Treasury mulls how to make nonbanks aid communities.

WASHINGTON -- The Treasury Department's top domestic finance official acknowledged Monday that it would be difficult to apply community reinvestment standards to nonbanks, but said the issue deserves further study.

It's not an issue of "literal application of the Community Reinvestment Act," said Frank Newman, Treasury under secretary for domestic finance. "The question is, what are the community responsibilities of various financial services providers?"

Mr. Newman has made comments recently that have been interpreted by some as a suggestion that mutual funds should be made subject to bank-like community reinvestment standards.

Duty to Reinvest

Mutual funds have been taking an increasing share of monies that once went into banks and have an affirmative obligation under law to reinvest in their communities, Mr. Newman noted.

Though he said "it's probably not practical" to apply CRA directly to mutual funds, he added that it might be possible to apply a reinvestment standard to mutual funds through other means, such as requiring them to invest a tenth of 1% of assets in community development banks.

The Treasury official stressed that the administration is only at the stage of "asking questions," rather than formulating answers, and that his suggestion was purely hypothetical.

|Why Not?' on Interstate

Following a speech to members of Women in Housing and Finance, Mr. Newman said he believes the administration should approach interstate branching and Glass-Steagall repeal by asking "why not?"

"There is clearly an opportunity for efficiency in interstate, so we have to ask the question, |why not permit that efficiency?'" he said.

In his remarks before the group, Mr. Newman said the administration doesn't "deliberately want to hurt community banks."

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