Long-simmering disputes at the Federal Housing Finance Board boiled over this month with the firing of board member Lawrence U. Costiglio.

Though Mr. Costiglio was rebuffed in an attempt to take a seat on the panel at last week's board meeting, the disagreements that led up to his dismissal continue to roil the Federal Home Loan Bank System, which the agency regulates.

In addition, Mr. Costiglio is expected to file today a challenge to his dismissal in federal court here. The 82-year-old New York lawyer, whose term on the board expired in 1995, was fired by President Clinton on March 9. Mr. Costiglio charged that his removal was illegal because no successor has been named.

At the heart of the controversy, said sources familiar with the Finance Board's operations, is a fight between Chairman Bruce A. Morrison on one side and Mr. Costiglio and several Home Loan Bank presidents on the other over efforts to rein in the banks' securities investments.

Mr. Morrison argued that the 12 banks, which have invested more than a quarter of their assets in nonhousing investments to boost income, should be forced to put the funds they raise with low-cost government debt in more "mission-related" assets.

"There are people in the system who do not want to see their investment arbitrage curtailed," Mr. Morrison said. "With them I disagree."

Mr. Costiglio asserts that Mr. Morrison finally sought his dismissal after he informed the Finance Board chairman that he would oppose the appointment of Nicolas Retsinas, former assistant secretary for housing at the Department of Housing and Urban Development, to a panel that oversees the issuance of the Home Loan Bank debt. Mr. Retsinas was also a member of the Finance Board until he left HUD in February. Last week the board delayed making any changes to the debt oversight panel.

"I resisted Mr. Retsinas' appointment because this would be the third person placed into the system with ties to Mr. Morrison," Mr. Costiglio said in a recent interview. "Mr. Morrison is looking to expand his control over the Home Loan Bank System."

Rita Fair, the agency's former managing director, became chairwoman of the Atlanta Home Loan Bank in July, and Mindy Turbov, a former special assistant to Mr. Morrison, became chairwoman of the Chicago bank in January.

Mr. Costiglio and Finance Board Member J. Timothy O'Neill have effectively blocked Mr. Morrison's regulatory initiatives to reduce the Home Loan banks' securities investments. The two men have argued that changes to the banks' lending practices should be left to Congress.

With Mr. Costiglio off the board, Mr. O'Neill is likely to find himself on the losing end of confrontations with Mr. Morrison. The other member, acting Federal Housing Commissioner Art Agnos, is expected to back Mr. Morrison on reducing the bank's nonhousing investments.

Mr. Morrison said he is not trying to stack the system with his allies, and noted that Federal Home Loan Bank of New York President Alfred A. DelliBovi-a supporter of greater investment authority-is a former Finance Board member who was appointed to the New York bank post at Mr. Costiglio's recommendation.

"The fact that these people worked at the finance board means they brought useful experience to their new jobs in the system," Mr. Morrison said.

To the contention that he engineered Mr. Costiglio's firing, Mr. Morrison said he made no secret of his differences with Mr. Costiglio, but insisted the move was entirely President Clinton's. "When asked for my opinion, I give it," he said. "But the White House controls who it appoints."

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