On the same day that Treasury Secretary Tim Geithner was in downtown Washington calling on banks to boost lending, up on Capitol Hill the House Financial Services Committee passed an amendment to that would do just the opposite.

At an Obama administration summit on strengthening credit flows to small businesses, Geithner said “We need banks to be working with us, not against recovery." At the very same time on Wednesday, an amendment from Reps. Brad Miller and Dennis Moore would allow the FDIC to impose a 20 percent haircut on all secured creditors, including the 12 Home Loan banks, when resolving systemically important institutions that fail.

The amendment, said to be pushed by FDIC chair Sheila Bair, is aimed at ending the Home Loan banks' priority status in the event of a failure. In the case of failed institutions, the Home Loan banks are first in line for getting a hold of the best assets in receivership. The FDIC has long sought to change that arrangement.

That could be a big problem not only for the Home Loan banks but for the extension of funds into the financial system in general. These 12 regional banks are the link to the capital markets for thousands of community banks across the country. If their source of credit dries up as a result of the amendment surviving in a final piece of legislation, more banks not less could end up failing for lack of liquidity. If that sounds overly dramatic, consider what Al DelliBovi, president of the Federal Home Loan Bank of New York told the American Banker: "This amendment would preclude advances to certain members. If we are only going to get 80 percent back from a certain borrower, then we will just not lend to them. That's an easy decision."

DelliBovi drew an even more blunt conclusion “If we're not secured, we are not going to lend.” Period.

Congressman Miller, a Democrat from North Carolina, has said the intention of the proposal is to save taxpayers from bearing the cost of systemic failures. That’s a goal well worth pursuing. But the amendment could have a serious impact on a variety of secured creditors. William Isaac, a former FDIC chairman William Isaac told the American Banker: “It may well increase the cost of funding to banks and it may curtail the availability of funding."

At the very least, Congress ought to hold public hearings on such an important issue that could have far-reaching, and quite possibly, unintended consequences.