Two days of hearings last week yielded a radical reform proposal for the Federal Home Loan Bank System: privatize the 12 banks and create a holding company to coordinate their activities.

Alex J. Pollock, president of the Federal Home Loan Bank of Chicago, told the capital markets subcommittee of the House Banking Committee that creating a national holding company to own and manage the system would "provide uniformity of control and management."

Currently, each district bank is managed independently, by its board of directors, and regulated by the Federal Housing Finance Board, an independent federal agency. Under Mr. Pollock's plan, the district banks would retain their local boards of directors but the system would become a private corporation, much like the Federal National Mortgage Association.

While lawmakers on the subcommittee had little reaction, Alfred A. DelliBovi, president of the Federal Home Loan Bank of New York, opposed Mr. Pollack's plan.

"It would create a rather monolithic system," Mr. DelliBovi said. "We have a lot of community bank members, and they need the kind of personal service a regional system can provide."

Thursday's hearing wrapped up two days of testimony on the future of the Home Loan Banks. Rep. Richard Baker, who chairs the subcommittee, said he will begin drafting a new bill to reform the system.

Rep. Baker suggested that the bill may turn out to be slightly less palatable to the district presidents than the one he introduced earlier this year. The district banks generally supported that measure, except for a provision reallocating the system's annual obligation for interest on thrift bailout bonds.

The lawmaker canceled a July vote on the bill when district presidents could not agree on a reallocation formula.

"Clearly the Federal Home Loan Bank System needs reform, and I intend to work on reform legislation with a critical eye," the Louisiana Republican said.

Rep. Baker said he is concerned about the rapid growth of the system's nonhousing-related investments. "These investment activities do not relate to the public mission of the system, nor can one identify a clear public benefit," Mr. Baker said.

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