Exhibit 10.8.6

EMPLOYMENT AGREEMENT AND GENERAL RELEASE

THIS EMPLOYMENT AGREEMENT AND GENERAL RELEASE (“Agreement”) is entered into by
and between the FEDERAL HOME LOAN BANK OF CHICAGO (“the Bank”) and KENNETH L.
GOULD (“the Executive”).

WHEREAS, the Bank has employed the Executive since 1992;

WHEREAS, the Executive has acquired extensive knowledge of and experience in the
Bank’s business during his employment at the Bank;

WHEREAS, the Executive and the Bank desire to continue their employment
relationship until September 30, 2007, when the Executive will resign from the
Bank;

NOW, THEREFORE, in consideration of the mutual promises contained in this
Agreement and for other good and valuable consideration, the adequacy and
receipt of which the parties expressly acknowledge, the Executive and the Bank
agree as follows:

1. Employment Period and Responsibilities. The Bank will continue to employ the
Executive at his current annual salary of $340,600 (minus required withholding)
until September 30, 2007 (“Resignation Date”), at which time he will resign from
the Bank. During this time, the Executive will continue to be paid in accordance
with the usual payroll practices of the Bank and he will transition his
responsibilities and make himself available for any assignments that senior
management of the Bank may request.

2. Performance Standards. During the time that the Executive continues to
provide services to the Bank, he agrees to continue to carry out the duties and
responsibilities of his position to the best of his abilities. The parties agree
that during this period, the Executive is permitted to engage in other
employment provided such employment does not conflict with his position at the
Bank and is not full time.

3. Employment Benefits. Except as set forth below, the Bank will maintain all of
the Executive’s current employment benefits until the Resignation Date when they
will cease in accordance with the terms of the respective benefit plans.

(a) The Executive will participate in the Bank’s Management Incentive
Compensation Plan only from January 1, 2006 until March 17, 2006;

(b) The Executive will participate in the Bank’s Long Term Incentive
Compensation Program for the following Performance Periods: 2004-2006;
2005-2007; and 2006-2008. The Executive will not participate in the Bank’s Long
Term Incentive Compensation Program for the Performance Period 2007-2009.

4. Executive Covenants.

(a) General. The Executive and the Bank understand and agree that the purpose of
the provisions of this Section 4 is to protect legitimate business interests of
the Bank, as more fully described below, and is not intended to impair or
infringe upon the Executive’s

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right to work, earn a living, or acquire and possess property from the fruits of
his labor. The Executive hereby acknowledges that the post-employment
restrictions set forth in this Section 4 are reasonable and that they do not,
and will not, unduly impair his ability to earn a living after the termination
of his employment with the Bank. Therefore, subject to the limitations of
reasonableness imposed by law upon restrictions set forth herein, the Executive
shall be subject to the restrictions set forth in this Section 4.

(b) Definitions. The following capitalized terms used in this Section 4 shall
have the meanings assigned to them below, which definitions shall apply to both
the singular and the plural forms of such terms:

“Confidential Information” means any confidential or proprietary information
possessed by the Bank without limitation, any confidential “know-how”, customer
lists, details of client or consultant contracts, current and anticipated
customer requirements, pricing policies, price lists, market studies, business
plans, operational methods, marketing plans or strategies, product development
techniques or plans, computer software programs (including object code and
source code), data and documentation, data base technologies, systems,
structures and architectures, inventions and ideas, past, current and planned
research and development, compilations, devices, methods, techniques, processes,
financial information and data, business acquisition plans, new personnel
acquisition plans and any other information that would constitute a trade secret
under the common law or statutory law of the State of Illinois.

“Determination Date” means the date of termination of the Executive’s employment
with the Bank for any reason whatsoever or any earlier date (during the
Restricted Period) of an alleged breach of the Restrictive Covenants by the
Executive.

“Person” means any individual or any corporation, partnership, joint venture,
association or other entity or enterprise.

“Principal or Representative” means a principal, owner, partner, shareholder,
joint venturer, member, trustee, director, officer, manager, employee, agent,
representative or consultant.

