The House Commerce Committee is to dig into financial reform legislation with a subcommittee hearing Thursday featuring 10 federal and state financial regulators.

Rep. Thomas Bliley, the panel's chairman, has pledged to rein in federal banking regulators who, he claims, are mocking Congress and circumventing state laws. While the Virginia Republican has not talked specifics yet, the commerce panel is expected to:

Prohibit preemption of state consumer protection laws on insurance sales.

Require insurance sales outside small towns to be conducted from holding company affiliates rather than bank subsidiaries.

Give state regulators and the Securities and Exchange Commission authority to set capital levels for insurance and securities firms that own banks.

"All of the above are bad for banking," said Kenneth A. Guenther, executive vice president of the Independent Bankers Association of America.

According to Rep. Rick Lazio, R-N.Y., the only Commerce member who also sits on the House Banking Committee, "Chairman Bliley is anxious to obtain what he perceives as a level playing field for the industries."

Rep. Lazio voted with the majority June 20 when the Banking Committee approved the bill.

Rep. Paul Gillmor, R-Ohio, said Commerce Committee members are determined to protect state supervision of bank insurance sales. "We don't want federal banking regulators governing the sale of insurance in Ohio," Rep. Gillmor said.

Banks have already lined up against many of the bill's insurance and securities provisions and any further tightening by Rep. Bliley's panel is likely to intensify their opposition.

Anticipating a bitter fight in the Commerce Committee, the American Bankers Association this week declared that it will oppose new limits on the comptroller's power to authorize new bank activities. "There must be no changes that negatively impact the comptroller," said Donald G. Ogilvie, ABA executive vice president.

In an interview Tuesday, Rep. Lazio said he hopes to convince Rep. Bliley not to tilt the bill too far against the banking industry. "It's difficult for me to imagine a bill surviving if banks walk away," he said.

The committee has no plans to revisit issues such as elimination of the thrift charter, Rep. Lazio said. "There is little inclination to reopen the most contentious issue between banks and thrifts," he said.

Rep. Lazio said Rep. Bliley hasn't decided whether to consider provisions allowing banks to merge with nonfinancial companies. If he does, the issue is sure to divide the committee, according to Rep. Lazio. Rep. Bliley has come down in favor of the idea, while Michigan's Rep. John Dingell, the committee's ranking Democrat, is fiercely opposed.

A tight deadline may force Rep. Bliley to shun that controversial issue. House Speaker Newt Gingrich has given the committee until Sept. 15 to make changes to the legislation. Because Congress will be in recess for the entire month of August, the lawmakers have roughly a month to work on the bill.

Committee members start in earnest Thursday when industry regulators weigh-in on the legislation at a hearing before the finance and hazardous materials subcommittee chaired by Rep. Michael Oxley.

The Ohio Republican plans to hold two additional hearings before the House recesses Aug. 2. Rep. Oxley's panel is expected to vote on a plan during the second week in September, with a full committee vote just days later.

Many sources predicted that unresolved industry disputes would force Rep. Gingrich and Rep. John Boehner, R-Ohio, who heads a financial modernization task force, to broker a deal if the legislation is to pass.

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