WASHINGTON - Banking industry lobbyists are trying to prevent a powerful senator from proposing legislation that would stop the Federal Home Loan Bank System's controversial mortgage finance program dead in its tracks.

Sen. Christopher S. Bond, chairman of a key Appropriations subcommittee, is reportedly considering whether to temporarily freeze a recent Federal Housing Finance Board rule that outlines permissible investments by the Home Loan banks. The moratorium would also reinstate a $9 billion cap on the assets of Mortgage Partnership Finance, a program that lets participating Home Loan banks acquire loans and handle their market risk while originators keep the credit risk.

Reimposing that cap - which was officially lifted Monday when the Finance Board published its rule in the Federal Register - would pose a problem because the program has already grown to $10.5 billion.

A Finance Board spokesman said the agency probably would not force Home Loan banks to dispose of loans they have already bought, even if the cap were restored, but industry officials argue that the cap would unfairly curb competition with Fannie Mae and Freddie Mac.

"The Mortgage Partnership programs are designed to increase capital available for mortgage lending and provide commercial banks and thrifts competitive alternatives in the secondary mortgage market," according to a letter sent Monday to Sen. Bond, Banking Committee Chairman Phil Gramm, and other key senators.

The letter was signed by nine industry trade groups, including America's Community Bankers, the American Bankers Association, the Independent Community Bankers of America, and the Council of Federal Home Loan Banks.

"It would be wrong to impose legislative limits," the letter said. "The program should be allowed to grow based on the risk-reward benefits it provides the 7,500 bank- and thrift-member owners" of the system.

Spokesmen for Sen. Bond did not return calls seeking comment. Industry lobbyists and Capitol Hill sources said that the Missouri Republican's staff members said he may attach the amendment to a veterans-housing spending bill. His subcommittee could vote on the bill as early as next week, but some observers predict it will be delayed until after the August congressional recess.

Why Sen. Bond has the program in his sights is unclear, but the question has provided fertile ground for speculation.

Some sources say Fannie Mae and Freddie Mac are behind the amendment. Others point to World Savings Bank, which along with thrifts in Texas, California, and Ohio lost its court appeal in January to stop the mortgage finance program.

A Fannie Mae spokesman denied that the company had pushed the amendment and said the company has no position on it. World Savings officials declined to comment. A Freddie Mac spokesman refused to say whether the company was involved and denied that it is out to stop competition. He said, however, that the program must be "examined very carefully" to ensure its participants are held to the same capital standards and can manage it safely.

Other sources pointed to Sen. Gramm as the instigator. The Texas Republican's spokeswoman declined to comment Tuesday, but Sen. Gramm criticized the Finance Board in a letter last month for issuing the investment rule before establishing new capital standards.

Echoing that complaint, America's Community Bankers and more than 20 state associations urged Sen. Gramm, House Banking Committee Chairman Jim Leach, and other lawmakers in a separate letter Monday to delay the deadline for the Finance Board's capital rule by as much as a year, to Nov. 12, 2001.

The letter argued that the agency - which lacks a quorum on its five-seat board - published its proposal July 13 and will not have time to properly complete the rule in the next four months.

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