“Protected Employees” means employees of the Bank or its affiliated companies
who were employed by the Bank or its affiliated companies at any time within six
(6) months prior to March 17, 2006.

“Restricted Period” means the period of the Executive’s employment by the Bank
plus a period extending two (2) years from the date of termination of
employment.

“Restrictive Covenants” means the restrictive covenants contained in
Section 6(c) and (d) hereof.

(c) Restriction on Disclosure and Use of Confidential Information. The Executive
understands and agrees that the Confidential Information constitutes a valuable
asset of the Bank and its affiliated entities, and may not be converted to the
Executive’s own use. Accordingly, the Executive hereby agrees that the Executive
shall not, directly or indirectly, at any time during the Restricted Period
reveal, divulge or disclose to any Person not expressly

 

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authorized by the Bank any Confidential Information, and the Executive shall
not, directly or indirectly, at any time during the Restricted Period use or
make use of any Confidential Information in connection with any business
activity other than that of the Bank. The parties acknowledge and agree that
this Agreement is not intended to, and does not, alter either the Bank’s rights
or the Executive’s obligations under any state or federal statutory or common
law regarding trade secrets and unfair trade practices.

(d) Nonsolicitation of Protected Employees. The Executive understands and agrees
that the relationship between the Bank and each of its Protected Employees
constitutes a valuable asset of the Bank and may not be converted to the
Executive’s own use. Accordingly, the Executive hereby agrees that during the
Restricted Period the Executive shall not directly or indirectly on the
Executive’s own behalf or as a Principal or Representative of any Person solicit
any Protected Employee to terminate his or her employment with the Bank.

(e) Exceptions from Disclosure Restrictions. Anything herein to the contrary
notwithstanding, the Executive shall not be restricted from disclosing or using
Confidential Information that: (i) is or becomes generally available to the
public other than as a result of an unauthorized disclosure by the Executive or
his agent; (ii) becomes available to the Executive in a manner that is not in
contravention of applicable law from a source (other than the Bank or its
affiliated entities or one of its or their officers, employees, agents or
representative) that is not known by the Executive to be bound by a confidential
relationship with the Bank or its affiliated entities or by a confidentiality or
other similar agreement; (iii) was known to the Executive on a non-confidential
basis and not in contravention of applicable law or a confidentiality or other
similar agreement before its disclosure to the Executive by the Bank or its
affiliated entities or one of its or their officers, employees, agents or
representatives; or (iv) is required to be disclosed by law, court order or
other legal process; provided, however, that in the event disclosure is required
by law, court order or legal process, the Executive shall provide the Bank with
prompt notice of such requirement so that the Bank may seek an appropriate
protective order prior to any such required disclosure by the Executive.

5. Enforcement of the Restrictive Covenants.

(a) Rights and Remedies upon Breach. In the event the Executive breaches, or
threatens to commit a breach of, any of the provisions of the Restrictive
Covenants, the Bank shall have the right and remedy to enjoin, preliminarily and
permanently, the Executive from violating or threatening to violate the
Restrictive Covenants and to have the Restrictive Covenants specifically
enforced by any court of competent jurisdiction, it being agreed that any breach
or threatened breach of the Restrictive Covenants would cause irreparable injury
to the Bank and that money damages would not provide an adequate remedy to the
Bank. The rights referred to in the preceding sentence shall be independent of
any others and severally enforceable, and shall be in addition to, and not in
lieu of, any other rights and remedies available to the Bank at law or in
equity.

(b) Severability of Covenants. The Executive acknowledges and agrees that the
Restrictive Covenants are reasonable and valid in time and space and in all
other respects. If any court determines that any Restrictive Covenants, or any
part thereof, is invalid or unenforceable, the remainder of the Restrictive
Covenants shall not thereby be affected and shall be given full effect, without
regard to the invalid portions.

 

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6. Return of Bank Property. The Executive agrees to return on or before
September 30, 2007 to the Bank all of Bank’s property in his possession. This
property includes, but is not limited to, the Bank’s equipment, financial
records, company credit cards, tapes, records, manuals, employee lists, customer
lists, brochures, files, catalogs, price lists, cost information, keys,
equipment, and all copies thereof.

