WASHINGTON - Just two days after the Senate Banking Committee passed legislation to encourage the securization of small-business loans, Rep. Paul Kanjorski stepped up his efforts behind a rival bill in the House.

The Pennsylvania Democrat held the first of two hearings Thursday on his plan to encourage a secondary market for loans that are not now widely securilized. Much broader than other proposals, his plan would include business, commercial, and community development debt and equity investments.

"This is the only way we are going to be able to leverage the vast amount of capital necessary for new business development and the expansion of existing businesses, without significantly increasing the federal deficit," Mr. Kanjorski said.

D'Amato Proposal Passed

On Tuesday, the Senate Banking Committee passed an alternative measure as part of its community development lending bill. Proposed by Sen. Alfonse D'Amato, R-N.Y., it would remove several regulatory and legal impediments to small-business loan securitization.

Mr. Kanjorski said Thursday that he wants his measure attached to the House Banking Committee's version of the community development proposal. That could pit the two plans against each other, if they survive floor votes in the House and Senate.

"I, for one, certainly think that this would be a sensible approach, especially since we are going to have to address the issue in conference with the Senate's bill," Mr. Kanjorski said.

Certification Plan

His bill would exempt institutions wanting to participate in the secondary market from some rules and laws that discourage securitization. To do this, institutions would have to be certified by the government as "secondary market facilitating organizations." Certification would require that specific portfolio standards be met.

Bankers and lobbyists praised Mr. Kanjorski's proposal for its breadth and flexibility. But they warned that the bill's certification and reporting requirements could add to the regulatory burden.

"You're setting up another regulator, in effect," said Ed Yingling, the American Bankers Association's chief lobbyist. "The specifics of the proposal may prove in practice to be cumbersome and could have some unintentional negative side effects."

Clinton Objective

The Kanjorski option, HR 2600, is unique in its inclusion of community development loans, a market the Clinton administration wants to stimulate.

"By facilitating the creation of an active secondary market in this area, HR 2600 has the potential of providing a critically needed multiplier to the funds proposed under the President's bill," the legislator said. "By linking these two bills together, we will be able to leverage much more capital without increasing government spending."

A third alternative has been proposed by Rep. John LaFalce, D-N.Y., chairman of the House Small Business Committee and a banking committee member. It would create a government-sponsored enter rise similar to Fannie Mae to encourage small-business loan securitization.

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