Redeemable Capital Stock

178

159

Total Liabilities

88,478

86,226

2,252

CAPITAL

Capital Stock

2,561

2,653

(92)

Retained Earnings

540

637

(97)

Other–Than–Temporarily Impaired Securities

•Charges based on difference in carrying value

and estimated fair value, not on expected cash

flows

•Estimate actual economic loss is expected to be

significantly less than impairment charges

•Expect to recover majority of losses as an

accretion into net interest income in future period

as expected future cash flows are received

Other-Than-Temporarily Impaired Securities

$ in millions

Impairment

Charge

Expected

Economic

Loss

Accretion

recognized in

Net Interest

Income

Three months ended

September 30, 2008

$11

Nine months ended

September 30, 2008

MPF 90-Day Delinquency

September 30,

June 30,

March 31,

December 31,

2008

2007

MPF Loans - conventional

0.48%

0.41%

0.38%

0.32%

Weighted Average

Conventional Fixed-Rate

Mortgages

1.31%

1.15%

1.04%

0.90%

MPF Delinquency

September 30,

December 31,

2008

2007

MPF Loans, par value

32,590

34,367

Non-accrual MPF Loans, par value

% non-accrual

0.05%

0.03%

Increased loan loss reserve to $3 Million in third quarter

John Stocchetti

EVP, Operations and Technology

EVP -

Operations & Technology

•

30+ years of experience in financial markets

•

FHLBC

experience

little

over

two

years

•

Head

Operations

Technology

six

months

•

Responsibility for two business lines and a number

of support units

•

Business Lines: MPF Program & Non-Credit

Services

•

Support Units Include: Banking Operations,

Business Continuity, Communications, Credit &

Collateral, Information Technology, and Project

Management Office

Today’s Objective

•

To update you on some projects, issues, and

activities that I hope will be of interest for you.

•

Some of these will interest you because you are:

•

a Customer

•

Some of these will interest you because you are:

•

a Shareholder

Member Stock

•

Brief History

–

2007 Cease and Desist Order

–

Earlier this year, FHLBC proposal to Finance

Board to allow members greater flexibility to

redeem “new”

activity-based stock.

–

The intent was to be supportive of members’

need for liquidity in the most efficient way.

–

On July 23, 2008, the Finance Board approved

an approach.

Member Stock

•

Brief History (cont.)

–

Unfortunately, the approved approach was

different from what we had requested.

–

We communicated the approved approach.

Member Stock

•

Brief History

–

We didn’t think the news was good enough and

we went to work with the regulator to improve it.

–

We think supporting members’

liquidity is vital

and we wanted to further enhance member

flexibility.

Member Stock

–

Good news:

We have gotten acknowledgement

from the regulator that our more flexible method

for redemption of new activity-based stock is

acceptable.

Member Capital Stock --

“Old Process”

•

FHLBC identified the value of member capital

stock on July 23, 2008, for each member.

•

This value for each member was defined to be

the “floor”

for each member.

Member Capital Stock --

“Old Process”

•

A member buying capital stock to support a

new advance after July 23, 2008, could redeem

that newly purchased stock under certain

conditions.

…once that

advance was paid down or terminated,

…provided that the redemption did not reduce the

capital stock position below the “floor.”

If the full

redemption would cause the capital stock to fall

below the floor, the redemption would be limited

by the floor.

Member Capital Stock --

“New Process”

•

FHLBC identified the value of member capital

stock on July 23, 2008, for each member.

•

This value for each member is defined to be the

“floor”

for each member.

Member Capital Stock --

“New Process”

•

A member buying capital stock to support a

new advance after July 23, 2008, can redeem

that newly purchased stock…

…at any time that it becomes excess stock,

…regardless of which advance is paid down,

old or new,

…subject to the rule that the capital stock

position cannot be lower than the floor.

Member Capital Stock –

The Improvement

•

Dollars are fungible: excess stock above the

floor can be returned no matter what triggered

the excess.

•

Less recordkeeping for the Bank as capital

stock no longer needs to be tagged to the

advance that triggered the purchase.

Member Capital Stock –

The Improvement

•

Increased flexibility for members and increased

efficiencies when requesting advances from

FHLBC.

•

We hope this removes a potential obstacle to

requesting new advances from FHLBC.

Credit & Collateral

•

Collateral process is undergoing a significant

upgrade in order to continue to support

liquidity for members and strive for operational

excellence in execution.

Credit & Collateral

•

New System

–

Rockall’s Collateral Administration System

•

The collateral process will be re-engineered around the

new system.

•

First-

rate collateral system used by three other Federal

Home Loan Banks.

•

Loan collateral and securities.

•

Commercial Real Estate

–

Operational Planning

–

Regulatory approval required

Credit & Collateral

Additional collateral initiatives include:

•

Introducing mark-to-market

methodology

•

Liquidation plan for collateral

•

Documentation

•

Improving listing and delivery options

for collateral

•

Reducing the number of securities

custodians used

Credit & Collateral

•

Credit Risk Management is also undergoing an upgrade to

continue to support liquidity for members, protect

member capital from credit risk, and strive for operational

excellence in execution. Initiatives include:

Implementing a new credit system allowing us to

achieve enhanced and consolidated reporting on

one platform

Enhancing the Bank’s risk rating methodology

Developing stronger ties to regulators

Continuing to proactively monitor risk to investment

securities and unsecured credit risk

MPF Program

•

Introduction of MPF Xtra

MPF Xtra continues the Program’s tradition of

providing value by offering members the

alternative to sell fixed rate conforming loans into

the secondary market.

MPF Xtra allows PFIs to retain servicing rights,

retain servicing fees, and continue cultivating

relationships with their customers, while

transferring credit risk, interest rate risk, and

prepayment risks to an investor.

The MPF Xtra investor is Fannie Mae.

MPF Program

•

Introduction of MPF Xtra

To date:

•

Training to approximately 200 PFIs.

•

Approximately 75 master commitments

executed with PFIs.

•

Nearly 100 more PFIS are reviewing

•

Potential to expand to other FHLBs

MPF Program

•

Next steps for the MPF Program:

Expand the number of investors in the pool

Continue to reach out to members to expand the

number of PFIs in the Xtra program

Strengthen the technology operating base

through outsourcing

Expand the use of webinars in 2009 to reach out

to members on various MPF related topics of

interest

Continue to provide top-notch operations support

Technology Vision (2009 & 2010)

•

The three main objectives for the foreseeable future are to:

Use technology to streamline internal operations

•

The Bank is implementing Summit and re-

engineering Bank processes.

Use outsourcing as a solution

•

The overriding objective is to improve quality of

technology services by utilizing top-tier service

providers.

Improve Member Experience

•

eBanking will be enhanced as a reporting tool and

will also be transformed into a transaction support

tool.

Questions?

FHLBC Fall Member Meetings

Federal Home Loan Bank of Chicago 8-KFHLBC Fall Member Meetings