WASHINGTON - Consumer watchdog organizations warned Congress last week that many individuals would mistakenly assume that securities products sold by bank carried federal deposit insurance.

As the House Banking Committee continued hearings into legislation to repeal the Glass-Steagall Act, Michelle Meier, government affairs counsel for Consumers Union, urged the committee to exercise caution.

"This committee, and Congress generally, needs to take very seriously the public perception problems involved with allowing banks to move further and further away from their traditional product activities," she said.

The Glass-Steagall bill introduced by House Banking Committee Chairman Jim Leach does contain some consumer protection provisions. The measure would prohibit investment companies from having the same name or title as an affiliated insured bank. Investment companies would also be banned from suggesting that their securities are federally insured.

However, Ms. Meier argued that the consumer safeguards in the Iowa Republican's measure may not overcome consumers' impression that banks offer only insured products.

"There is a public perception from six decades of marketplace reality that putting your money in the bank is a 100% safe investment," Ms. Meier said. "There is increasing evidence that banks are actually engaging in some degree of misleading practices, causing confusion and misunderstanding on the part of consumers."

Rep. Leach told Ms. Meier that while he was "absolutely open" to consumer concerns regarding financial industry modernization, he could not give her "any assurance whatsoever that the results will be of your liking."

Janice C. Shields, research analyst for the Center for Study of Responsive Law, said she was concerned that confidential information obtained by a bank could be used by a securities affiliate to target consumers for the sale of uninsured investments.

"Some financial dangers and subtle hazards continue to be impervious to regulatory control," Ms. Shields said.

Rep. Doug Bereuter suggested that a provision could be added to the bill that would require consumers to sign a form before information could be shared among affiliates.

"There must be a way for a person of average or even less than average intelligence to be informed in writing," the Nebraska Republican said.

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