WASHINGTON - At a time of mounting stress on the Federal Home Loan Banks, antipoverty organizations will urge Congress this week to expand the bank system's mission to include a role in rebuilding the nation's cities.

"We feel the public purpose of the banks needs to be brought up to date," said Chris Lewis, a lobyist for the Association of Community Organization for Reform Now.

In the wake of the Los Angeles riots, Acorn is seeking legislation that would require the district banks to purchase small-business loans originated by member institutions in distressed areas.

5% of Assets Suggested Target

Mr. Lewis said the organization had not settled on an amount, though others who have talked with the organization said a target of 5% of assets was suggested.

The loans would be originated by thrifts and banks that belong to the Home Loan Bank System. Those institutions would continue to hold a portion of any such loans sold to the district Home Loan banks as a means of ensuring prudent underwriting.

Acorn's views will get an airing this week, as the House Banking Committee begins a series of hearings today on legislation sponsored by Rep. Richard Baker, R-La., that would overhaul the bank system. The two proposals could be bundled as a package.

Bundling the Bills

The Baker bill is aimed at revitalizing the system by limiting its contribution to the savings and loan bailout, equalizing membership requirements for banks and thrifts, and encouraging consolidation.

Rep. Baker hopes to persuade the banking committee and its chairman, Rep. Henry B. Gonzales, D-Tex., to include his initiative as part of the housing re-authorization bill, which recently cleared the panel's housing subcommittee.

This week's hearings often an opportunity for Rep. Baker to make his case before the full committee takes up the housing bill.

Although many observes believe prospects for the housing bill are fading, it may be the only vehicle left in this election year to carry the Baker initiative.

Misgiving Over Provisions

If Rep. Baker can work out a compromise with Acorn, the antipoverty group's support could prove crucial in persuading liberal committee members, including Rep. Gonzalez, to back the Louisiana Republican's initiative.

Even so, an aide to Rep. Baker expressed misgivings about the community development provisions.

"The original role of the bank system is to support housing related finance and this is not housing-related finance," said the Baker aide.

The bank system is under pressure from a variety of quarters.

First, the 1989 thrift bailout required the district banks to fund a subsidized housing program, while providing a contribution of a minimum of $300 million a year to pay for the rescue.

Moreover, the system's main line of business - the advances it makes to its member institutions - has dropped precipitously during the recession, to $76.9 billion as of April 30, from $103.7 billion a year earlier.

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