WASHINGTON - Stephen M. Cross has found himself in the unwilling position of taking on the Federal Reserve.

Mr. Cross, deputy comptroller of the currency for compliance, is one of the authors of the Clinton administration's plan to reform the Community Reinvestment Act.

Some Federal Reserve governors have pounced on the proposal, even suggesting scrapping the plan and starting over,

"I don't subscribe to any of those comments that this will be torn up and thrown into the fireplace," Mr. Cross said in a recent interview. If that were the case, he said, "then sending this out for public comment would be a charade."

Calm Amid Storm

Clearly, Mr. Cross is infuriated by the Led's response. A man with a calm demeanor, he is better known for making academic arguments than confronting the central bank.

He said that although he expected some changes to be made to the rules, he thought they would be technical rather than substantive ones. The new proposal promises to reduce the regulatory burden for banks while encouraging lending to low-income communities.

Mr. Cross, who is a nine-year veteran of the OCC, looks back on his work on CRA reform as his most significant policymaking experience. It started with a directive by President Clinton in July, and the formation soon thereafter of a team of principals, led by Eugene A. Ludwig, comptroller of the currency.

Pitching In

One of the things Mr. Cross said he liked most about his work was the active role of those principals.

"Gene was in the trenches. He had his tie loosened and sleeves rolled up at every meeting," he said. Other members included Fed Governor Lawrence Lindsey, and two OCC lawyers, Matthew Roberts and Jeff Gillespie.

The group embarked on a seven-city road trip to hold public meetings with diverse groups of people. One of the most unusual aspects of the journey, said Mr. Cross, was that the public hearings were held before the comment period. That was also the case with the original CRA.

The group met with representatives of banks of all sizes, "some of whom have probably never spoken to the banking agencies before," he said.

New Territory

The proposed rule, said Mr. Cross, will help move banks into new geographic areas where they haven't been doing much lending. "I believe that bankers who have cursed CRA could one day be thankful for it for pushing them into profitable lending," he said.

Banks now find it more difficult to compete with large corporate borrowers, he said, and could find new lending opportunities in small businesses.

Mr. Cross said CRA is an effort to address market failure. "If you believe the market works all the time, you don't need CRA," he said. "But markets don't always Work."

Mr. Cross said there are certainly bankers who say they don't need CRA al all. The new rules, he said, would eliminate what gets in the way of banks making loans, He said institutions will no longer be evaluated on ad copy and number of board meetings. "We are trying to get rid of the silliness." he said

Business-Plan Approach

One option under the new rule would be for banks to adopt a strategic plan to be approved by the regulatory agencies. The plan would encourage banks to treat CRA like any other part to their business plan - developing goals and analyzing progress at different stages of the year.

Mr. Cross said a lot of bankers liked the idea because they could customize their own programs. Others, he said, were concerned that such a plan would release too much confidential information.

Mr. Cross said he is confident that the OCC will not have to go back to the drawing board on CRA. "If we got something wrong, we're going to fix it," said Mr. Cross. However, he said, "I don't believe the fundamental approach will change."

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