Treasury speaking to Justice Dept. about its fair-lending prosecution.

WASHINGTON -- The Clinton Administration has begun internal discussions over the Department of Justice's high-profile prosecutions of bank fair lending violations, an administration official said Thursday.

Deputy Treasury Secretary Frank Newman said his office "is having some discussions" with Justice, but he declined to provide details except to say the issues are complex.

"We are having some internal discussions," he said following a speech to the Exchequer Club, a group of lobbyists, lawyers, and others interested in Washington financial issues. "That's all I can say at this time."

Although Mr. Newman's comments suggested that he has reservations about the Justice Department policy, he noted that, "on the whole, the administration is serious about fair lending."

It was not possible to obtain comment from Justice.

Mr. Newman devoted much of his talk, as well as an earlier hour-long briefing, to the administration's efforts to control risk in the financial system, particularly that involving the use of derivatives.

The President's working group on financial markets, headed by Treasury Secretary Lloyd Bentsen, reported to Congress Thursday on a series of 80 initiatives taken this year and last to limit risk in the financial markets.

Although the administration has urged Congress to hold off on legislation regarding derivatives, Mr. Newman made it clear that his department's position could change.

"We are not saying, 'no legislation ever,'" Mr. Newman said. "We are saying that we are still working on these issues and would like to see the regulatory process continue as it is while we do."

"It may be we will reach a point where we need more authority," he added. "We just aren't there yet."

Mr. Newman, Treasury's number two official, also expressed some concern about the payment system, which he said is "not quite as up to the minute as modern technology permits . . . So there is some risk, and we will keep working on it," he added.

In other comments to the Exchequer, Mr. Newman said the administration plans to pursue legislation overhauling the Federal Home Loan Bank System. Although he did not cite other bank legislation initiatives, Mr. Newman did not rule them out either.

Treasury is supposed to conclude a study of industry competitiveness by the end of next year. But the official said the administration could decide to recommend legislation earlier.

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