Former N.J. Gov. Beats Drum For Home Loan Bank System

James J. Florio, a former governor of New Jersey, has become the new firebrand for the expansion of the Federal Home Loan Bank System's scope.

Mr. Florio was named chairman of the Federal Home Loan Bank of New York last month. He plans to aggressively promote the banks' interests and agenda to policymakers, the financial community, and the general public.

"The Home Loan Bank system is an institution that is not paid as much attention as it deserves," said Mr. Florio, who has been on the bank's board for four years. "I'm enthusiastic about being able to be an apostle for the system."

The 300-member New York Home Loan Bank's jurisdiction includes New York, New Jersey, the Virgin Islands, and Puerto Rico. "Someone who's been governor of New Jersey commands respect," said Alfred DelliBovi, president of the New York Home Loan Bank. Mr. Florio "very much takes a very deep interest in the workings of the bank," he said.

Mr. Florio's oratory and schmoozing skills will come in handy as the Home Loan Bank system promotes a controversial secondary mortgage market program and defends its investment strategy.

The system's Mortgage Partnership Finance program was conceived by the Chicago Home Loan bank as an alternative to Fannie Mae and Freddie Mac, the government-sponsored enterprises that dominate the secondary market for home loans.

The New York bank hopes to participate in the program and is working to get approval from the Federal Housing Finance Board, which regulates the system.

"We're very enthusiastic about anything that will allow us to give assistance to our members, the community banks, in their efforts to provide greater capital and credit to their communities," Mr. Florio said.

Some have criticized the program, however, fearing that some Home Loan banks may not be prepared to handle its additional credit risk. Mr. Florio said the New York bank is pursuing the program cautiously. "Things have to be pursued in a prudent way," he said.

However, he is keen on the idea of creating competition for Fannie and Freddie. "One of the things we've advocated is a level playing field for the GSEs," he said.

Mr. Florio argues that the Home Loan Bank System's members will become crucial providers of housing and small-business finance, as consolidation and deregulation create megabanks that "are going off into other areas that would provide for noncoverage of these important banking functions."

Hence the need for the system to enhance its powers. "Changing times dictate that we be willing to look at how you enhance credit capability. Life is different than it was in the 1930s," when the Home Loan Bank System was created, he said.

Critics have also complained that some of Home Loan banks' investments in capital markets have been unrelated to the banks' mission of funding housing.

Mr. Florio said that investments such as money market accounts were neccesary for the banks to have some liquidity. However, he pointed out that the New York bank has reduced its nonhousing investments "dramatically"-to 9% of the bank's balance sheet at Jan. 31, from 29% last year.

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