Legislation to increase FHLB membership still pushed as amendment to housing bill.

Though it was withdrawn during markup of housing legislation in a House subcommittee, a proposal to broaden membership by commercial bank in the Federal Home Loan Bank System will be the subject of hearings June 9-10 and will be offered as an amendment when the housing bib is taken up by the full House Banking, Finance and Urban MM committee.

The co-sponsors, Reps. Stephen L. Neal, D-N.C., and Richard H. Baker, R-La., agreed to withdraw the amendment until hearings were held after a discussion with Rep. Henry B. Gonzalez, D-Texas, during markup of a bill to reauthorize the National Affordable Housing Act. Gonzalez is chairman of the entire committee as well as of the Housing and Community Development Subcommittee.

"It's a win-win situation," said J. Denis O'Toole, executive vice president for government affairs at the U.S. League of Savings Institutions. "It's always helpful to have a full hearing on the issues and the colloquy between the sponsors and Chairman Gonzalez was very positive."

O'Toole said there, is one aspect of the legislation that might make it difficult for the U.S. League to support the final version. One provision limits the annual contribution of the FHLB System to the Resolution Funding Corporation to the lesser of 20% of the aggregate net earnings of the FM banks or $300 million. Since the Financial Institutions Reform, Recovery and Enforcement Act of 1989 mandates the 300 million annual contribution to help pay for the thrift bailout, any shortfall would have to be made up somehow.

The latest version of the Neal-baker legislation would give the Federal Deposit Insurance Corporation the authority to take it out of the regular insurance premiums paid to the Savings Association Insurance Fund or to assess an additional premium. The U.S. League opposes the additional premium.

In addition to limiting the annual contribution to the RFC, the Neal-Baker measure would:

Equalize the eligibility rules so banks would be on the same footing as thrifts;

* Make the membership voluntary for thrifts as well as banks;

* Permit up to 11 branch banks in each FHL bank district;

* Order a study of the feasibility of an "affiliate" membership for mortgage bankers.

The legislation conflicts with a proposed regulation by the Office of Thrift Supervision that would require thrifts and savings banks to remain members of the FHLB System.

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