Federal Home Loan Bank of Chicago 8-K Regulation FD Disclosure

FEDERAL HOME LOAN BANK

UPDATE

WBA Bank Executives Conference

February 10, 2009 

Exhibit 99.1

Re: Forward-Looking Statements

This presentation contains forward-looking statements based on

our current expectations as of today.

These statements may use forward-looking terms such as

“anticipates,”

“believes,”

“expects,”

“could,”

“plans,”

“estimates,”

“may,”

“should,”

“will,”

or their negatives or other

variations of these terms.

The Bank cautions that, by their nature, forward-looking

statements involve risk and uncertainty, that actual results could

differ materially from those expressed 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, economic conditions, (including effects on,

among other things, mortgage-backed securities), changes in

mortgage interest rates and prepayment spreads on mortgage

assets, and the risk factors set forth in the Bank’s periodic filings

with the Securities and Exchange Commission available on the

Bank’s website, www.fhlbc.com.

The Bank assumes no obligation to update any forward-looking

statement made in this presentation.

Overview

Providing access to liquidity

Supporting Wisconsin community

financial institutions (CFIs)

Improving communication

Addressing FHLBC issues

FHLBanks supporting community

financial institutions

Providing Access to Liquidity 

FHLBC provides liquidity in two ways:

Advances (secured loans)

Mortgage Partnership Finance®

Program

$ in billions

Advance Balances, at par

$0.0

$5.0

$10.0

$15.0

$20.0

$25.0

$30.0

$35.0

$40.0

IL

WI

Providing Access to Liquidity

Need for liquidity brought advances portfolio to record

level by year-end 2008.

FHLBC was there and funding when options were

limited.

Merged Advance Products and Banking:

Support growing advances

Provide enhanced Asset/Liability Management

support to members: weekly market update

Increased product offerings

Providing Access to Liquidity

Installing new collateral reporting/monitoring

system that will incorporate mark-to-market values

Changes in reporting

Changes in “haircuts”

System will also accommodate expanded collateral

authority, including commercial real estate

(approval pending)

Providing Access to Liquidity

Substantial changes in MPF®

Program resulted

in increased capacity to provide liquidity:

Decision announced to end purchases of MPF

conventional assets for balance sheet effective

7/31/08

Des Moines, Pittsburgh and Topeka Home

Loan Banks provided bridge for our members

until permanent solution was in place

MPF Xtra™

product

rolled out 10/1/08

Providing Access to Liquidity

MPF Xtra product volumes to date have been

significant as reduced mortgage rates have

caused wave of refinancings

Staffing has been increased to support the help

desk to handle volumes

Automating process under discussion

Several other Home Loan Banks have made

application to Finance Agency to offer MPF

Xtra product

Other Ways to Support Wisconsin Members

Affordable Housing Program

Community Investment Cash Advances (CICA)

Letters of Credit

HUD 184 Native American Mortgage Purchase

Program

Affordable Housing Program

Competitive grant program

Applications for 2009 awards available later

this month

Applications due May 1, 2009

$7.5 million available

WI members received 22 of 46 awards in

2008

Affordable Housing Program

Downpayment Plus Program®

Opening Date: March 1, 2009

Total available $4.5 million ($1.8 million WI)

Community Investment Cash Advances

Housing Finance

Economic Development

Agricultural Lending

Small Business

Disaster Assistance Financing

Letters of Credit

Public Unit Deposits

Housing

Economic development

Tax-exempt bonds AND taxable bonds

Taxable provision sunsets December 31,

2010

Letters of Credit

Wide range of qualifying projects

Manufacturing and other commercial

construction

Hospitals

Schools

Infrastructure

HUD 184 Program

Native American Mortgage Program

Currently, three active FHLBC members

110 loans in 2008

Improved Communication

SEC registration was mixed blessing:

Provided substantial information in required

financial reports, but

Constrained the Bank’s communications with our

members

Improved Communication

Decision was made to use SEC reporting to

facilitate rather than restrict dialogue with

members

“Tell the world”

in order to talk with our

members

Improved Communication

Not just with members:

Our regulator

Your regulators

Your accountants

Other Home Loan Banks

Acknowledge and accept our role and our

importance in supporting our District

Improved Communication

Increased member communication means:

Increased information about FHLBC credit

scoring and dialogue

Issues identified by Bank or member are

open to discussion

Improved Communication

Increased member communications means:

White paper and calling program to address

questions of potential impairment of FHLBC

stock

Providing support to each member while

limiting risk to member capital

Addressing FHLBC Issues: Q2 2008

Discontinued merger talks with Dallas Home

Loan Bank

Change in Leadership

Not just President, but Executive Team

Addressing FHLBC Issues: Q2 and Q3 2008

New approach to balance sheet management

Net interest margin

Risk management

MPF continues as off-balance sheet program

Important partnership with Fannie Mae

MPF Xtra is first off-balance sheet product

Focus on reducing non-interest expense and

improving operational excellence

Addressing FHLBC Issues:  MBS

Private-label mortgage backed portfolio

All

securities

were

“triple

A”

at

the

time

of

purchase

Default rates have risen dramatically as conditions

have deteriorated

Other-than-temporary impairment accounting requires

securities that “break”

to be written down to fair value,

even if economic losses are substantially lower

Impacts current income and can impact retained

earnings

Ratings Migration

Privately Issued MBS Securities

As % of Total Par Amount

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

12/31/2007

3/31/2008

6/30/2008

9/30/2008

AAA

AAA (-W)

AA

AA (-W)

A

A (-W)

BBB

BBB (-W)

BB

BB (-W)

B

CCC

$ in millions

Other-than-Temporarily Impaired Securities

As of September 30, 2008

Total Impairment

Charge to Date

Accretion

Recognized in

Net Interest

Income to Date

Expected

Economic

Loss to Date

1Q

($33)

($1)

2Q

($63)

$1

($5)

3Q

($72)

$3

($16)

Net Impairment

Effect for 3Q 2008

($69)

Addressing FHLBC Issues: Economy

Volatile markets, lower rates

MPF assets are high-quality, high-yield

Issue:  replacing MPF assets with lower-

yielding assets may impact net interest margin

Addressing FHLBC Issues: Capital Plan

Amendment to Cease & Desist order permitting

liquidity for incremental investments in capital stock

Since July 2008, redemptions of $50,000-$5,000,000+

(excess capital stock)

Must satisfy regulatory requirements for approval

of capital plan

Addressing FHLBC Issues: Capital Plan Goals

Implement capital conversion plan as soon as

possible following approval

Obtain approval for revised retained earnings and

dividend policy that permits restoration of a

dividend while building/maintaining an appropriate

level of retained earnings

FHLBanks and Community Financial Institutions

FHLBanks have been a primary source of liquidity

and term financing during the credit crisis

The cooperative structure of FHLBanks provides

an industry-financed solution rather than a

taxpayer-financed solution

Community financial institutions did not cause the

current crisis and are an essential part of the

solution

Challenging times should keep us focused on

working together

FEDERAL HOME LOAN BANK

UPDATE

WBA Bank Executives Conference

February 10, 2008