The College Construction Loan Insurance Association's initial attempts to move into the A-rated bond insurance market appear to have foundered, thanks to an intense lobbying effort by industry participants.

Sources on Capitol Hill and in the bond insurance industry Friday said the Senate's version of the proposed amendment would require any A-rated bonds insured by Connie Lee, as the federal corporation is known, to first be declined by each and every monoline bond insurance company now backing municipal bonds.

Connie Lee also would be given an annual $100 million volume cap for such deals.

"Basically, the amendment is going to say, 'Get back to your mission and serve the triple-B colleges that need help,'" said a bond insurance executive familiar with the proceedings. "It's a fair resolution for all of us."

Senate staffers last Friday were expected to settle on final wording over the weekend, but the restrictions had been generally agreed upon.

The developments mark a tipping of the scales in favor of General Electric Capital Corp., which lobbied for a more restrictive amendment on behalf of its bond insurance subsidiary, Financial Guaranty Insurance Co. on the other hand, Student Loan Marketing Association, part owner and founder of Connie Lee, appears to be losing momentum in its drive to liberalize Connie Lee's mission.

Oliver Sockwell, president and chief executive officer of Connie Lee, was unavailable for comment.

At this point, the Senate's recommended version of the Connie Lee amendment is close to becoming the final word. The only lawmaker opposed to this compromise is Rep. E. Thomas Coleman, R-Mo., a source on Capitol Hill said.

Craig Orfield, press secretary for Rep. Coleman, said he was unaware of the Congressman's position on the proposal and declined comment.

Another major recommendation being forwarded by Senate staffers is that the General Accounting Office conduct an in-depth study on whether Connie Lee "serves its current mandate," according to staff documents. So far, Connie Lee has insured only 13 deals totaling $306 million in tax-exempt new issues.

The GAO study also would determine to what extent the private bond insurance market is serving higher education, and the impact both Connie Lee and the private market is having upon the nation's colleges and universities.

Connie Lee last month successfully pushed an amendment through the House of Representatives' subcommittee on post-secondary education that would allow the insurer to enhance any A-rated municipal bond that three insurers had declined.

The bond insurance market, led by Financial Guaranty Insurance Co., lashed out against the proposal as vague, riddled with loopholes, and a contravention of Connie Lee's social purpose.

In its enabling legislation, Connie Lee was required to insure only triple-B or lower-rated bonds, which would then insure the corporation would serve the public purpose of assisting weaker educational institutions.

The Connie Lee aspect of the higher education reauthorization is only one of many thorny issues in the legislation, and several sources said staffers had been pressing for a resolution to the issue with unusual haste.

The federal corporation concept, especially as it has been embodied by bond insurer Connie Lee, is coming into fashion on Capitol Hill. The Department of Transportation is weighing whether to launch a similar insurer for transportation-related municipal bonds, and several other federal agencies are said to be mulling the idea.

Higher education bonds made up almost 5% of the new-issue municipal bond market in 1991, or $7.63 billion of the $172.57 billion sold last year.

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