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The banking industry, trying to deflect growing criticism over stingy lending practices, asked President Bush to push reforms that would stimulate new loan activity.

The American Bankers Association, the industry's main trade group, suggested in a letter to Bush this week that banks would approve more loan requests if a number of key issues were resolved.The initiative, announced at the association's annual convention here, came after Bush criticized the banking industry for its dormant lending activity this year, creating what has become known as the credit crunch.

Many economists believe that the banks' retreat from new lending has hampered the economy's ability to recover decisively from recession. With fewer banks granting loans, the theory goes, businesses are less able to expand and consumers have fewer means to finance purchases such as homes and cars.

As scrutiny on bank lending policies overall increases, the bankers association is using the opportunity to highlight how costly bank regulations are restricting banks' ability to attract new capital and extend loans.

In the letter to Bush, the association said lending is restricted because of the high costs of obeying voluminous federal and state banking regulations.

Other factors include lenient bankruptcy laws, costs of environmental cleanups, property appraisals and the liability of bank directors and officers for their decisions, the association said.

"I think the real issue we're raising is there are a whole lot of other things going on that affect the availability of credit," Richard Kirk, the association's president, said in the letter.

The letter coincides with the trade group's push for comprehensive bank reform this year in Congress. Bankers say the industry would be better suited to compete if it won new powers to sell products like insurance, stocks and bonds, and were freed from a series of overlapping and burdensome regulations.

Charles Peabody, banking analyst for Kidder, Peabody & Co. in New York, said the plan sounds as if bankers were trying to reduce their risk - and cut their costs - by obtaining a break on items such as liability insurance for officers and environmental cleanups.

Peabody agreed with the association's position that banks are limited in raising new capital because of a required 12 percent reserve to be held against savings deposits.

The Federal Reserve, the nation's central bank and the regulator of the industry, does not pay interest on the 12 percent reserve and that limits the amount of capital banks can use to underwrite new loans.

The industry currently is trying to either set aside a smaller amount in reserve or substitute Treasury bills for cash in the reserve.