President Clinton's community development loan plan (version 2) is a much better deal for banks than the one he espoused during the campaign, and the industry should be grateful.

But if I were a resident of one of the dmxressed communities that this proposal is designed to help, I wouldn't be jumping for joy just yet, because of a glitch. And that glitch is in the form of the nonprofit, federally chartered corporation that will administer the $387 million in matching funds.

Unless Congress nips the staff size of this organization from day one, it's guaranteed to blossom into a lovely bureaucracy with lots of lawyers and clerks scurrying about processing applications and consuming too big a percentage of the modest outlay to make the well-intentioned effort worthwhile.

How Not to Do It

These bureaucrats will require office space, desks, phones, commodes, computers, a flack to handle press calls, a government affairs person, tons of paper for memos, reports, and congressional testimony, and a travel budget.

Mr. Clinton might use the Federal Housing Finance Board as a case study of the things that can go wrong with this new endeavor.

The agency, which regulates the 12 institutions that make up the Federal Home Loan Bank System, gets by fine with a part-time chairman but requires a full-time staff of close to 120 people, or about 10.08 people per regulated institution, according to a surreptitious survey prepared by someone in the bank system.

That compares with about 0.53 employees per regulated institution at the Office of the Comptroller of the Currency; 1.03 per regulated institution at the Federal Deposit Insurance Corp., and 1.20 per regulated institution at the Office of Thrift Supervision.

According to the survey, if the FHFB were in line with the other agencies, it would have a total of 16 employees.

The agency's annual budget is $15.8 million, $8.3 million of which goes to salaries.

Charles Chamness, the agency's spokesman, said the survey is unfair in that it neglects to mention that the agency also runs an office of finance for the system as well as overseeing its affordable-housing programs.

Daniel F. Evans Jr., the GOP appointee who currently runs the place, adds that government regulations promote big staffs and other inefficiencies.

The Indianapolis lawyer and FOQ (Friend of Quayle) says that the FOB (Friend of Bill) who succeeds him will discover quickly that the government game is rigged to protect federal jobs.

Mr. Evans said that when one of his executives fired an unsatisfactory employee, there were time-consuming investigations, depositions, and hearings. The next time there was deadwood to clear, everyone decided it wasn't worth the grief. The same rules require him to have staff he feels he doesn't need.

Mr. Evans, a partner in a law firm, also grouses that as chairman of this agency he can't run out to K mart to buy cheap stationery nor is he able to cut travel costs by taking advantage of deeply discounted air fares.

If he purchased a two-for-one ticket for him and a staff member to visit one of the banks, he would be violating federal regulations, even if it saved the government a bundle, he said.

Congress anticipated the kinds of problems Mr. Evans has had when it established the Thrift Depositor Protection Oversight Board, the policymaking arm of the Resolution Trust Corp. It capped the number of employees there at 40. Currently, 32 people are on the payroll.

Finding a Better Way

When the President and Congress get down to crafting the nuts and bolts of his plan, they might figure out how to move this new bureaucracy in with an existing one to share staff, facilities, and equipment.

Or maybe they can scrap the idea of a new federally chartered corporation and lend the money directly through an existing agency. After all, the whole object of this exercise is to get as much money as possible into the hands of community entrepreneurs, not into the pockets of government employees.

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