WASHINGTON - Under a little-noticed provision of the recently enacted financial reform law, the Federal Housing Finance Board won the power to change more than one-third of the 79 directors it appoints to the 12 Federal Home Loan banks.

The Gramm-Leach-Bliley Act reset the terms of all Home Loan bank directors to three years. Previously, directors appointed by the finance board had four-year terms, and directors elected by member banks and thrifts served two years.

The law did not spell out how the finance board should carry out the change. But the agency, interpreting the provision to be effective immediately, removed 29 appointed directors who had already served three years and gave an extra year to 14 elected directors who had already served two years - though successors to these latter 14 had already been voted in.

The finance board this month reappointed three of the 29 whose terms were curtailed, and it plans to name 26 others by early February. Appointees are in the minority on the 12 Home Loan bank boards, which have 114 elected directors.

Fifty-seven elected directors' terms would have ended Dec. 31 without the one-year extension. But 42 of them had won reelection in any event. A further 14 who had been elected to take seats on Jan. 1 are to remain on the sidelines. A 15th newly elected director did join a board Jan. 1 because a director who would have gotten an extra year died.

Some critics are claiming the finance board's decision is unfair to the newly elected directors. But if the agency had not enforced the law immediately, directors whose terms ended Dec. 31 but were not reelected could have complained that they should have been given a third year.

"However you interpret it, you're going to inconvenience someone," said Joseph S. Bracewell, vice chairman of the Federal Home Loan Bank of Atlanta and chairman and president of Century National Bank here.

Three-year terms are an improvement because it takes time to understand the complexities of the system, said Dale J. Torpey, president of Community State Bank in West Branch, Iowa, and chairman of the Federal Home Loan Bank of Des Moines. "The learning curve on this is pretty steep," he said.

In a separate move, the finance board said it plans to speed up adoption of another provision in the financial reform law that gives more small banks access to advances.

The law permits member banks with less than $500 million of assets to use small-business and agriculture loans as collateral for advances. Currently, acceptable types of collateral are residential mortgage loans, mortgage-backed securities, and U.S. Treasury and other agency bonds. About 65% of the system's 7,226 members would be eligible to use the new collateral.

Rather than wait until June to propose the rule, as first scheduled, the finance board intends to issue a plan in March or April, said Stephen P. Hudak, special assistant to the agency's chairman. The rule is to include guidelines for how to value the collateral and how much may be advanced against it. There will be a 90-day comment period.

"The quicker we get it started, the quicker we can get it done," Mr. Hudak said.

Some small banks are desperate for an expansion of collateral beyond mortgages, said Ann Grochala, director of bank operations at the Independent Community Bankers of America. "That's the one [proposal] our members wanted now. Some have run out of eligible collateral," she said.

Members are already calling the Des Moines bank to see when they may start pledging agricultural loans as collateral, according to its president, Patrick Conway.

He said the bank is starting to analyze how much it will advance against the new collateral but it will be much less than the typical 80 cents on the dollar for mortgages.

About 90% of the Des Moines Home Loan bank's members qualify to use the new forms of collateral. And 600 other small banks in the five-state district may be persuaded to join in light of the coming collateral rules.

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