Banking and insurance industry negotiators are under pressure to wrap up their work on compromise financial reform legislation.

It remains unclear whether the participants-who are focusing exclusively on the bill's controversial insurance provisions-can reach consensus in time for the Senate Banking Committee's planned Sept. 3 vote.

"The talks are progressing," said Michael P. Smith, president of the New York Bankers Association, which has hosted some discussions. "The hope would be by the beginning of next week we would have conclusion."

But Samuel J. Baptista, president of the Financial Services Council, predicted that lawmakers would step in and make the final decisions. "Someone on the Hill will have to make a political call as to what is an acceptable compromise," he said.

Negotiators still disagree over the wording of protections for national banks from state laws that discriminate against their insurance sales powers. Bankers want their Supreme Court victory on this issue in the Barnett case to be clearly codified.

A possible compromise has emerged on state consumer protections, sources familiar with the talks said. It would let banks sell loans and insurance products at the same desk in a branch but require deposit products to be sold elsewhere on the premises.

Senate Banking wants enough time to use an insurance deal as leverage to force the Federal Reserve Board and the Treasury Department to bargain on financial powers for bank operating subsidiaries.

But Fed Chairman Alan Greenspan and Treasury Secretary Robert E. Rubin remain at an impasse on whether to give new powers to operating subsidiaries or holding company units.

"We and the Fed have agreed to disagree," Treasury Under Secretary John D. Hawke Jr. said in an interview Wednesday. "We have not been able to resolve our differences. Secretary Rubin and Chairman Greenspan see each other all the time. I'm sure it comes up, but we have not been carrying on negotiations."

To underscore the point, White House Chief of Staff Erskine B. Bowles vowed in a letter last Friday to Senate Banking Committee Chairman Alfonse M. D'Amato that President Clinton would veto the bill in its current form because it weakens national bank powers and heaps regulatory costs on small banks.

The letter prompted major spin doctoring by lobbyists. Supporters said it showed the White House is worried the bill has gained momentum and that Mr. Bowles' lack of specific demands invited compromise. Opponents said it strengthened the banking industry's negotiating hand and endangered the bill.

"The reason for the letter was that some lobbyists were spreading the view that the veto threat should not be taken seriously, that it was only the secretary's recommendation," Mr. Hawke said. "We wanted to set that straight and make it clear the strength of our view is shared in the White House."

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