House Banking Committee Chairman Jim Leach warned Monday that expanding the Federal Home Loan banks beyond residential lending could be risky.
Though he supports reform of the 12-bank system, Rep. Leach said he is wary of plans by Rep. Richard Baker, R-La., to allow the banks to make loans for rural and economic development.
"I have some doubts about that approach," Rep. Leach said in an interview after a speech here. "Richard would like to treat the Federal Home Loan banks in a way that allows borrowing for any purpose."
Rep. Baker, who is chairman of the banking panel's capital markets, securities and government-sponsored enterprises subcommittee, is expected to introduce a bill this week to restructure the Home Loan Bank System.
Besides enlarging the system's focus, the proposal would allow membership in the system to become voluntary, even for thrifts.
The legislation also would eliminate the cap on advances to commercial banks of 30% of a Home Loan Bank's total loans, and it would broaden the types of assets that could be used as collateral for borrowing from the system.