Two of the Clinton administration's top banking priorities - regulatory relief and fair lending - could be on a collision course.

In the past few months, Mr. Clinton's banking aides have delighted bankers by recognizing the negative impact that overregulation has had on lending. Simultaneously, the administration has impressed public interest advocates with strong words and initiatives to end loan bias.

"Their approach is to throw a little bone here to one group, then throw a little bone there to the other, and hope nobody sees each other's bones," said Chris Lewis of the Consumer Federation of America.

Regulatory Seesaw

Last week, bank regulators proposed broad exemptions from appraisal rules, a boon to banks. Just a few weeks earlier, some regulators also adopted fair-lending procedures that "pointed to the importance of professional appraisals in guaranteeing credit to minority homebuyers," said Mr. Lewis.

Now public interest advocates are pressing banks to collect racial and demographic data on commercial loans similar those gathered on mortgages. Bankers complain that the paperwork burden would restrict their ability to make loans.

White House Getting Involved

Last month, Comptroller of the Currency Eugene Ludwig said he was looking into ways to encourage lenders to track small-business and consumer lending. And White House aide Paul Diamond told a group of bankers last week that the administration was preparing to tackle the issue.

Administration officials are aware of the policy trap, but they have yet to finesse their way out of it.

"If the administration is not careful in that area, that could really send a mixed message to bankers in the field," said Edward Yingling, chief lobbyist for the American Bankers Association.

Added Mr. Lewis, "Frankly, the administration needs to clarify: Are they for fair-lending enforcement or for reduced documentation?"

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