7. Resignation From Board Assignments. The Executive agrees to resign on his
Resignation Date from any offices he may hold with the Bank.

8. Cooperation. The Executive agrees to cooperate with the Bank and its
financial and legal advisors in any legal internal or business matters, as
reasonably requested from time to time by the Bank, with due regard to his other
commitments.

9. Confidential Agreement. The Executive and the Bank agree that they will keep
the terms, contents, and existence of this Agreement completely confidential,
and will not hereafter disclose any information concerning this Agreement, to
anyone except as required by law or to individuals who reasonably must be
informed of its terms and who will be advised of and bound by this
confidentiality clause.

10. General Release.

(a) In consideration of the payments and benefits described in this Agreement,
the Executive, and anyone claiming through the Executive, agrees not to sue and
release the Bank and each of its past, present, and future owners, trustees,
fiduciaries, shareholders, directors, officers, administrators, agents,
partners, employees, attorneys, and the predecessors, successors, and assigns of
each of them (collectively, the “Released Parties”), from any and all claims,
whether known or unknown, which the Executive now has, has ever had, or may ever
have against any of the Released Parties arising from or related to any act,
omission, or thing occurring at any time prior to his signing this Agreement
including, but not limited to, any and all claims that in any way result from,
or relate to, the Executive’s employment or cessation of employment with any of
the Released Parties. These released claims further include, but are not limited
to, any and all claims that the Executive could assert or could have asserted in
any federal, state, or local court, commission, department, or agency under any
common law theory, or under any fair employment, employment, contract, tort,
federal, state, or local law, regulation, ordinance, or executive order
including under the following laws as amended from time to time: the Age
Discrimination in Employment Act, Title VII of the Civil Rights Act of 1964, the
Americans With Disabilities Act, the Employee Retirement Income Security Act,
the Illinois Human Rights Act, and the Chicago and Cook County Human Rights
Ordinances.

(b) The Executive further acknowledges and agrees that the payments and benefits
set forth in this Agreement shall be in lieu of any severance benefits that may
be payable to him upon his termination of employment with the Bank. In
consideration for such payments and benefits, the Executive hereby waives any
severance benefits to which he otherwise might be entitled including, but not
limited to, any payments required under the Bank’s Employee Severance Plan
effective July 1, 2005 or any applicable successor plan.

 

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(c) The Executive acknowledges that he has not suffered any on the job injuries,
occupational diseases or wage, overtime or leave claims relating to his
employment with the Bank.

(d) The Executive further agrees to sign on the Resignation Date a Supplemental
Confidential Settlement Agreement and General Release, a copy of which is
attached as Exhibit A.

11. Acknowledgment of Sufficient Time to Consider This Agreement and to Consult
With a Lawyer. The Executive expressly acknowledges that he has been informed
that he may consult with a lawyer of his choice, that he has consulted with his
lawyer, and that he has had sufficient time to consult with his lawyer prior to
executing this Agreement. The Executive further acknowledges that he has been
informed that he is entitled to a period of at least 21 days within which to
consider this Agreement, but that he may execute this Agreement at any time
prior to the expiration of the 21-day period.

12. Revocation Right. Within 7 days following the date of the Executive’s
execution of this Agreement, the Executive shall have the right to revoke this
Agreement by serving within such 7-day period written notice of his revocation
upon Jeffrey A. Lazar, Federal Home Loan Bank of Chicago, 111 East Wacker Drive,
Chicago, Illinois 60601. If the Executive does not revoke this Agreement during
this 7-day period, this Agreement shall become effective on the eighth day after
the date of the Executive’s execution of this Agreement and the Executive shall
have no further right to revoke this Agreement.

13. Knowing and Voluntary Release. The Executive acknowledges that in releasing
and waiving any claims and rights that he has or may have against the Released
Parties, including those under the Age Discrimination in Employment Act, he does
so knowingly and voluntarily, in exchange for consideration in addition to
anything of value to which he already is entitled.

