AFTER THE RIOTS : U.S. Sets Up More Low-Interest Loans : Recovery: $600 million from federal bank system will go to rebuild homes and businesses damaged in riots.

President Bush announced Wednesday that the government will provide $600 million in low-interest loans for South Los Angeles and other areas devastated in the violent aftermath of the Rodney King verdicts.

The new loan funds, to be made available through the Federal Home Loan Bank Board system, are in addition to $600 million in emergency funds already designated for the stricken city and a host of other urban aid programs being considered by Congress and the President. The House was poised to vote on the earlier allocation today as part of an $822-million appropriation package to be shared by Los Angeles and flood-damaged Chicago.

Bush made the announcement during a trip to a rundown neighborhood in Baltimore--the third inner city foray he has made in a week for a firsthand look at urban distress.

He pronounced the new loan money--which could be made available at interest rates of between 4.4% and 7.9%--as “good news for the people who lost homes and jobs, as well as owners who lost businesses” in Los Angeles. But a panel of big-city Democratic mayors denounced the package as “woefully inadequate” and urged Congress to do more.

The $600 million in community rebuilding funds will be loaned for the purchase or rehabilitation of homes, and will be available to people willing to undertake commercial enterprises in the poorest areas of the city.

Individuals with incomes less than 115% of the area’s median will qualify for the help, which is in addition to disaster loans from the Small Business Administration and Federal Emergency Management Agency.

Owners of apartment buildings will qualify if their units will be rented to households with incomes below 115% of the median.

The loans also can be obtained for rebuilding stores or offices in the South Los Angeles area or other neighborhoods where the residents have incomes below 80% of the city’s median income.

Private banks will make the loans with low-cost advances from the 12 district banks of the Federal Home Loan Bank system, an independent agency that can loan money at below-market rates.

Forty-three of the eligible private savings and loans and three of the private commercial banks are in Los Angeles County. Statewide, another 126 savings and loans and 21 commercial banks may participate in the program, officials said.

The loans are not guaranteed by the government, officials said, so lenders must be prudent in selection of borrowers to avoid undue risk.

Daniel F. Evans Jr., chairman of the Housing Finance Board, which oversees the Federal Home Loan Bank system, said his agency approved the $600 million injection of loan funds for Los Angeles on its own after reviewing the post-riot situation.

Because the board does not depend on congressional appropriations, Evans said, it can act very swiftly, and lending institutions can approve loans without a lot of government red tape.

“The beauty of the retail (lending) network is that it already exists,” Evans said. “I intend to follow through on this to see that the rubber hits the road.”

The President said the additional loan funds are “one way we can underscore the fact that we are serious about helping Los Angeles recover. . . , but it’s not just Los Angeles, it’s all American cities.”

His afternoon visit to a run-down neighborhood in East Baltimore followed a visit Monday to a police station in Philadelphia and his trip to Los Angeles at the end of last week.

At an East Baltimore medical center, he met with a group of young, black pregnant women who are paid $10 to attend a weekly lesson on prenatal care.

Meanwhile, a group of mayors testified before the Senate Banking Committee and met with House Democratic leaders in an effort to mobilize support for their proposal for a $35-billion urban aid program.

“We need not the pittance that the President spoke of,” said New York Mayor David Dinkins. “That is woefully inadequate.”

“We see the tragic occurrence in Los Angeles as an opportunity,” said Mayor Joseph Riley of Charleston, S.C. “We must try to find good from bad events.”

House Majority Leader Richard A. Gephardt (D-Mo.), emerging from a two-hour session with the mayors, said he and other House leaders will confer with them again in 10 days.

“We’re not going to agree to a package that won’t mean anything,” he told reporters.

Altogether, Administration and congressional leaders have proposed aid programs for cities estimated at $6 billion.

They include $500 million for law enforcement, $1 billion for housing, a $1.5-billion enterprise-zone tax plan, a school choice program, welfare reform and a youth jobs program. In addition, Congress and the Administration have agreed to extend unemployment benefits.

Democrats and Republicans have agreed to move expeditiously to get the programs approved.

At a meeting of Administration officials Wednesday, which included chief of staff Samuel Skinner and budget director Richard Darman, Housing Secretary Jack Kemp said lawmakers should not be constrained by the nation’s $400-billion deficit.

“The time to move is right now, and we shouldn’t let the budget per se stand in the way,” Kemp said. “We’ve got to decide whether we’re for people or for budgets.”