HOUSTON - President Bush's reelection prospects could be hurt by the tightness of bank credit in many parts of the country, Republican officials warned during their national convention last week.

Many GOP legislators and other party leaders were holding the Bush administration responsible for a credit crunch that they say continues to hurt small businesses back home. Most said the administration had not done enough to spur bank lending.

"George Bush has a steep climb ahead in Pennsylvania," said Rep. Thomas J. Ridge, R-Pa. "And the economic and political landscape would be significantly different and a lot more positive if someone had addressed the credit contraction sooner."

|Uphill Fight' Foreseen

Thomas H. Kean, the former New Jersey governor, said: "We have got to get credit to expand and create jobs, and right now the banks are saying no."

President Bush faces "an uphill fight" in New Jersey because of the rocky economy, Mr. Kean said, though he still expects the Republican ticket to win, particularly if the economy picks up.

But the former governor, who is being talked about as a possible challenger to Democratic Sen. Frank Lautenberg in 1994, said bank examiners "are still being unnecessarily tough."

The administration "absolutely" has to do more to modify the behavior of the supervisory agencies, he said.

Republican conservatives also say the Bush administration has been far too cautious in addressing credit and banking-related issues.

"Treasury has been far too lenient in dealing with regulators," said Rep. Robert S. Walker, R-Pa. He called the credit crunch "the single biggest item with people who are looking to create jobs.

Business owners "say it doesn't matter how low interest rates go," Rep. Walker said. "If credit isn't there, it is impossible for them to create jobs and do what is necessary to get the economy moving."

Administration officials say they have devoted considerable time and effort to ending the credit squeeze.

Deputy Treasury Secretary John Robson said his office has been working on the credit crunch since July 1990, "before it was on people's lips. We have been pounding on the Fed to keep rates down from the time we entered office."

Moreover, he said, the Treasury Department has mounted a strong effort to persuade examiners to be more lenient in evaluating bank loans.

"We've had three national meetings with examiners and over 250 smaller meetings," Mr. Robson said. "I personally have met with examiners in six or eight cities, 50 at a time, just to sit down and talk."

Banks Termed Timid

Mr. Robson said the Treasury Department has been able to make about 40 changes in bank and thrift regulatory policies that are helping to make money available. But he said banks are continuing to behave too timidly and warned that they risk losing market share permanently.

Some GOP lawmakers shared that assessment.

"What we need are some courageous bankers," said Rep. Robert K. Dornan, who represents California's conservative Orange County.

And Rep. Doug Bereuter of Nebraska said Congress could make significantly more credit available by passing legislation he has co-sponsored that would ease regulations bankers say are most burdensome.

Bankers and administration officials alike say Congress helped create the credit crunch, not only by passing legislation that added to the regulatory burden, but by holding the regulators' feet to the fire for the industry's problem loans.

Sen. Phil Gramm, R-Tex., said bankers should not expect action by the Democratic-controlled Congress on legislation designed to ease regulations. "Congress is as pro-regulation as it has ever been," he said.

Not everyone said the credit crunch was a problem back home. Rep. Bereuter, for example, said the Nebraska economy is strong and he isn't hearing many complaints about loan availability.

Good Word for Administration

Gov. Carroll Campbell of South Carolina said the administration's efforts have had a noticeable impact.

"Loans are being scrutinized more than they were and I'm sure there are some small businesses not getting loans," he said.

"But [Treasury Secretary Nicholas] Brady has met with the regulators twice and told them not to be so tough."

Still, most people in Houston said the credit crunch continues to be worrisome.

"We've been working hard on it," said Sen. Gramm, a Senate Banking Committee member and the keynote speaker at the Republican convention.

"But there's a big difference between changing the regulations and getting the word down to Main Street America."

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