WASHINGTON - Clinton administration officials criticized House Republicans Tuesday, blasting efforts to bar banks from the insurance business and labeling legislation repealing Glass-Steagall inefficient.

Treasury Under Secretary John D. Hawke Jr. said he opposes the House version of Glass-Steagall repeal because it would require banks embarking on most kinds of securities activity to set up expensive holding company subsidiaries.

"We're very unhappy about these structural limitations," Mr. Hawke said in a speech to the Association of Banks in Insurance.

"We see the Glass-Steagall legislation as a step in the right direction, but there is nothing so attractive in that legislation that we would want to see it go ahead if there were significant insurance prohibitions attached."

House GOP leaders announced plans last week to link Glass-Steagall repeal with regulatory relief legislation and quickly vote on the combined bill. As it stands now, the package includes a five-year moratorium on the Comptroller of the Currency's power to expand bank insurance powers.

House leaders also stripped from the legislation a provision that would have allowed banks to affiliate with insurance companies in most states.

Mr. Hawke said a moratorium on the Comptroller would stifle what he called "the most progressive force for banking modernization in the last 35 years."

If enacted, the ban would likely be prolonged, thwarting the agency's ability to continue as a catalyst for banking modernization, he said.

There is great danger the moratorium "is going to be extended when it expires and it will control the competitive landscape for years to come," he said.

In a separate speech Tuesday, Comptroller Eugene A. Ludwig urged bankers to oppose the regulatory relief bill if it includes the moratorium.

"No amount of cost cutting can ever make the banking industry competitive if it cannot offer the products its customers demand," he said.

Mr. Ludwig warned that if insurance agents - who lobbied for constraints on the Comptroller - succeed, they may set their sights on restricting insurance sales in areas beyond the national bank charter.

"If the insurance interests can beat the banks in Congress this year, do you think they won't carry their battle to the state legislatures next year?" Mr. Ludwig asked.

"What's at stake here is not so much the survival of the national banking system, but its relevance - and perhaps that of the larger banking industry as well."

Mr. Ludwig also took aim at the Glass-Steagall bill.

Like Mr. Hawke, the Comptroller said restricting banks' insurance powers is a high price to pay for a bill that does little to break down the walls between the banking and securities industries.

"Banks would be subject to strict limits in underwriting and dealing in any financial product designated as a 'security,' " Mr. Ludwig said.

American Bankers Association officials have said they will oppose any legislation restricting the Comptroller's powers.

The Independent Bankers Association of America is less certain.

"We're going to have to look at what's left in the regulatory relief package to see if it justifies the OCC language," said Ron Ence, the group's director of legislative affairs. "At this point, we just don't know."

These bills are pending in the Senate, but consideration there is nowhere near as far along. Senate Banking Committee Chairman Alfonse M. D'Amato has said he wants to pass legislation narrowly focused on shoring up the Savings Association Insurance Fund.

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