WASHINGTON - A plan to promote themselves has boomeranged on the presidents of the federal Home Loan banks.

In a letter last week, House Banking Committee Chairman Jim Leach slammed a $500,000 public relations proposal that he said 10 of the 12 Home Loan banks supported.

"The plan to spend approximately $500,000 of system assets for collusive lobbying efforts is disgraceful," the Iowa Republican wrote on Dec. 7. "We are disappointed that we cannot honestly discuss policy differences with you directly, and that you prefer to use an invisible screen of paid lobbyists."

The letter was co-signed by Rep. Richard Baker, R-La., who is chairman of the House Banking subcommittee with jurisdiction over the Home Loan banks.

Rep. Leach has been an outspoken critic of the system. During oversight hearings in September, the Iowa Republican called the federal Home Loan banks "a system in search of a rationalization for existence."

Rep. Leach accused the presidents of losing sight of the system's mission to provide low-cost funds to mortgage lenders. He also criticized the Home Loan banks for depositing money in Japanese banks.

James D. Roy, president and chief executive of the Federal Home Loan Bank of Pittsburgh, defended the banks in a Dec. 8 response.

Mr. Roy told Rep. Leach and Rep. Baker that the Home Loan bank presidents had rejected the proposal, which was written by Ketchum/Bailey & Robinson, a Washington public relations firm.

"We regret that you were misled by whoever gave you incomplete information," Mr. Roy wrote.

The public relations campaign proposed by Ketchum encompassed "far more than any of the presidents intended, including a grass-roots lobbying campaign," he noted.

However, Mr. Roy defended the need to promote the role of the system.

"The consensus is ... that a modest, privately funded communications plan is fully consistent with fulfillment of our public policy mission," Mr. Roy said. In an interview on Monday, Mr. Roy admitted that "privately funded" still means system money would be used.

The 15-page proposal by Ketchum went beyond strategies for enhancing the system's image to tips on how to lobby Rep. Leach.

"The challenge will be in trying to influence his decision-making process," the memo said. "Leach is known for being savvy and an independent thinker who is not reliant on the counsel of his staff."

The memo recommended that the presidents "mobilize" Iowa banks, thrifts, and academics to personally lobby Rep. Leach.

Lorraine Thelian, Ketchum's executive director, said the company often offers clients "a full-blown campaign with the understanding that they'll go through it and select the parts that are most appropriate."

Lawmakers said the lobbying plan "most certainly breaches the moral underpinnings of the relationship between the federal Home Loan banks and the Congress which has granted the ... system agency-like status."

Rep. Leach and Rep. Baker referred to the system's strategy as "an egregious attempt to prevail on an important public policy issue by using dollars rather than logic to advance a vested interest."

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