WASHINGTON -- The log-jams blocking interstate branching and community development bank legislation appear to have been broken.

In a series of meetings last week, key lawmakers said Clinton administration officials ironed out a number of the most difficult isses in both bills, which have been linked politically.

As a result, many observers believe it is now possible for both bills to pass Congress by the July 4 holiday. If so, that would clear the calendar for August hearings on President Clinton's involvement with a failed Arkansas thrift and the Whitewater Development Co.

Republicans have been seeking the sessions for months, and a number of congressional and industry sources said the prospect of hearings provided part of the motivation for agreement on interstate and community development bank legislation.

An Important Meeting

A key development last week was a meeting between Rep. Floyd Flake, D-N.Y., and Senate Banking Committee chairman Donald W. Riegle, D-Mich.

A Flake amendment in the House version of the community development bank bill would make part of the measure's $382 million available to pay for rebates to banks that lend in low-income communities.

Sen. Riegle was opposed to the measure, but agreed to support partial funding for Rep. Flake's Bank Enterprise Act amendment. Following the meeting, the Clinton administration, which had also opposed Rep. Flake, agreed to support funding as well.

In addition, the Democratic and Republican staff directors for the House and Senate banking Committees last week agreed to a schedule of meetings to discuss different sections of the community development bank bill.

One took place Thursday morning as aides met on a title in the bill that is aimed at easing what banks refer to as "regulatory burden." Although the regulatory relief titles in the House and Senate bills are similar, the two chambers must agree on identical language before a bill can become law.

In addition, the administration proposed compromise language for a section of the interstate branching bill that deals with the applicability of state law. The administration-backed measure would permit states to regulate branches of out-of-state national banks as though they were state-chartered.

The measures also require federal agencies to give notice and accept public comments before preempting state laws in a number of areas, including fair lending and community reinvestment. The Office of the Comptroller of the Currency riled consumer groups by preempting basic banking laws in New York and New Jersey.

The amendment will likely prove controversial. The American Bankers Association opposes the measure outright, while the Independent Bankers Association of America prefers an even tougher "states-rights" law.

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