WASHINGTON - The Federal Home Loan Bank of New York on Friday bought back and retired underwater derivatives floating in Orange County's troubled investment pool.

The bankrupt California county has asked the other 11 regional home loan banks to consider buying back at least $1.5 billion of derivatives. Discussions are being held between each regional bank and the county.

Alfred A. DelliBovi, president of the New York Home Loan Bank, said his institution bought back and retired a $50 million structured note held by Orange County. The county now holds no other New York Home Loan Bank debt.

"It made sense for us, it made sense for them, and it did a little more - it helped them out," Mr. DelliBovi said Friday. The thrifts and commercial banks who are stockholders in the New York bank "are no worse off and no richer" as a result of the deal, he said.

Orange County ate the losses on the note. The bank will quash any potential, further losses by retiring the debt.

Salomon Brothers Inc. - which the county hired to help it unwind its complicated, money-losing portfolio - has contacted all 12 regional home loan banks over the past two weeks to explore the possibility of their buying back debt from Orange County.

Most of that debt is in structured notes, which are customized debt securities usually issued by government-sponsored enterprises. They carry triple-A ratings for credit risk but have high liquidity and market risk. The New York bank's note was an inverse floater due to mature in late 1997.

In interviews, officials at most of the 12 regional home loan banks said they would not buy back the securities unless they were sold at market value.

Michael A. Jessee, president of the Boston Home Loan Bank, said the only thing decided so far is: "We're not going to take a loss."

Another regional president, George M. Barclay of the Dallas Home Loan Bank, said his institution would not buy back any of the $100 million of its structured notes that Orange County holds.

"It is very, very difficult" to decide what holdings are worth, Mr. Barclay said. "I am concerned that, in retrospect, if we paid too much, my stockholders would have a legitimate complaint, and if we paid too little, . . . we are subject to criticism from benefiting from the adversity of Orange County."

Orange County's portfolio contained debt from most of the nation's government-sponsored enterprises. Last month, the Federal National Mortgage Association agreed to pay Orange County cash to buy back structured notes it had issued. Fannie paid a discount from face value.

Last month, Fannie Mae debt was the largest piece of Orange County's holdings of GSE debt. The Federal Home Loan Bank System was second-ranking.

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