Capital Briefs: Home Loan Bank Reform: Wait Till Next Year

A bill that would modernize the Federal Home Bank System was officially laid to rest Tuesday, but Rep. Richard H. Baker predicted the measure would be approved by Congress next year.

"I am confident that our bill will pass with overwhelming bipartisan support in the 105th Congress," the Louisiana Republican said in a statement Tuesday. An aide to Rep. Baker said time simply ran out on the Enterprise Resource Bank Act this year.

The legislation, which was introduced by Rep. Baker, was approved unanimously by House Banking's capital markets subcommittee in March. However, the Treasury Department criticized the bill as expanding the system's mission too broadly. In his statement, Rep. Baker revealed his frustration with the Treasury Department's stance.

"We made an earnest effort to resolve the remaining differences with Treasury," he said. "As a result, we believe that Congress is in the position of deciding the future mission of the bank system."

Rep. Baker's bill would allow the newly named Enterprise Resource Banks to expand beyond residential lending to rural and inner-city development loans and would make membership voluntary for all institutions.

The bill also would require each district bank to pay no more than 23.7% of its net income to satisfy the obligation for interest on Resolution Funding Corp. bonds. Currently, each district bank must turn over up to 20% of its income to pay off the bond interest. If this totals less than $300 million, each Home Loan bank will be assessed for the shortfall in proportion to its advances to members insured by the thrift insurance fund.