WASHINGTON - In one of the few election-year examples of bipartisanship, Democrats and Republicans are jointly cultivating a huge carrot they hope to dangle in front of bankers by yearend.

It comes in the form of a "New Markets" bill that features a $4.5 billion tax credit over 10 years - plus billions of dollars in other incentives - to encourage banks and other institutions to invest in poor areas.

"The New Markets tax credit would increase the universe of investment tools for strengthening communities by offering another investment vehicle," said Mark A. Willis, executive vice president of Chase Manhattan Bank's community development group. "The indirect subsidy offered by the tax credit could make investments that might not otherwise be feasible, feasible."

The credit is part of a legislative package that President Clinton and House Speaker J. Dennis Hastert shook hands on late last year to attract private investment to the country's poorest regions. The House approved the bill in July, and the Senate is expected to clear it before Election Day.

If enacted in its current form, the legislation would make banks and other investors eligible as early as next year for tax credits worth more than 30% of the amount invested in poor inner cities and rural communities, $1 billion of guarantees for low-cost loans funding large job-producing projects, and $150 million of matching venture capital for small businesses. The plan also would increase the low-income housing tax credit by 40%.

"It says to bankers who are hesitant about … investing in low-income communities: 'We're going to increase your level of comfort by giving you a tax credit or loan guarantee,' " said Vickie Tassan, Bank of America senior vice president for community development banking. "It lets people experiment while, for banks like B of A that do community development as a line of business anyway, it is just an additional incentive for a normal course of business."

Besides these financial benefits, banks could also get highly sought-after Community Reinvestment Act credit for their investments. Banks must meet three tests under the CRA: lending, service, and investment. Though the investment test is a smaller component, bankers complain that they have a tough time finding qualified investments to satisfy it.

The legislation would require participants to invest in private pools, which in turn would inject a projected $15 billion of capital into poor communities through loans and equity investments. These investment pools would apply to the Treasury Department for tax credits for their investors, who would get a 5% credit for the first three years of investment, and 6% for the next four years.

Banks could establish their own pools, but many are likely to invest in funds run by community development institutions, venture capital firms, or small-business investment companies.

The community development experts at Chase and Bank of America said that is premature to say whether their institutions would run their own investment pools. Mr. Willis said that investing in existing pools, and thus sharing the risk, "might be the way to go."

"There could be opportunities to create investment vehicles, but more likely we would be investing in existing entities," said Ms. Tassan. She was among representatives from a variety of industries who made recommendations to the White House while the proposal was being drafted.

Community bankers, on the other hand, might be more keen to run their own pools. "Knowing what the needs and shortfalls are in their own communities, I would think they would want to create their own investment vehicles," said Paul Merski, chief economist at the Independent Community Bankers of America.

Direct investment is not the only way bankers could benefit from the New Markets program. "While generally not in the private equity business, as banks are trying to develop projects where they might not be in the position to provide the equity, they might be able to draw in other investors" to the project, said Edward L. Yingling, the chief lobbyist at the American Bankers Association.

Regardless of how banks participate, the industry is firmly behind the program's philosophy.

"What's good for the economic viability of a community is good for banks and their customers," Mr. Merski said. "Anything that increases investment opportunities in poor areas … is good for small business, good for small-business lending, and thus good for banks operating in those areas, helping create new customers and expand the business opportunities for banks."

Two Senate bills contain provisions of the Clinton-Hastert program, which passed the House 394 to 27 in July. A version sponsored by Sen. Joseph Lieberman, the Democratic vice presidential candidate, and Sen. Rick Santorum, R-Pa., includes a provision that would create so-called individual development accounts, or limited-purpose savings accounts, for low-income people who lack them.

Because these accounts are not a priority of the White House or congressional leaders, Senate watchers doubt they will be included in the final legislative package.

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