Bid to Raise Cap On FHLB Lending Has Foes in House

increasing the cap on the amount of money Federal Home Loan System banks may lend to commercial banks. However, House lawmakers are ready to oppose the Senate Banking Committee chairman's plan. The New York Republican wants to raise the current limit on home loan advances to commercial banks by to 40% from 30% of outstanding system advances, according to congressional sources. Sen. D'Amato intends to fold the change into a massive budget reconciliation bill, on which House and Senate conferees are expected to resume work Tuesday. The plan has irked Rep. Richard Baker, R-La., who is working on a measure to overhaul the Home Loan Bank System from top to bottom. If the 30% cap is raised now, the lawmaker would lose an important bargaining chip, needed to garner support for his bill from the 12 district bank presidents, according to one of Rep. Baker's aides. "That would be a real problem, because at that point there'll be no impetus for modernization," the staffer said. "Too many of the banks will get what they need. We need to keep their feet to the fire." An aide to Rep. Paul E. Kanjorski, D-Pa., one of the House Banking Committee budget conferees, said the lawmaker shared Rep. Baker's concerns. However, Rep. Baker and Rep. Kanjorski may not have much choice but to accept Sen. D'Amato's plan. According to congressional sources, the House must go along with Sen. D'Amato's new 40% limit in order to gain his support for a separate provision reallocating the $300 million the system owes each year on Resolution Funding Corp. bonds. House lawmakers have approved this reallocation formula, which would require each district bank to pay no more than 23.7% of net income to satisfy the obligation on the thrift bailout bonds. This change is the system's top priority, according to Rita Fair, managing director of the Federal Housing Finance Board, the agency that regulates the system. "We would certainly support putting in the 40% limit, but the thing we care about more than anything in the world is that the Senate puts this Refcorp fix in it," Ms. Fair said. While reallocating responsibility for the bond servicing has topped the district banks wish list - all 12 Home Loan bank presidents endorsed the new formula in a Nov. 2 letter to Sen. D'Amato - raising the cap on advances to commercial bank members has been a pressing issue as well. In early September, 16.6% of the system's advances were to commercial banks, and that ratio is growing quickly. According to the finance board, lending to commercial banks may reach 20% by the end of 1995. "If we hit that 30% ceiling, we are essentially out of business because we can't make loans to majority of our members," said Alfred A. DelliBovi, president of the Federal Home Loan Bank of New York. Mr. DelliBovi said the system could reach the 30% limit sometime next year. The Senate Banking Committee staff did not return calls seeking comment Friday.

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