Trying to understand the motivations or predict the behavior of Senate Banking Committee Chairman Alfonse D'Amato can be hazardous. He's known as a cagey politician who plays his cards close to the vest.

He's outdone himself, though, in the past few weeks. His behavior toward the banks doesn't make sense unless he doesn't want to pass financial reform legislation this year, which is a possibility.

Take it as a given that, Sen. D'Amato's behavior aside, bankers are extremely skeptical of the legislative process. They've been burned before.

The Bush administration, for example, proposed a financial modernization package in 1991. The banking industry embraced it warmly.

The bill had four titles, three of which were terrific. The fourth contained a collection of bad ideas to increase the regulatory burdens on banks and deprive regulators of the discretion to use good judgment.

Congress discarded the first three titles and adopted the fourth. The result was a law nicknamed "FDICIA," for the Federal Deposit Insurance Corporation Improvement Act. It is the worst piece of banking legislation in decades.

More recently, the Congress imposed on banks a $12 billion tax to help recapitalize the savings and loan insurance fund. That banks had no hand in causing the S&L debacle and that Congress was reneging on two prior legislative deals didn't faze the politicians.

It's also a given that banks don't have much need for legislation. Laws previously enacted by Congress, interpreted by the regulators, and upheld by the courts give banks much of the freedom they currently need to compete.

The way to get banks to the table is to design a bill offering benefits to banks and assure them that nothing really negative will be allowed on the bill. Sen. D'Amato's approach has been ... um ... different. He's proposed legislative initiatives that send chills down bankers' spines and then railed against the industry for being uncooperative.

Several weeks ago, Sen. D'Amato proposed a very un-Republican initiative to curtail banks' right to charge fees for using their automated teller machines. It unnerved a lot of bankers, who worried he'd include it in any modernization bill.

Next the good senator decided to attack Gene Ludwig, regarded widely in the banking industry as one of the best Comptrollers of the Currency ever. Mr. D'Amato declared that Mr. Ludwig "has displayed a clear disregard for the limits of his authority, for other ... regulators, and for the Congress."

Sen. D'Amato's charges against Mr. Ludwig are silly, and once again unnerved a lot of bankers. The comptroller's actions have been upheld in four unanimous decisions of the Supreme Court. While a fair number of congressional leaders have displayed their ignorance of the comptroller's authority, Mr. Ludwig appears to know precisely what it is.

Perhaps convinced he hadn't done enough to turn off bankers, Sen. D'Amato decided to go to the limit last week. He announced plans to draft a bill to strip the Federal Reserve and the comptroller of their power to determine the permissible securities and insurance activities of banks.

Sen. D'Amato says he's frustrated with the banks. They've had the temerity to say they'd rather have no legislation than bad legislation. They define bad legislation as anything that will diminish their ability to compete. Shame on them.

It's ironic that banks find themselves in this position. They fought for financial modernization for decades. Their pleas fell on deaf Congressional ears, while their share of the financial services marketplace plummeted from 40% to 20%. They took their fight to the courts and won one resounding victory after another.

The banking industry would be out of its collective mind to give up what it's worked so hard to achieve. Despite recent evidence to the contrary, Sen. D'Amato knows full well what it takes to bring banks to the table: He needs to serve up a bill that's worthy of consideration.

Mr. Isaac, former chairman of the Federal Deposit Insurance Corp., is chairman and CEO of Secura Group, Washington.

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