Capital Briefs: Home Loan Banks' Collateral List to Grow

The Federal Housing Finance Board is expected Wednesday to approve a rule expanding the types of collateral the 12 Home Loan banks may use for standby letters of credit.

Acceptable collateral would include secured small-business loans and investment-grade bonds issued by state and local governments. Approval is expected despite objections raised last week in a letter to the agency from Richard S. Carnell, the Treasury Department's assistant secretary for financial institutions.

The rule "would involve a needless expansion of government-subsidized competition with private providers of credit enhancement," Mr. Carnell wrote. It "would enable the FHL banks to make more aggressive use of their federal subsidy and to take on risks with which they have little or no experience."

A Finance Board spokesman downplayed Mr. Carnell's comments on the proposal, which was published in May. "It is many days late and many dollars short," the spokesman said.

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