WASHINGTON -- As its membership continues to climb, the Federal Home Loan Bank System is expanding the products and services it offers members.

The system had 4,127 members at the end of August, 45% of which were commercial banks, according to data released Tuesday at a meeting of the system's regulator, the Federal Housing Finance Board.

Total membership has been increasing because of changes mandated by the 1989 S&L bailout law, which allowed commercial banks to join the thrifts as members. As a result, the Finance Board has been considering revamping the system's mission and its products.

Chartered in 1932

The Home Loan bank system was chartered by Congress in 1932 to encourage home ownership by lending to savings and loans. It consists of 12 regional Home Loan banks that are owned by local financial institutions.

The 12 regional banks use their implicit government guarantee to raise money inexpensively on Wall Street then lend it to member institutions that need cash.

The system's plans for the future were unveiled on Monday in the form of a paper called System 2000.

More Power at District Level

Generally, the system will give the 12 district banks and their boards more power to tailor services to local members, as long as financial safety and soundness are preserved, according to System 2000.

While no new products specifically have been named, a system task force will consider adding fee-based services, interest rate risk hedging instruments, and new advance products.

The task force will discuss its recommendations in January.

Some observers believe System 2000 is an effort by bureaucrats to justify their existence. and say that other government-sponsored enterprise efficiently provide liquidity to lenders-the system's traditional function -by buying mortgages then securitizing them.

Is the System Needed?

"The question we need to ask ourselves is why do we need the Federal Home Loan Bank System," said Alexandria, Va.-based consultant Bert Ely.

But according to System 2000, the bank system is still needed because it supports lenders that hold mortgages they originate in portfolio instead of selling them in the secondary markets.

Chairman Daniel F. Evans Jr. apparently will not be overseeing the result of the Federal Housing Finance Board's work.

He said he has no intention of staying on as a full-time member of the board, and doesn't know why anyone else would want to either.

"I can't imagine what a full-time board will do," he said during the Monday press conference.

The four-year-old agency's part-time board is scheduled to convert to a full-time body in January.

Mr. Evans, whose term expires in 1999, said he devotes 100 days or more each year to board responsibilities. He is a partner in the Indianapolis law firm of Baker & Daniels.

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