Magazine article American Banker

Bid to Raise Cap on FHLB Lending Has Foes in House

Magazine article American Banker

Bid to Raise Cap on FHLB Lending Has Foes in House

Article excerpt

Sen. Alfonse M. D'Amato is expected this week to propose increasing the cap on the amount of money Federal Home Loan System banks may lend to commercial banks.

However, House lawmakers are ready to oppose the Senate Banking Committee chairman's plan.

The New York Republican wants to raise the current limit on home loan advances to commercial banks by to 40% from 30% of outstanding system advances, according to congressional sources. Sen. D'Amato intends to fold the change into a massive budget reconciliation bill, on which House and Senate conferees are expected to resume work Tuesday.

The plan has irked Rep. Richard Baker, R-La., who is working on a measure to overhaul the Home Loan Bank System from top to bottom. If the 30% cap is raised now, the lawmaker would lose an important bargaining chip, needed to garner support for his bill from the 12 district bank presidents, according to one of Rep. Baker's aides.

"That would be a real problem, because at that point there'll be no impetus for modernization," the staffer said. "Too many of the banks will get what they need. We need to keep their feet to the fire."

An aide to Rep. Paul E. Kanjorski, D-Pa., one of the House Banking Committee budget conferees, said the lawmaker shared Rep. Baker's concerns.

However, Rep. Baker and Rep. Kanjorski may not have much choice but to accept Sen. D'Amato's plan.

According to congressional sources, the House must go along with Sen. D'Amato's new 40% limit in order to gain his support for a separate provision reallocating the $300 million the system owes each year on Resolution Funding Corp. …

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