WASHINGTON -- A small but significant regulatory relief package for banks moved a step toward passage this week as the House approved President Clinton's community development lending bill.

The Senate is considering a similar measure as part of its community development effort, but is not expected to vote on it until January.

Rep. Doug Bereuter, R-Neb., a principal sponsor of the relief measure, said legislation was needed because steps taken by the administration to cut regulatory red tape were insufficient.

|Small Comfort'

The "small leeway" the administration has granted examiners "will be small comfort to the banker in California who has experienced examiners that all too often have replaced a banker's credit judgment with disclosure requirements, ratios, and formulas," he said.

The community development portion of the bill drew fire from some Republicans. Rep. Bill McCollum, R-Fla., said it was unnecessary to create a new agency to spur lending in low-income areas.

"What really needs to be provided," he said, "is an incentive for the existing traditional banking institutions to go out and invest in these low-income areas."

That could have been accomplished, he said, if Congress had been willing to give commercial banks a "safe harbor" under the Community Reinvestment Act in return for lending in low-income neighborhoods.

The bill provides $382 million over four years for financial institutions primarily engaged in community development. The money can be used to help start up a new lending institution or to beef up a program at an existing one, but it must be matched by private-sector funds.

A third of the money would be used to fund the Bank Enterprise Act, which gives banks and thrifts rebates against their deposit insurance premiums in return for making loans in low-income communities. The act was passed in 1991 without funding.

Rep. Henry B. Gonzalez, D-Tex., chairman of the House Banking Committee, said the community bank program shows promise but needs more funding to make a difference.

"What CDFIs could do with more resources!" he said on the House floor Sunday, using the acronym for Community Development Financial Institutions. "With more funding the program could help more CDFIs, he said.

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