WASHINGTON -- Two major banking bills ran into a roadblock Wednesday, as House-Senate negotiations were suspended to give lawmakers more time to deal with a nettlesome foreign bank issue.

Aides to the House and Senate banking committees said it was unclear when lawmakers would meet again to continue talks on interstate branching legislation and the community development financial institutions bill.

A House Banking subcommittee canceled a hearing in order to clear time today for a new conference committee meeting. But many observers said it is unlikely negotiations would resume this week.

Two other House committees -- Energy and Commerce and Ways and Means - are involved in negotiations on a provision authorizing retaliatory measures against countries that discriminate against U.S. institutions, and they are taking a tough line on jurisdictional issues.

Riegle's Baby

But the measure - the Fair Trade in Financial Services Act is important to its sponsor, Senate Banking Committee Chairman Donald W. Riegle, D-Mich. And Sen. Riegle is unlikely to give up easily on Fair Trade.

In a seven-hour session that ran past 10 p.m. Tuesday, the conferees worked their way through a number of controversial issues in the community development bill, and appeared to be within striking distance of wrapping up the talks.

On one key issue, the conferees agreed to a provision that provides financial incentives for banks that lend in low-income communities, but modified it so that the payments are not funneled through the insurance fund.

Banks had supported the general principle of incentives, but were concerned that the Bank Enterprise Act, as the provision is known, would set a precedent that could result in the insurance funds being used for political purposes.

That precedent could become particularly important next year, when the Bank Insurance Fund's reserves are expected to exceed statuatory requirements.

"One of our top issues next year is to ensure that banks get a premium reduction," said Edward L. Yingling, chief lobbyist for the American Bankers Association. "So we don't want any politicalization of the funds."

The conferees agreed to divert a third of the $382 million in funding provided by the bill for community development banks to the Bank Enterprise Act program. The Bank Enterprise Act, the brainchild of Rep. Floyd Flake, D-N.Y., was enacted in 1991, but never funded.

Baker Amendment Rejected

In other action, the conferees rejected an amendment sponsored by Rep. Richard Baker, RLa., that would generally have the effect of permitting commercial banks to take up to 40% of the Federal Home Loan Bank system's advances. Currently, the ceiling is 30%.

The Baker amendment failed when the Senate refused to accept it. The Vote was a victory for the Savings and Community Bankers of America, which opposed the Baker amendment.

Lawmakers also voted down legislation that would have required lenders who make "high-interest" mortgage loans to grant grace periods of up to four months to borrowers who become unemployed.

The bill defines "high-interest" loans as those carrying rates of 10 percentage points over prime. The amendment was sponsored by Rep. Maxine Waters, D-Calif.

By far the most controversial issue of the evening Tuesday, however, was an amendment sponsored by Sen. Howard Metzenbaum, D-Ohio, that would give regulators more time to sue officers and directors of failed banks and thrifts.

The conferees, approving a scaled-back version of the amendment, made it clear they didn't want the agencies to have the power to reopen eases that could stretch back 10 years in order to sue directors who made errors of judgment or committed minor infractions.

"What do we want to catch?" asked Rep. Richard Hughes, D-N.J., chairman of a House Judiciary subcommittee that reviewed the measure. "Do we want to catch imprudent lending between 1984 and 19867 Do we want to catch directors who failed to examine credit reports?

"We don't think it's fair to go back 12 years to review and second guess the actions of business people who served on boards and relied on the professional advice of officers of thrifts," he added.

Better than Nothing

But agency officials said the watered-down amendment approved by the panel was worse than no provision at all.

"If you read the transcript [of Tuesday's session], these guys are saying, 'don't go after negligence,'" said Peter Knight, legislative director for the Resolution Trust Corp. "We are concerned that the courts will see this and say we shouldn't bc going after any of these people.'"

The RTC and the Federal Deposit Insurance Corp. had argued that the measure is necessary because state statutes of limitations - some as short as two years - often expire before institutions fail.

As a result, any instances of wrongdoing uncovered by regulators are likely to go undiscovered until it is too late to bring suit.

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