Senate Banking Committee Chairman Alfonse M. D'Amato accused banks Tuesday of trying to thwart financial reform legislation to keep a competitive edge over securities and insurance companies.

Speaking at the annual meeting of the New York Bankers Association, Sen. D'Amato said bankers are jealously guarding the upper hand in financial powers that regulators and the courts have dealt them.

"There are those who now say, 'Oh, we've got ours,'" the New York Republican said in rare public comments on the reform measure. "It would behoove all of us to stop playing the game of who's got the temporary advantage."

Banking industry officials denied the lawmaker's charge that their support of reform efforts has been half-hearted.

"We worked very hard for several years to see if we could get financial modernization that we could support," said Edward L. Yingling, the chief lobbyist for the American Bankers Association. "Unfortunately we haven't seen a bill in the official legislative process that we can support. But I guess I would add we're willing to keep working."

A much-fought-over reform bill pending in the House would let banks, insurance companies, and securities firms merge. Republican leaders want to vote on the bill by April 2 and could tie it to legislation changing credit union membership limits.

Sen. D'Amato told reporters that he does not oppose linking the two bills but said it might be unrealistic to expect a majority of senators to support such a complex bill.

On financial reform, he pledged to consider the House bill if it passes with a large, bipartisan majority. But relying on a carefully worded text, Sen. D'Amato said in his speech he does not endorse the bill or predict its enactment this year. Opposition from the Clinton administration and banking groups as well as the abbreviated 1998 congressional calendar present major obstacles, he said.

"If the whole industry is united in their opposition, it makes it pretty difficult," Sen. D'Amato told reporters after his speech.

The ABA is expected to come out against the bill officially today. The Independent Bankers Association of America has opposed it for months.

In a letter Tuesday, the thrift industry urged House Speaker Newt Gingrich to scrap the measure because it bars the formation of new unitary thrift holding companies and guts key thrift powers such as the pre-emption of state laws.

The bill is a "350-page leap into political conflict and financial uncertainty," wrote Paul A. Schosberg, president of America's Community Bankers. "The bill is so badly flawed it cannot be fixed."

Negative reaction to the reform bill was widespread among New York bankers.

Chase Manhattan Corp. president Thomas G. Labrecque said insurance and securities companies could conduct more nonfinancial business than banks under the bill. Nonbanks that already own commercial businesses would be permitted to earn 15% of their revenue from commercial ventures, but banks would be limited to 5%.

"We can't want an advantage," Mr. Labrecque said, but "the legislation should not give someone else an advantage."

George W. Hamlin 4th, president of Canandaigua National Bank and Trust Co., said bank insurance sales would be diminished under the bill. He called the bill "inimical to progressive community banking."

For similar reasons, the New York Bankers Association will "strongly oppose" the bill, said Charles V. Wait, chairman of the trade group and head of Adirondack Trust Co.

But banker opposition may not be enough. Insurance and securities executives generally support the bill. And if it gets linked with a popular credit union bill, bankers might not be able to stop it.

"I would really like to see something happen," Sanford I. Weill, chairman of Travelers Group, told the New York bankers. Although the legislation has some flaws, Mr. Weill said, he would rather it pass the House and be revised as it moves through the Senate.

Mr. Weill said later in an interview that Sen. D'Amato's remarks were his most upbeat ever about the bill's prospects in the Senate.

While he also supports the bill, Maurice R. Greenberg, chairman of American International Group Inc., said lawmakers should dump limits on nonfinancial activities. As currently written, the bill might force AIG to divest some of its commercial holdings to meet the 15% limit.

Separately on Tuesday, Merrill Lynch & Co. released a survey showing that 60% of voters support allowing the banking, securities, and insurance industries to merge, while only 31% are opposed. Support was bipartisan, with 65% of Republicans and 58% of Democrats and Independents favoring reform.

The securities firm has been a key proponent of financial reform, hosting a pivotal meeting in January between industry executives and House Republican leaders.

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