Panel Votes to Require S&L; Mortgage Subsidies

The House Banking Committee, bitterly divided along party lines, voted Wednesday to require the savings and loan industry to provide up to $150 million a year in subsidized home mortgages for poor and moderate income persons in exchange for legislation bailing out the insurance fund for thrift deposits.

“All our frustrations over housing legislation for the last eight years came out on this issue,” said Rep. Richard H. Lehman (D-Sanger), after the 90-minute debate, which included bursts of passionate oratory seldom seen in discussions of financial legislation.

The vote was 27-24 in favor of an amendment by Rep. Henry B. Gonzalez (D-Tex.), the committee chairman, requiring the S&L; industry’s home loan banks to contribute up to 10% of their earnings to provide mortgages at low interest rates. All 20 of the committee Republicans opposed the amendment, along with four Democrats.

The amendment would require the home loan banks owned by the S&L; industry to set aside at least $75 million a year for the next four years, $90 million in 1994, and $150 million in 1995 and future years.

The money would be used to reduce the cost of mortgage loans for persons with earnings up to 80% of the median income for a particular area. Most eligible households would get mortgages at one or two percentage points below the general market rate, and some could get greater discounts.

The Democrats, led by Gonzalez, were determined to link low-cost mortgages to the S&L; legislation despite the opposition of the Bush Administration. Neither the S&L; bill passed last week by the Senate, nor a version adopted earlier by the House financial institutions subcommittee, contained any housing subsidies.

“We need to show the American people they get some benefits for the billions and billions of dollars” to be spent on the S&L; financial clean-up, said Gonzalez, referring to the funds that will be used to close hundreds of insolvent institutions and pay off depositors. The Bush Administration estimates the program will cost $157 billion over 10 years.

However, Republicans insisted that the S&L; bill should not be complicated with other social issues.

“We must keep this bill lean and clean,” said Rep. Chalmers P. Wylie (R-Ohio), the committee’s ranking Republican. The amendment is “an end-around play to provide support for subsidized housing.”

Rep. Marge Roukema (R-N.J.), said, “passions are running very high. I am astonished at the pulse rate.” After the S&L; rescue is completed, she said, “we will have ample time to work on a major revision of housing policy.”

Rep. Robert Garcia (D-N.Y.), an advocate of the housing subsidy, said the measure “strikes to the heart of what we are doing.” He said the mortgage subsidies would help many hard-working credit-worthy blue collar families earning up to $30,000 a year.

If these people “are credit-worthy, why can’t they borrow money?” demanded Rep. Clifford Stearns (R-Fla.). Democrats groaned and hissed.

“In Florida, a person making $30,000 a year can afford quite a bit,” responded Stearns.

Rep. Nancy Pelosi (D-San Francisco), said: “Everybody gets scared all of a sudden when we open up the issue for people . . . who really pay the bill, the taxpayers.”

Money for the subsidized mortgages, which could allow as many as 500,000 families to receive help with their home loans, would come from the profits of regional home loan banks, which are owned by the S&L; industry itself. The banks provide loans to individual S&Ls.;

The S&L; industry already is paying substantial amounts toward the bailout, and further financial demands would be hard to handle, the Republicans said.

“At stake is the safety and confidence of the financial system,” said Rep. Jim Leach (R-Iowa). “To play games with this legislation would jeopardize confidence in the system.”

The animated debate over housing was the highlight of the first day of work by the Banking Committee on the S&L; legislation, which will restore the financial health of the government fund that guarantees deposits up to $100,000.

Earlier in the day, the committee voted for a new symbol of safety to reassure the public about the security of S&L; deposits. Thrift institutions’ new logo will be an eagle, perched above the statement that the government stands behind deposits.

Rep. Walter Fauntroy, a Baptist minister and the District of Columbia’s Democratic non-voting delegate, began his remarks about the S&L; legislation with a prayer, saying it was the first time in his 19 years in Congress that he was so moved by an issue. “Let us pause at this moment keenly aware of the awesome responsibility we carry for millions of Americans,” he intoned. “With every vote give us a clarity of thought and a purity of heart,” he said, exhorting the members to rise above “narrow self-interest.”

A few minutes later, the committee passed the first amendment of the day, a measure tailored to help just one beneficiary, Frost National Bank, located in the San Antonio district of committee chairman Gonzalez.