Surprising both supporters and critics, legislation overhauling the nation's financial laws is likely to reach the House floor this year.

On Thursday, the bill cleared the House Commerce Committee by a 33-to-11 vote. The Rules Committee plans to consider the measure next week.

"This bill is on a roll, and the leadership thinks they can pull it off" before adjournment next month, said industry lobbyist Richard F. Hohlt.

Republican leaders pledged to work through the weekend to settle differences between the Commerce plan and the version approved by the House Banking Committee in June.

Approval in the House this year is widely considered crucial to enacting the legislation before the 1998 elections. Though Senate Banking Committee Chairman Alfonse M. D'Amato has said he supports financial reform, he has refused to allow debate on the issue until the House acts.

"The leadership seems committed to moving this bill," said Karen Shaw Petrou, president of ISD/Shaw in Washington. "It looks like the House is going to be here through Thanksgiving, and if they are, I think they will find time" to vote on financial reform.

Intense opposition from the banking industry appeared to have made the legislation too controversial to get through the House before the scheduled Nov. 7 adjournment.

But lawmakers could be working two additional weeks, and the legislation has gained momentum. After his committee voted, Commerce Chairman Thomas Bliley, R-Va., said he is "hopeful" the House can pass the legislation this year. "But that's not to say it's a done deal."

Rep. Bliley said the working group will try to make enough changes to win the banking industry's support.

American Bankers Association chief lobbyist Edward L. Yingling said bankers have not given up on a deal but are resolved to fight the current plan.

"We want to sit down with them to see if we can work things out," he said. "It's going to be difficult, but there is a chance."

Kenneth A. Guenther, executive vice president of the Independent Bankers Association of America, continued to urge bankers to oppose the legislation vigorously. "This is a bad day for banking," he said.

With Thursday's vote, the Commerce Committee agreed to let bank holding companies own a limited amount of nonfinancial businesses and curb the Federal Reserve's authority over nonbank affiliates of holding companies.

Bank holding companies would be permitted to earn up to 5% of annual gross revenue from nonfinancial businesses, to a cap of $500 million.

Those limits would be raised after Dec. 31, 1998, in line with increases in the consumer price index.

The committee also approved an amendment by Rep. Paul Gillmor, R-Ohio, that would prohibit the Fed from setting capital requirements for holding companies' nonbank affiliates. The Fed also would be barred from examining a nonbank subsidiary unless there were "reasonable cause" to believe it poses a risk to an affiliated depository institution.

To reduce thrift industry opposition to the bill, the committee approved a provision that would allow savings associations to exercise any power currently allowed to thrifts after the measure's enactment. Previously, the bill permitted thrifts to retain only specific activities they were engaged in as of Sept. 15, 1997.

Robert R. Davis, director of government relations for America's Community Bankers, said his group remains opposed to the bill, which would eliminate the federal thrift charter and force divestiture of all "grandfathered" activities if an institution is sold.

"They've effectively told thrift owners, 'You can continue to live in your house, but you can't sell it,'" he said.

The banking industry is opposed to a host of provisions. Leading their list is one that would strip federal bank regulators of authority to preempt state insurance laws.

Also, bank operating subsidiaries would be severely restricted and new limits would be imposed on securities activities.

If the banking industry's concerns are not resolved, Sen. Lauch Faircloth on Thursday predicted the legislation will be "dead on arrival" in the Senate.

"Sending a flawed bill to the Senate, with vast opposition, will poison the appetite to take up financial modernization next year," the North Carolina Republican said.

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