As the debate over the financial modernization package entered its final, sensitive stages, it came close to being derailed by disagreements over the 22-year-old Community Reinvestment Act.

When the bill stalled late Thursday, people on both sides of the debate were expressing frustration and bewilderment about the CRA factor. Before the ultimate compromise took shape, Phil Gramm, the chairman of the Senate Banking Committee, went to bat for a significant rollback of the neighborhood lending law, with other Republicans supporting him against the Clinton administration's staunch resistance.

In the end, the bill turned out to be "very CRA-neutral," said Joe Belew, president of the Consumer Bankers Association. "This doesn't dismantle CRA and doesn't extend CRA appreciably."

A CRA activist had a different view. "It sounds like a capitulation by the White House," said Matthew Lee, executive director of Inner City Press/Community on the Move. "There is no question some of those provisions chip away at CRA."

Few argue that CRA should not have come up. "The privilege of having a bank charter is the social obligation to serve the community," said Lawrence Platt, an attorney at the Kirkpatrick & Lockhart firm in Washington. "When the question is, 'How do we extend the scope of the privilege?' it's not surprising that the government would ask, 'How do we extend the scope of the obligation?' "

But it seemed surprising that the issue should have loomed so large.

Banks, initially wary of being forced to shoulder the burden of the CRA requirements, have learned to live with the 1977 law. Today some bankers claim to make some of their most profitable loans in compliance with its provisions. Mr. Platt said none of the bankers he represents would have given up the financial modernization to gain relief from the CRA.

About 5% of banks -- and none of the largest banks -- have an "unsatisfactory" CRA rating, which would prevent them from forming diversified financial companies under the proposed law.

Sen. Gramm, R-Tex., raised concerns that the CRA examination process is burdensome to small banks. He charged that activists have been cashing in on mergers by forcing banks into making grants to community groups in order to gain approval of their mergers.

As late as Thursday, Sen. Gramm threatened to hold up the entire bill until a more sympathetic president entered office -- a threat that triggered obituaries for the bill in Friday's newspapers. After a late night phone call to the White House from Sanford I. Weill, chairman of Citigroup Inc. -- which would have to divest its insurance business if no bill is passed -- the compromise emerged.

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