WASHINGTON -- The Federal Reserve Board on Wednesday became the first federal banking agency to approve new limits on real estate lending.

But two of the seven governors - Wayne Angell and Lawrence Lindsey -- voted against the guidelines, warning that bureaucratic rules would replace bankers' judgments.

"What we have before us today is a decision about going down the road to making banking a public utility," Mr. Angell said. "I cannot go down that road."

Cost but No Gain

Added Mr. Lindsey, "I see us gaining nothing by enacting this regulation. Worse, I see it costing something."

The members stressed that, if the other regulatory agencies make major changes in the rule, it must be sent back to the Fed for another vote.

"And I gather there will be major changes," Fed Chairman Alan Greenspan said.

The rule to tighten real estate lending was mandated by the Federal Deposit Insurance Corporation Improvement Act of 1991. The FDIC and other agencies have indicated support for the guidelines, which set loan-to-value limits for various types of property credits.

No Fed member seemed entirely comfortable with the policy.

Mr. Greenspan said that, rather than set loan-to-value limits, regulators should continue to focus on increasing bank capital levels.

Several governors worried that the rule, which was generally more lenient than a previous proposal, may have gone too far. Edward Kelley said, "I am concerned that the loan-to-value ratios are on the high side of reasonable."

Bank Policies Required

The regulation requires each bank and thrift to have a comprehensive written real estate lending policy that generally conforms to the agencies' guidelines.

The guidelines allow banks and thrifts to lend 65% to 100% of a property's value, depending on the type of real estate.

No financial penalty will be imposed on institutions that violate the limits, which are to take effect March 19. Bank holding companies and their nonbank subsidiaries are not covered by the rule.

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