Home Loan Bank Measure Gains in House

WASHINGTON - The House Banking Committee passed a measure late Wednesday that would let commercial banks borrow more from the Federal Home Loan banks.

In addition, the measure would set capital requirements at 2.5% of assets for the secondary mortgage agencies known as Fannie Mae and Freddie Mac.

The Federal Home Loan Mortgage Corp. and the Federal National Mortgage Association each have capital equal to roughly 1% of assets. They had argued against higher requirements, saying they could withstand a severe economic downturn. James A. Johnson, Fannie Mae's chairman and chief executive, called the proposed requirements "tough, dynamic, and fair."

Opening for More Aggressive Recruiting

Each of the nation's 12 Federal Home Loan banks can now allocate only 30% of its low-interest, long-term advances to commercial banks. The bill would change the 30% cap to a systemwide aggregate. This would permit Home Loan banks that have aggressively recruited commercial banks to make much larger advances to those customers.

Commercial banks, which have increased their share of the mortgage business, have been pressing to eliminate the 30% funding cap entirely.

"To the extent that [the bill] lessens some of the burdens that are currently there, we're happy with it," said Ken Clayton, counsel for the American Bankers Association.

The Federal Housing Finance Board, which regulates the Home Loan bank system, also supports an end to the restrictions.

The U.S. League of Savings Institutions and the National Council of Savings Institutions have favored wider bank membership in the Home Loan Bank System on condition that thrift membership become voluntary, instead of mandatory.

They were therefore disappointed that the measure did not tackle the thrift membership issue.

Daniel F. Evans, chairman of the Federal Housing Finance Board, has testified that thrifts may be able to move toward voluntary membership by 1994.

Many of the Federal Home Loan banks have aggressively courted banks for membership as a new source of revenue. The system needs to bolster revenues to finance an annual $300 million payment to the thrift bailout mandated by the Financial Institutions Reform, Recovery, and Enforcement Act of 1989.

In the Senate, a separate bill addressing the safety and soundness of government-sponsored enterprises has been approved at the committee level. The bills are due to hit the Senate and House floors in mid-September.

Ms. Healy writes for the Medill News Service.

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