WASHINGTON - A bill that would allow voluntary membership for all institutions in the Federal Home Loan Bank System is expected to be introduced by Rep. Richard Baker as early as today.

The legislation would level the playing field between commercial banks, for which membership is voluntary, and federal savings and loans, which are required by law to own stock in the system, according to Ron Ence, director of legislative affairs for the Independent Bankers Association of America.

"If we had written the bill ourselves it would look a lot like this," Mr. Ence said.

With commercial banks now making up over half of the system's membership, a major obstacle to granting federal savings and loans voluntary membership has been concern over how to retain a permanent capital base to protect the system from losses.

The Baker bill aims at establishing a permanent capital base by limiting the ability of member institutions to pull their equity out of the system when they leave. The bill permits departing member institutions to withdraw equity only if the district bank would still meet its minimum capital requirements.

If an institution's departure did threaten such a drop in capital, the district bank could refuse to retire the institution's capital.

The Baker bill would require each bank to hold capital equal to about 2.5% of total assets - plus .45% of its off-balance sheet obligations, or 10% of the bank's risk weighted assets, whichever is greater.

The Federal Housing Finance Board - the home loan bank system's regulator - also would be given the authority to establish additional capital requirements for safety and soundness purposes.

The administration is expected to offer its own system modernization plan within the next month. During hearings in December, the finance board had mulled using a more complicated two-tier structure of permanent and nonpermanent capital. However, the administration will likely follow the lead of the Baker bill, according to Rita Fair, managing director of the finance board.

"The Baker bill gives the individual banks a great deal of flexibility in terms of maintaining a standard and how to meet that standard," said Ms. Fair, who added that the bills will look "a lot alike."

The bill also would reconfigure the way the system pays its annual obligations to the Affordable Housing Program and on the Resolution Funding Corp., or Refcorp., bond interest.

The annual Refcorp. obligations would have to be paid first, and the current $100 million floor on the annual AHP obligation would be changed to 10% of system earnings after Refcorp. is paid.

Brian Smith, director of policy for America's Community Bankers, said this provision could be a bitter pill for housing groups.

"While this will probably make the Treasury happy, since they get first call on the money, some will feel that at a time when housing is not getting much from other sources, they need that extra $10 million," Mr. Smith said.

A provision bound to be even more controversial would allocate each district bank's Refcorp. obligation in proportion to its average minimum required level of capital.

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