Agency merger still a long shot, despite rumors.

WASHINGTON -- Rumors that the Treasury and the Federal Reserve have reached a compromise to consolidate the agencies are rampant but untrue.

And even if the two sides could agree, there is little chance this year of passing any legislation to combine the bank and thrift regulators.

The most prevalent rumor making the rounds of Washington insiders has the Fed regulating state member banks and the holding companies led by a state bank, foreign banks, and some number of the largest banks, anywhere from the top 25 to the top 50.

The proposed Federal Banking Commission would regulate all nationally chartered banks except the large ones under the Fed, holding companies of national banks, state and federal thrifts, and state banks that do not belong to the Fed system.

But administration officials insist no such compromise has been reached. In fact, these sources said Treasury Under Secretary Frank Newman is the only official still pushing hard for a compromise.

Mr. Newman and Fed Chairman Alan Greenspan have been holding frequent one-on-one conversations about consolidation, trying to forge a deal, according to administration sources.

Not an Easy Sell

It is possible that the two men will fashion a plan both can support, but then Mr. Newman will have to sell it to the rest of the administration.

One official said most Clintonites are "opposed to going ahead with a proposal that isn't going anywhere."

As the third-ranking official at Treasury, Mr. Newman has the freedom to pursue what he pleases. But administration officials say that any compromise acceptable to Mr. Greenspan will be so far away from what the administration originally proposed that it wouldn't be worth pushing through Congress.

"Everyone is hoping if a compromise comes it never gets through Congress," one regulator said. "It's become political rather than rational."

Many in the administration would be "relieved if this disappeared," he said.

The consensus is that no consolidation plan can get through Congress this year.

While the Senate Banking Committee has held numerous hearings on consolidating the agencies, the House Banking Committee has yet to tackle the issue.

No one expects the House to take up the bill until after Whitewater hearings have been completed.

The congressional inquiry into Whitewater, the umbrella term for questions about the involvement of President Clinton and Hillary Rodham Clinton with a an Arkansas real estate development company and a failed Little Rock thrift, has not yet begun.

Original Proposal

Treasury Secretary Lloyd Bentsen unveiled the administration's proposal to create a Federal Banking Commission on Nov. 23.

The original plan would have merged the supervisory activities of the Office of the Comptroller of the Currency, the Office of Thrift Supervision, the Fed, and the Federal Deposit Insurance Corp.

The Fed would continue to conduct monetary policy and run the payments system. The FDIC would have remained the banking and thrift industry's insurer.

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