Leading a torrent of criticism, President Clinton vowed Wednesday to veto the financial reform bill authored by Sen. Phil Gramm unless he makes significant concessions, including strengthening its community reinvestment requirements.

"The bill would undermine the effectiveness of the Community Reinvestment Act, a law that has helped to build homes, create jobs, and restore hope in communities across America," the President wrote to the Senate Banking Committee chairman on the eve of the panel's vote.

"The CRA is working, and we must preserve its vitality as we write the financial constitution for the 21st century."

The President also complained that the Gramm bill would overly restrict powers for subsidiaries of national banks, provide inadequate consumer protections, and invite economic danger by letting commercial firms buy unitary thrifts.

"Reform of the laws governing our nation's financial services industry would promote the public interest," the President wrote. But, he added, "I will veto the bill if it is presented to me in its current form."

Sen. Gramm acknowledged Tuesday that he would have to modify the bill to get it passed. But he shot back Wednesday, saying his bill would restore the reinvestment law's "integrity" by protecting bank mergers from groundless protests.

He also argued that his bill would stop new affiliations between banks and nonfinancial firms. "Financial services modernization is of such overriding importance to the national economy that President Clinton will be compelled to sign it," the Texas Republican said.

But the Clinton administration has thrown its weight behind the House Banking Committee's bill, which is tougher on CRA and better addresses the President's concerns. Treasury Secretary Robert E. Rubin urged Democrats on Wednesday to vote for the bill, on which House Banking is scheduled to begin voting today.

Sen. Jack Reed, D-R.I., said Democrats will counter Sen. Gramm's bill with an alternative that moves in the direction of the compromise bill written by Reps. Jim Leach, R-Iowa, and John J. LaFalce, D-N.Y.

The Democrats' version mirrors the compromise bill that died in the Senate last year. But it would expand powers further for national banks by letting them underwrite securities and conduct merchant banking activities in an operating subsidiary.

Speaking to a meeting of America's Community Bankers, Sen. Reed said the debate is boiling down to a "very clear choice between the administration, the House of Representatives, and the Senate Democrats versus the chairman (Gramm)."

Looking for more allies, Sen. Gramm struck an agreement Wednesday with insurance agents that he said would result in "broad based" industry support for his bill. Details of the deal will be revealed Thursday, his spokeswoman said.

Fifty financial services executives-including Sanford I. Weill, chairman and co-chief executive officer of Citigroup, Hugh L. McColl J., chairman and CEO of BankAmerica Corp., and Harvey Golub, chairman and CEO of American Express Co.-called Wednesday for "swift congressional action."

"We urge you to continue to work together to resolve the few remaining differences and reach a bipartisan consensus," they wrote to House and Senate Banking leaders. "There is widespread agreement that these changes are long overdue."

Meanwhile, consumer groups echoed President Clinton's attack of the Gramm bill. Consumer advocate Ralph Nader called the Senate Banking chief "the ultimate tool of the banking lobby" and said that he "is using his committee to savage the Community Reinvestment Act."

Advocates criticized both the House and Senate banking bills.

They said the bills would create conglomerates that taxpayers might have to bail out while failing to extend CRA to the insurance and securities units of bank holding companies. They also said the bills would not guard customer privacy or provide affordable checking accounts for lower-income people.

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