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Friday, March 11, 1994     Page: 7A QUICK WORDS: KANJORSKI BUSINESS LOAN
PLAN MOVES AHEAD

WASHINGTON, D.C. — Legislation to increase the availability of bank loans
to businesses came a step closer to reality Wednesday, after a bipartisan 46-5
vote by the House Banking committee.
   
The Business, Commercial and Community Development Secondary Market
Development Act was introduced by Rep. Paul E. Kanjorski, D-Nanticoke,
chairman of the Banking Subcommittee on Economic Growth and Credit Formation.
    “My legislation creates a secondary market for business real estate and
community development loans, which would increase the supply of funds
available for business and community development lending at affordable
interest rates,” Kanjorski said.
   
He said additional funds would come from institutional investors such as
pension funds and insurance companies either prohibited or discouraged from
making direct loans to businesses under current law.
   
The secondary market is a result of banks and other lending institutions
selling packages of loans to an entity known as a “pooler,” who then creates a
pool of loans and sells investment-grade securities.
   
The process allows poolers to combine high-risk loans with low-risk loans.
An investor will purchase a security on a pool of loans knowing that not every
loan in a given pool will fail. If some loans do fail, there are enough other
loans to absorb whatever losses might occur, providing credit to higher-risk
borrowers who would otherwise not easily attract investors.
   
Fannie Mae and Freddie Mac are examples of a secondary market at work,
Kanjorski said. The programs pool mortgages, resulting in an explosion in home
lending and more credit available to home owners.
   
The new loan program is designed as a boost to business expansion to
improve the overall economy.
   
“Capital means jobs in today’s modern economy,” Kanjorski said. “The
fastest way to put more Americans to work is to make it easier for new and
expanding businesses to have access to the credit they need.”