WASHINGTON - The Senate Banking Committee's ranking Republican said he is close to agreement with, the White House on legislation to promote community development banks and create a secondary market for small-business loans.

Alfonse M. D'Amato of New York indicated he is willing to accept large parts of the administration's community development bank proposal in exchange for administration support on secondary markets - even though he is sponsoring a different approach to development banks.

"I have always said the concept of community development is one I support," the senator said following a hearing Wednesday. "So I am not going to take a contrary position just because there is a section of the bill I disagree with."

Major Step Forward

Although the community development bank legislation still faces-major hurdles, an agreement between the administration and Sen. D'Amato would be a major step forward.

The panel's chairman, Sen. Donald W. Riegle Jr., D-Mich., is a strong proponent of the administration bill, and earlier this year he told Sen. D'Amato the secondary-market proposal should be added to the package.

Sen. Riegle has scheduled a hearing today on the D'Amato bill and two other measures aimed at boosting small-business lending.

The trick for Sen. Riegle now is to keep the community development bill from becoming burdened with so many controversial measures that it collapses under its own weight.

Branching Issue Raised

It is likely that some elements of the banking industry's regulatory relief program could be added to the bill, and Sen. D'Amato indicated that consideration is being given to adding a measure he co-sponsored with Sen. Riegle aimed at ending abuses in home equity lending.

Many observers believe those items could be added to the bill without a problem. But Sen. Christopher J. Dodd, D-Conn., raised the issue of interstate branching at Wednesday's hearing and asked Treasury Under Secretary Frank Newman to consider whether it could be added to the package as well.

Sen. Dodd also wants the panel to consider limits on bank insurance powers, and action on interstate would likely open the door to consideration of the insurance issue.

|It Is Controversial'

Mr. Newman said the administration would prefer to address interstate branching later in the year as a separate matter, but Sen. Dodd urged the Treasury official to reconsider.

"It is controversial," said Sen. Dodd. "If we have it as a free-standing issue, it is a nonstarter. It has to be done in the context of other things."

Sen. D'Amato echoed Mr. Newman's caution on the issue, arguing that interstate branching could drag the community development bill down.

"The more you add to the bill, the more controversial it becomes," he said.

However, the senator said his secondary-market proposal is directly relevant to the package, since a functioning secondary market would help all small-business lenders - including development banks - leverage their capital.

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