The Federal Home Loan Bank of Chicago’s Path from CRO to CEO

Michael Ericson ran the risk function on his way to the top job. His predecessor did the same.

Friday, December 3, 2021

By L.A. Winokur


While rising to the challenges of 21st-century crises, chief risk officers have gained in prestige and C-suite positions. Rarely, however, do former CROs become chief executive officers, with Barclays’ recently appointed CEO, C.S. Venkatakrishnan, a notable exception.

At the Federal Home Loan Bank of Chicago, it has happened twice. Matthew Feldman, CEO from 2008 through 2020, and Michael Ericson, who succeeded him in January 2021, were both CROs.

Ericson joined the Chicago financing institution, one of a network of 11 Federal Home Loan Banks, in 2005 as vice president of accounting policy and SEC reporting. He was executive vice president and CRO from 2008 to 2014; EVP and group head, members and markets from 2014 to 2020; and EVP and chief operating officer during 2020, before becoming president and CEO when Feldman retired. (Feldman was CRO from 2004 to 2006 and was executive vice president of operations and administration before rising to CEO.)

Michael A. EricsonMichael A. Ericson, President and CEO, FHLB of Chicago

“I had a great opportunity to learn and grow from Matt and other members of the executive team,” Ericson stated.

As he transitioned into the role, the risk landscape amid the ongoing COVID-19 crisis was “unprecedented,” said Ericson, who earlier in his career was senior manager in PricewaterhouseCoopers’ Financial Services Group (1994-2003). Before joining the FHLB, he was vice president, accounting policy at Bank One before it merged with JPMorgan Chase, where he became global treasury controller (2003-2004).

The CEO discussed his bank’s role, his career, and current responsibilities and issues in this recent interview.

What are the Federal Home Loan Banks?

The FHLBs were created by Congress in 1932 as member-owned cooperatives. Each bank has its own geographically defined district. Federally insured banks, thrifts and credit unions can be members of the FHLBs, along with privately insured credit unions. Insurance companies and community development financial institutions can also be members.

Our mission – to provide funding and liquidity to our members – is most clearly illustrated in times of financial stress. That was the case in 2008 during the great financial crisis. FHLBs provided hundreds of billions of dollars of liquidity to our member institutions at the peak of the crisis before the Federal Reserve stepped in and provided additional liquidity.

What makes the FHLBs particularly relevant today?

We saw the important role the FHLBs played during the COVID pandemic, in the spring of 2020. Member demand for liquidity shot up at that point in time, and increased significantly before the Fed stepped in again.

Another big part of our mission is that we set aside 10% of our prior year’s net income to support affordable housing, which is tremendously valuable in supporting our members and the communities they serve.

What is your source of funding?

We are self-capitalizing by our member institutions. Much like an accordion, we can expand quickly as member demand increases, and we can contract as quickly as member demand decreases.

Given our deep access to the capital markets, we pass along our funding advantage to our members in the form of low-cost loans, or advances.

We are a primary source of liquidity for our members and serve as an exceptional funding and liquidity risk management partner to our members in that regard.

Who are your competitors?

Any aspects of wholesale funding outside of our channel would be a competitor for us.

Who are your regulators?

The Federal Housing Finance Agency (FHFA) regulates the FHLBs and FHLB system, as well as Fannie Mae and Freddie Mac.

What is your relationship with the SEC?

Each of the FHLBs has its own stock that is registered with the SEC, so we are all public registrants. Even though our stock is registered, the stock itself is not publicly traded. Back in 1932, when Congress created the FHLBs, they assigned $100 of value to each share of stock that is owned. That value is the same today.

How did your background prepare you for the FHLB?

Public accounting grounded me in a risk-based, controls-based mindset, with a number of financial institutions who were my clients. When I came on board to the FHLB, I was really focused from a finance perspective. We were getting the bank situated to register our stock with the SEC, as well as going through a financial-statement correction. Also, we were becoming Sarbanes-Oxley compliant.

How did your predecessor help pave the way?

Matt was a big believer in moving people around to get experience. He moved me into the CRO role to expand my skills. At that point in time, we were under a cease and desist order with the regulator and had to work through those challenges as well.

It was Matt throwing me into the deep end of the pool and helping me learn and grow along the way. I had a tremendous opportunity to do that and get that experience, and to see the bank not only recover, but grow from that point forward. That was invaluable.

What was the significance of the last leg of your journey before becoming CEO?

The Members and Markets side oversees all of the sales-related functions we would have in support of our members, as well as the capital markets activity: the treasury, funding, liquidity and investment areas of the bank. It’s on the front line of activity and allowed me to understand the broader operations of the bank.

The biggest element of being head of the Members and Markets Group, as well as being COO, was being accountable to the business outcomes of the bank itself in support of the members that we serve. You’re accountable not only for the business development aspect, but you’re also the first line of defense in managing the risks.

What’s a priority for you right now?

It’s important that we stay focused on our mission: serving our members and being a partner to our members in Illinois and Wisconsin, and staying true to our mission to ensure we’re providing them with competitively priced funding for a reasonable return on their investment and support for their community investment activities.

What management stamp do you hope to put on the business?

There are a couple of things that are important to me: the community investment space and diversity, equity and inclusion (DEI).

When I stepped in as COO, one of the first things I did was to move our chief diversity officer, Cedric Thurman, to also head our community investment area. The goal was to have our business products that support our members be more closely aligned to DEI outcomes.

As I mentioned before, 10% of our previous year’s net income is set aside for community investment activities. This is substantial for us. Over the past couple of years, we’ve had a little over $30 million per year being set aside. That connection has been transformational and has had a really meaningful impact, not only to the bank, but also to the membership.

How about from a risk management perspective?

Risk management is critical. It has had and always will have a seat at the table as long as I’m the CEO; a voice and forum to communicate risks, not only to me, but also to the board and risk management committee of the board.

Our risk management group today is much more mature than when I was the CRO. I give (current CRO) Michelle Jonson a significant amount of credit for the work that she’s done in that capacity.

Today we have a very robust market risk team, credit risk area, operational risk area, and a very strong focus as it relates to security, IT security, model risk and enterprise risk. We need to continue to ensure that that stays in place, especially as the risk dynamics continue to change.

Anything you’d like to add regarding risk priorities?

Cybersecurity is one of the key risks. Another is the “great resignation.” Like any organization, we’ve seen turnover here as well.

Considering the history here, is this a CRO-turned-CEO superpower?

I think there is some truth to that. Strong CEOs in general do have a good risk-based mindset and risk-based focus. You have to have that as you operate and navigate through the challenges, complexities and ambiguities that any organization has to deal with.

Matt did a tremendous job being balanced on understanding opportunities and risks to take advantage of the opportunities accordingly. I’d like to believe I have the same mindset. I think good business professionals – good risk professionals – recognize both and balance both.


L.A. Winokur is a veteran business journalist based in the San Francisco Bay Area.



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