14. Notices. All notices and other communications required or permitted under
this Agreement shall be deemed to have been duly given and made if in writing
and if served personally on the party for whom intended or by being deposited,
postage prepaid, certified or registered mail, return receipt requested, in the
United States mail bearing the address shown below for each such party or such
other address as that party may designate in writing hereafter

 

(a)    If to the Bank:

  

(b)    If to the Executive:

         Federal Home Loan Bank

  

         At the most recent address

         of Chicago

  

         on file with the Bank

         111 East Wacker Drive, Suite 800

  

         Chicago, Illinois 60601

  

         Attention: General Counsel

  

15. Non-admission. Nothing herein shall be deemed to constitute an admission of
wrongdoing by the Executive, the Bank or any of the other Released Parties.
Neither this Agreement nor any of its terms shall be used as an admission or
introduced as evidence as to any issue of law or fact in any proceeding, suit or
action, other than an action to enforce this Agreement.

 

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16. Waiver. The Bank’s future waiver of a breach by the Executive of any
provision of this Agreement or failure to enforce any such provision with
respect to him shall not operate or be construed as a waiver of any subsequent
breach by the Executive of any such provision or of the Executive’s right to
enforce any such provision with respect to the Executive. No act or omission of
the Bank shall constitute a waiver of any of its rights hereunder except for a
written waiver signed by the Bank’s President.

17. Entire Agreement/Ratification. The terms contained in this Agreement
(including Exhibit A) constitute the entire agreement between the parties with
respect to the subject matter hereof and supersede all prior negotiations,
representations or agreements relating thereto whether written or oral. The
Executive represents that in executing this Agreement, he has not relied upon
any representation or statement not set forth herein. No amendment or
modification of this Agreement shall be valid or binding upon the parties unless
in writing and signed by both parties.

18. Governing Law. This Agreement shall be governed by the laws of the State of
Illinois without regard to its conflicts of laws rules.

THE EXECUTIVE AND THE BANK EXPRESSLY STATE THAT THEY HAVE READ THIS AGREEMENT,
THAT THEY UNDERSTAND EACH OF ITS TERMS, AND THAT THEY HAVE ENTERED INTO IT
VOLUNTARILY AND INTEND TO BE BOUND THEREBY.

 

FEDERAL HOME LOAN BANK OF

CHICAGO

    KENNETH L. GOULD By:   /s/ J. Mikesell Thomas     By:   /s/ Kenneth L. Gould
Its:   President & CEO       Dated: May 15, 2006     Dated: May 12, 2006

 

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SETTLEMENT AGREEMENT AND GENERAL RELEASE

THIS SETTLEMENT AGREEMENT AND GENERAL RELEASE (“Settlement”) is entered into by
and between the FEDERAL HOME LOAN BANK OF CHICAGO (“the Bank”) and KENNETH L.
GOULD (“the Executive”).

In consideration of the mutual promises contained in this Agreement and the
Employment Agreement and General Release executed on April     , 2006 and for
other good and valuable consideration, the adequacy and receipt of which the
parties expressly acknowledge, the Executive and the Bank agree as follows:

1. General Release. (a) In consideration of the payments and benefits described
in the Employment Agreement and General Release executed on April __, 2006, the
Executive, and anyone claiming through the Executive, agrees not to sue and
release the Bank and each of its past, present, and future owners, trustees,
fiduciaries, shareholders, directors, officers, administrators, agents,
partners, employees, attorneys, and the predecessors, successors, and assigns of
each of them (collectively, the “Released Parties”), from any and all claims,
whether known or unknown, which the Executive now has, has ever had, or may ever
have against any of the Released Parties arising from or related to any act,
omission, or thing occurring at any time prior to his signing this Agreement
including, but not limited to, any and all claims that in any way result from,
or relate to, the Executive’s employment or cessation of employment with any of
the Released Parties. These released claims further include, but are not limited
to, any and all claims that the Executive could assert or could have asserted in
any federal, state, or local court, commission, department, or agency under any
common law theory, or under any fair employment, employment, contract, tort,
federal, state, or local law, regulation, ordinance, or executive order
including under the following laws as amended from time to time: the Age
Discrimination in Employment Act, Title VII of the Civil Rights Act of 1964, the
Americans With Disabilities Act, the Employee Retirement Income Security Act,
the Illinois Human Rights Act, and the Chicago and Cook County Human Rights
Ordinances.

