Legislation creating a secondary market in small business and commercial real estate loans appears closer to reality as congressional staffers negotiate final language of banking legislation in preparation for a public House/Senate conference on differing bills, a meeting likely to be held this week.

Staffers are working on the proposition Rep. John D. Dingell, D-Mich., powerful chairman of the House Energy and Commerce Committee, will support securitization of these instruments, including commercial real estate loans, according to congressional staffers and industry lobbyists.

The only issue still dangling is whether Dingell will require that the Treasury Department certify companies to serve as secondary market agents for commercial loans, as proposed in a House bill, or instead will merely require a report be prepared as to the need for the regulation of these secondary market facilitating organizations. The latter would signal support for legislation introduced in the Senate by Sens. Donald W. Riegle Jr., D-Mich., and Alfonse M. D'Amato, R-N.Y., chairman and ranking minority member, respectively, and appears to be the case, according to industry lobbyists.

The provision is contained in the Senate version of H.R. 3474. The legislation is titled the Community Development, Credit Enhancement and Regulatory Improvement Act of 1994, but the shorthand for it is the community development banking and financial institutions bill.The certification language is contained in legislation proposed by Paul E. Kanjorski, D-Pa. and passed by the House.

Negotiators are working under a severe deadline to complete work on that bill as an interstate banking and branching bill.

Congress adjourns July 1 for 10 days and the hope is to clear the decks of all banking legislation as soon as possible. The hope is for staffers to negotiate all possible issues by June 29, setting the stage for a meeting of the House/Senate conferees that day.

The Riegle-D'Amato bill would clear away the underbrush that serves as technical barriers to securitization of these instruments; the Kanjorski bill calls for the Treasury Department to certify companies to serve as secondary market agents.

The Riegle-D'Amato bill also contains a provision creating a loan-loss reserve fund to be financed by state and federal government contributions as lender/borrower premiums. The provision authorizes the federal government to provide $50 million to finance its part of the reserve fund, but doesnt appropriate the money. That will have to be done separately. It is based on small business capital access programs created in 11 states since 1986.

Dingell has opposed efforts in the past to facilitate creation of secondary markets for small business and commercial real estate, especially commercial real estate.

But Dingell the week of June 20 signaled he will support such legislation this year, giving a potentially breakthrough victory to D'Amato, whose securities industry supporters sees such markets as big meal tickets.

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