The head of the Federal Housing Finance Board supports legislation to revamp the Federal Home Loan Bank System, which it oversees. But that's a dicey position in light of the fact Bruce Morrison's agency is part of an administration whose Treasury Department opposes the bill.
The Treasury Department has criticized the bill because it would allow Home Loan banks to push beyond residential lending to rural and inner-city development loans.
The bill, sponsored by Rep. Richard H. Baker, R-La., was approved unanimously last week by a House Banking subcommittee, but it's still a long way from enactment.
Mr. Morrison shared his views on the bill's prospects with a group of reporters Tuesday.
What happens if the legislation isn't passed this year?
MORRISON: It will be a lost opportunity, and we should not lose opportunities for bipartisan progress in a world in which financial services legislation has been bogged down by partisanship and competing financial interests.
If comprehensive legislation can't be passed, we can revisit a more scaled down approach, but I think that's definitely second best.
Can you address the prospects for this legislation in the Senate? And what about White House opposition?
MORRISON: I know that the economic advisers to the President are interested in a system that is focused on its mission and able to address credit availability needs, including rural needs.
My discussions with various members of Senate Banking suggest that there is general support for modernization legislation. In some quarters, there is support directly for the Baker bill as it is currently drafted.
What, if any, political stumbling blocks do see?
MORRISON: (House Banking Committee Chairman) Jim Leach has indicated concerns which I think can be addressed. He needs to be persuaded to mark the bill up and take it to the House floor. It will be his call at the end of the day whether that happens.
I wouldn't call it a stumbling block, but I would describe it as a gate to which he is the keeper.
In terms of defining the banks' mission, are you making any suggestions to change the Treasury Department's mind?
MORRISON: The administration, in an interagency task force, over the last year focused on rural credit needs, and identified this as something that the Home Loan Bank System and its members ought to address.
The words "economic development" are viewed by some as too broad. But in my view, that doesn't mean loaning money to General Motors. As the regulator, we would focus on community-based, job-creating activities where there are credit availability issues. From where I sit, this is a bit of a tempest in a teapot.
Do you share the Treasury Department's concern about the fact the legislation expands what is considered collateral?
MORRISON: Maybe the difference in my emphasis and Treasury's is that I'm sitting here day to day in the regulatory job, and I understand the capacity that (the Finance Board has) to keep things within bounds.
I'm not worried about a line in the bill that says you can have $250,000 of small-business collateral, because I know that we'll write a regulation and we'll govern it in a way that will deal both with the mission issues and the safety and soundness issues.
Our job here is to be a first-class regulator. We are looking for some legislative help so we can do this.