(b) The Executive acknowledges that he has not suffered any on the job injuries,
occupational diseases or wage, overtime or leave claims relating to his
employment with the Bank.

2. Acknowledgment of Sufficient Time to Consider This Agreement and to Consult
With a Lawyer. The Executive expressly acknowledges that he has been informed
that he may consult with a lawyer of his choice, that he has consulted with his
lawyer, and that he has had sufficient time to consult with his lawyer prior to
executing this Agreement. The Executive further acknowledges that he has been
informed that he is entitled to a period of at least 21 days within which to
consider this Agreement, but that he may execute this Agreement at any time
prior to the expiration of the 21-day period.

 

EXHIBIT A

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3. Revocation Right. Within 7 days following the date of the Executive’s
execution of this Agreement, the Executive shall have the right to revoke this
Agreement by serving within such 7-day period written notice of his revocation
upon Jeffrey A. Lazar, Federal Home Loan Bank of Chicago, 111 East Wacker Drive,
Chicago, Illinois 60601. If the Executive does not revoke this Agreement during
this 7-day period, this Agreement shall become effective on the eighth day after
the date of the Executive’s execution of this Agreement and the Executive shall
have no further right to revoke this Agreement.

4. Knowing and Voluntary Release. The Executive acknowledges that in releasing
and waiving any claims and rights that he has or may have against the Released
Parties, including those under the Age Discrimination in Employment Act, he does
so knowingly and voluntarily, in exchange for consideration in addition to
anything of value to which he already is entitled.

5. Notices. All notices and other communications required or permitted under
this Agreement shall be deemed to have been duly given and made if in writing
and if served personally on the party for whom intended or by being deposited,
postage prepaid, certified or registered mail, return receipt requested, in the
United States mail bearing the address shown below for each such party or such
other address as that party may designate in writing hereafter

 

(a)    If to the Bank:

  

(b)    If to the Executive:

Federal Home Loan Bank of Chicago

  

At the most recent address on file with the Bank

111 East Wacker Drive, Suite

  

800 Chicago, Illinois 60601

  

Attention: General Counsel

  

6. Non-admission. Nothing herein shall be deemed to constitute an admission of
wrongdoing by the Executive, the Bank or any of the other Released Parties.
Neither this Agreement nor any of its terms shall be used as an admission or
introduced as evidence as to any issue of law or fact in any proceeding, suit or
action, other than an action to enforce this Agreement.

7. Waiver. The Bank’s future waiver of a breach by the Executive of any
provision of this Agreement or failure to enforce any such provision with
respect to him shall not operate or be construed as a waiver of any subsequent
breach by the Executive of any such provision or of the Executive’s right to
enforce any such provision with respect to the Executive. No act or omission of
the Bank shall constitute a waiver of any of its rights hereunder except for a
written waiver signed by the Bank’s President.

 

EXHIBIT A

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8. Ratification. The terms contained in the Settlement Supplement, the
Employment Agreement and General Release executed on April     , 2006 and is
being signed pursuant to that Agreement. All terms of that Agreement remain in
effect and are hereby reaffirmed. The Executive represents that in executing
this Agreement, he has not relied upon any representation or statement not set
forth herein. No amendment or modification of this Agreement shall be valid or
binding upon the parties unless in writing and signed by both parties.

9. Governing Law. This Agreement shall be governed by the laws of the State of
Illinois without regard to its conflicts of laws rules.

THE EXECUTIVE AND THE BANK EXPRESSLY STATE THAT THEY HAVE READ THIS AGREEMENT,
THAT THEY UNDERSTAND EACH OF ITS TERMS, AND THAT THEY HAVE ENTERED INTO IT
VOLUNTARILY AND INTEND TO BE BOUND THEREBY.

 

FEDERAL HOME LOAN BANK OF CHICAGO     KENNETH L. GOULD By:          By:     
Its:            Dated:                       , 2007     Dated:  
                    , 2007

 

EXHIBIT A