WASHINGTON -- Republicans in Congress urged the Clinton administration Wednesday to assure commercial banks a role in the proposed community lending program. But they were rebuffed by a Treasury official.

Frank Newman, under secretary of the Treasury for domestic finance, told members of the House Banking Committee that only a limited amount of money will be available for the community development bank program.

Therefore, "it's difficult to propose giving money to Citibank, NationsBank, or Bank of America, which already have very substantial resources," Mr. Newman said.

$382 Million Earmarked

The administration has called for spending $382 million over four years on community development lenders of all kinds. A commercial bank would be eligible for grants only if its primary business was community lending.

"The problem is, in my area there are no" community development financial institutions, said Rep. Alfred A. McCandless, R-Calif.

Rep. Jim Leach, R-lowa, who plans to offer an alternative to the administration's proposal, said he was disappointed that the administration had not incorporated any of the ideas advanced by Republicans,

Meeting CRA Obligations

Mr. Leach would encourage banks to invest in community development banks by offering a "safe harbor" on their Community Reinvestment Act responsibilities.

Mr. Newman said he expects that regulators will decide to give banks and thrifts credit toward meeting CRA responsibilities, but did not say how much.

Banks would be able to enhance their CRA ratings but could not satisfy their obligations by investing in a development institution, he said. Under the current system, investment in development banks is already a factor considered by examiners in evaluating a bank's CRA compliance.

His boss, Treasury Secretary Lloyd Bentsen, told the panel that the administration's program "is not a substitute for active community lending from institutions currently subject to the Community Reinvestment Act."

While most of the House committee's Democrats seemed inclined to support the administration proposal without modification, Rep. Floyd Flake, D-N.Y., is working with Rep. Leach on an alternative.

Alternative Law

Rep. Flake co-sponsored a 1991 law that gives banks credit toward their deposit insurance premiums for certain types of lending in poor communities. He said yesterday that he hopes to expand that program, the Bank Enterprise Act, with money from the administration's community development plan.

His program, he said, is up and running but in need of funds. By contrast, the administration has proposed spending $10 million a year - more than 10% of its total - on administrative and start-up costs,

"There's quite a lot of concern about that $10 million," he said.

Rep. Flake said he supports the administration plan, but believes that making use of existing institutions "lets us get the wheels turning a lot faster."

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