The House Commerce Committee will wrap up its hearings on financial reform legislation Wednesday, with testimony from securities and banking industry officials.

With Congress scheduled to recess Aug. 2, staffers will spend the month drafting changes to the measure narrowly approved by the House Banking Committee June 20.

Soon after Labor Day, Commerce's finance and hazardous materials subcommittee will vote on the plan allowing banks, insurance, and securities firms to merge. A vote of the committee is expected by Sept. 15.

House leaders have not restricted which provisions of the bill Commerce may rewrite. While lobbyists are trying to convince the committee to reinstate the thrift charter, lawmakers appear reluctant so far to range that far from their traditional jurisdiction.

Commerce members focused Friday on how best to regulate banks selling insurance. Wednesday's hearing is expected to spotlight oversight of bank securities activities.

At the subcommittee hearing Friday, lawmakers proposed handing disputes between banking regulators and state insurance commissioners to the courts.

Requiring regulators to take turf battles to the courts would allow the Commerce Committee to eliminate a provision creating the National Council on Financial Services to settle disagreements.

"If the council is replaced with some form of expedited review in federal courts, this committee must determine what guidance the court should be given," said Rep. Michael Oxley, R-Ohio, the subcommittee's chairman.

Testifying at Friday's hearing, bank and insurance industry executives said court resolutions of industry disputes would be acceptable, but disagreed over important details.

For instance, Gerald Roach, president of the Mutual Assurance Society of Virginia, said federal banking regulators' arguments should not carry more weight than those of state officials. He said any dispute process should be exempt from the Supreme Court's Chevron decision, which requires the courts to defer to the federal government in conflicts with states.

John P. Hamill, president of Fleet Bank in Massachusetts, said banking regulators should not have to give up an advantage that is granted to all federal agencies. "Deference to federal regulators is a fundamental principal that should be continued," he said.

Another change suggested by Rep. Frank Pallone Jr., D-N.J., would allow state regulators to prevent banks from cross-marketing banking and insurance products.

The bill inherited from House Banking "effectively dismantles the ability of states to protect consumers" from pressure to buy nonbanking products, he said.

But Steven C. Alonso, president of Banc One Financial Services Inc., said those restrictions would increase costs for bank customers.

"Most people know that automobile insurance costs less if you have your homeowner's insurance with the same company," he said. "Likewise, without coercing customers, banks must be free to offer consumers a similar range of product options and prices."

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