The pending financial reform bill would raise expenses for the Federal Home Loan banks, probably reducing the dividends they pay to member banks and thrifts.

The bill would change the formula for deciding how much the 12 Home Loan banks must pay each year to the Resolution Funding Corp., or Refcorp, which was created in 1989 to finance the thrift bailout. Instead of a flat $300 million payment, the banks would pay 20% of annual earnings.

Directors of 10 of the 12 banks attending a meeting in Seattle this week reacted negatively to the 20% figure, said John L. von Seggern, executive vice president of the Council of Federal Home Loan Banks. The council, which does not include the Chicago and New York banks, had sought 18.4% as the payment ratio.

"We're talking a huge increase," Mr. von Seggern said. "We're just disappointed."

The Home Loan banks in the early 1990s had pushed to change the payment formula to a percentage of earnings, but at that time their earnings were lower and they were scrambling just to be able to pay the $300 million.

Now amid strong earnings at the banks, the Chicago Home Loan Bank estimates they would collectively pay an additional $908 million during the next five years. This money would otherwise be available to pay the system's 7,100 members an average of $127,000 apiece in dividends. The top 10 shareholders would get about $214 million.

The estimates are based on an assumption that the banks would achieve 5% annualized earnings growth.

Last year the $300 million payment worked out to 16.9% of the system's earnings. In 1997 the payment equaled 20.1% of earnings.

The good news is that the Refcorp obligation would be paid off sooner, laying the groundwork for increased dividends in the future, said Brian P. Smith, director of policy and economic research at America's Community Bankers. "All of this is a matter of choosing your poison," he said.

The last Refcorp bond payment is due in 2029. Under the new formula, the system could pay off its obligation in just 15 to 25 years, observers have estimated. The benefit would resemble that experienced by homeowners who pay off their mortgages early, said Alfred A. DelliBovi, president of the New York Home Loan Bank. "It's good news in the short term and better news overall," he said. "Get the burden off our backs quicker."

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