WASHINGTON -- The House has once again approved an amendment that would permit commercial banks to borrow more money from the Federal Home Loan Bank System.
The amendment, sponsored by Rep. Richard Baker, R-La., passed' previously as part of the House version of the Community Development Financial Institutions bill. However, the Senate rejected the amendment during negotiations last week with the House.
The Baker amendment would increase the amount of advances that nonqualified thrift lender, or QTL, members can receive from the FHLB system from 30% of the total amount of advances to 40%, effective Oct. 1, 1995.
Savings associations are required to meet the QTL tests which mandates they hold 65% or more of their assets in housing-related assets.
With the amendment included in a housing reauthorization bill, Rep. Baker gets another chance at seeing his legislation become law. But he is likely to face the same Senate negotiators when the housing bill goes to conference.
The housing bill passed the House Friday on a 345-36 vote.
"The amendment itself is fairly noncontroversial," said Ron Ence, director of legislative affairs at the American Bankers Association. "But it became controversial because the administration chimed in against it. They thought it would be a disincentive for bigger reform next year."
Yet the Clinton administration "has been talking about broader reform for years," according to Mr. Ence.
Thrifts Oppose Amendment
The thrift industry is vehemently opposed to the measure. Because they are required to own stock in the home loan bank system, thrifts are reluctant to expand the borrowing rights of institutions that don't meet the qualified thrift lender test - mainly commercial banks - except in the context of broader reform.
"Our basic point of view is that all reform ought to be dealt with globally rather than fiddling around with one part or another," said Randall McFarlane, government relations director for the Savings and Community Bankers of America.
"Commercial banks now make up more than 50% of the membership in the system," said Mr. Ence. "But we're still stuck at 30% of advances. This equalizes things and is a step in the right direction."
Many presidents of the regional Federal Home Loan Banks favor the Baker amendment.
George M. Barclay, President of the Dallas Home Loan Bank, said the current version of the Baker amendment - which postpones its effects until next year - is, "a great compromise."
"It provides the commercial banks the assurances that we will be there to lend to them and it also provides time for the Congress and those who would like to see comprehensive legislation to get that accomptlished," Mr. Barclay said.
Currently, commercial banks are only demanding 10% of system-wide advances, but that percentage is "increasing exponentially," according to Mr. Ence, and "it won't be long before we bump into the ceiling."
A companion housing bill has emerged from the Senate, but it contains no language similar to the Baker amendment. The Senate is "strongly opposed" to "piecemeal" home loan bank reform, according to Mr. McFarlane.