WASHINGTON - A broad coalition of major financial service trade groups is urging House Speaker Newt Gingrich to retain a provision in regulatory relief legislation that allows banks and insurance companies to affiliate.

The nine groups, which include the American Bankers Association, the Securities Industry Association, and America's Community Bankers, argued that the measure, sponsored by Rep. Richard Baker, is essential.

"The pending legislative effort to modernize our financial services industry would not constitute true reform without the Baker amendment, but rather would be an attempt to reinstitute a balkanized financial structure totally out of date with the marketplace," the groups said in a letter sent Monday to Speaker Gingrich.

The message is not new - the ABA and others applauded the Louisiana Republican's amendment as soon as he succeeded in adding it to regulatory relief legislation during the House Banking Committee's deliberations last month. Rather, it is the influential list of organizations that signed the letter that is noteworthy, according to ABA chief lobbyist Edward L. Yingling.

"The real significance of all this is you've got trade associations representing the entire financial services industry except Independent Bankers Association of America and the insurance agents," Mr. Yingling said.

"It sends a signal to the powers that be on the House side that there is a very strong constituency for modernization," he added.

IBAA executive vice president Kenneth A. Guenther said his group and the Independent Insurance Agents of America are organizing a coalition of their own, representing small business, agriculture, and consumer groups - all of which would feel an economic squeeze because of the Baker amendment.

"The battle is joined," Mr. Guenther said. "This is a classic square-off between those representing Main Street and those representing Wall Street."

The coalition letter sends a clear message that the undersigned groups will not support any watering down of the Baker amendment, said Karen Shaw Petrou, president of ISD/Shaw Inc.

Ms. Petrou, whose firm tracks bank legislation and regulations, said House leaders are contemplating changing the language of the Baker amendment to mandate that states must pass legislation in order to allow banks and insurance firms to affiliate.

"That would put the onus on the bankers to pass laws in states' capitals that had traditionally been very friendly to agents," Ms. Petrou said.

The letter "is a really important countervailing influence to the agents and the IBAA. It makes it clear to leadership that if there is any kind of ... concession on the Baker amendment, there will be a big fight on the House floor," she added.

The letter also criticized a provision in the regulatory relief bill that would restrict the comptroller of the currency's ability to expand national bank insurance powers as being "totally inconsistent" with financial modernization.

"This provision (really, as drafted, a rollback) will impose new limitations on what some providers of financial products and services can offer to the public and will further segregate the financial services industry," the groups said.

Also signing the letter were the American Financial Services Association, the Bankers Roundtable, the Consumer Bankers Association, the Financial Services Council, the Investment Company Institute, and the ABA Securities Association.

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