Did officials at the Federal Reserve Board and the Office of the Comptroller of the Currency get the same copy of the financial reform bill?

It's hard to tell by the way they are reading it.

Since mid-May when the House approved the sweeping reform bill in a 214- 213 squeaker, the two agencies have come out with opposite interpretations of various provisions. The warring is perhaps best exposed by the agencies' contradictory readings of bank insurance powers under the legislation.

"There is no diminution of the power of national banks to engage in the retail sale of insurance, particularly in the case of offices under $100 million," Fed General Counsel J. Virgil Mattingly Jr. wrote in a one-page letter May 19 to the Independent Bankers Association of America.

But acting Comptroller Julie L. Williams labeled the same provisions a setback to the insurance powers of national and state banks. She closed a five-page May 28 letter to the same group with a clear jab at the Fed:

"In sum, as you can see, any suggestion that the bill would have only a limited impact on banks' insurance powers is like saying that the Titanic only sustained a few dents."

Lobbyists said such wide disagreement leaves them in the lurch.

"This is why it has been extraordinarily difficult to fix the insurance provisions," said IBAA lobbyist Marty Farmer. "One side will have to give."

Some examples from the regulators' letters illustrate their divergent interpretations.

First, the Fed and OCC disagree whether the bill loosens restrictions governing where a bank must base its insurance sales.

The Fed says the bill makes it easier for banks to sell insurance because operating subsidiaries would be freed of the current rule requiring a base in a town with fewer than 5,000 people.

The comptroller agrees the so-called "place of 5,000" limitation is eased, but at a cost. Though bank operating subsidiaries, for the first time, could sell insurance from any location, they would have to comply with Fed restrictions on transactions between affiliates if they are based in larger towns. Labeling that requirement as "discriminatory," Ms. Williams said it would put an added regulatory burden on many banks.

How protected banks would be from state insurance regulators is another bone of contention.

The Fed says the bill would bar states from "prohibiting or significantly interfering" with national bank insurance sales by enacting into law the Supreme Court's landmark Barnett decision. The Illinois statute that lawmakers used as a model state insurance law is simple. Its requirements include licensing of agents, disclosures as required by current bank rules, and no linking of insurance and other products. An employee other than the lending officer must sell insurance products at a branch with more than $100 million of deposits. State laws that are more restrictive are not allowed.

The comptroller says the bill provides less protection because it codifies only a portion of the Barnett decision. The Illinois law can be interpreted many different ways.

Ms. Williams also complained about instances where the comptroller's authority is weakened, which Mr. Mattingly did not address. For instance, the Comptroller's Office would be stripped of the legal deference that courts give the agency's decisions when challenged by state insurance regulators.

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