The Clinton administration disguised income redistribution and higher taxes as deficit reduction.

Similarly, its proposal for a single bank regulator disguises political domination of bank lending as a way to simplify government and lower the cost of regulation.

The scheme also fails to address the urgent need to comprehensively reform regulation of the financial services industry.

The proposal has superficial attractions, including "reinventing government" and neatening the regulatory structure.

But looking deeply, one discovers that the real objective is political control of the economy and implementation of a social agenda - without the bother of getting legislation through Congress.

An Attack on the Fed

An independent, powerful Fed, with its responsibility to control inflation, is the principal obstacle to the fulfillment of that ambition. So the proposal contains what is arguably one of the cleverest and most dangerous attacks ever mounted on the independence of the Federal Reserve System.

How would the administration's goal be accomplished by the Federal Banking Commission?

First, by its composition. Members would be politically appointed, with relatively short terms - five years. The idea that they would be independent of the administration is transparent nonsense.

White House Control

In fact, the President would control three of the five commission votes - those of the chairman, the Treasury secretary, and the outside member from the President's party. They would be completely dependent on the administration.

Furthermore, the outside member from the opposition party would owe his position to the President.

The fifth member - the chairman of the Fed - would be effectively isolated.

Would the commission chairman and other presidential appointees be tough, experienced regulators, concerned with safety and soundness and the health of the industry? Or would they be more influenced by the politicians who approve their appointments, and by special interests - housing groups, diversity advocates, and others?

Worrisome Precedent

The recent appointment to the Federal Deposit Insurance Corp. board of an individual whose sole banking expertise is in government relations, community relations, and philanthropy answers the question - and the answer is extremely worrisome.

The political composition of the commission would make it susceptible to influence by members of Congress from the President's party - Republican or Democrat. It was precisely this weakness of the Federal Home Loan Bank Board, and its inability to resist Congress, that led to the savings and loan calamity.

With a political commission as sole regulator and without a powerful, independent central bank. the fixers and manipulators would resume burrowing, this time into the heart of the banking system.

Real Reform Needed

The administration's pursuit of a political and social agenda distracts from what is really needed - complete reform of the financial regulatory structure. Holding out the illusion of reform, the administration leaves intact an unbalanced financial services structure that perpetuates the erosion of the banking industry.

It is wrong solution for the wrong problem.

The outdated solutions of the 1930s - separating the banking, insurance, the securities industries - cry out for comprehensive reform. So do the new agencies of consumer protection, and, indeed, the antiquated, creaking committee structure of Congress.

Instead, the administration proposes tinkering with just one small part of the problem - duplicative and costly bank regulation. In the process, it casts aside a system of tried and true checks and balances.

The Russians have recognized that they need an independent central bank, free from influence by their president and parliament. Why are we moving in the opposite direction?

All Banks Threatened

About the only favorable aspect of this situation is that this is an issue on which the banking industry can and must unite. Community banks are as threatened as big banks by a single regulator, subject to political leverage and bent on forcing bankers to accept its lending policies and social manifestos in place of free market judgment - a regulator banks cannot escape by changing charters.

The industry must take control of the debate. This plan is not about reducing the cost of regulation. It is not about simplifying government. It is about political control of the banking business. It is about the stability of the financial system and the United States economy.

Once again, banks have been forced into opposition. Never mind. This is a fight for survival that can be won. This time bankers can demonstrate that political manipulation is not in the voters' economic interest, and that reform of financial services regulation is.

Mr. Furash is chairman and chief executive of Washington-based Furash & Co., a management consulting firm.

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