WASHINGTON - Closed-door negotiations to include bank insurance provisions in Glass-Steagall legislation broke down Thursday when insurance representatives refused to support legislation that preempts state insurance laws.

Representatives of the insurance, securities, and banking industries met with staff members of the House Banking and Commerce committees for two hours Thursday morning to discuss the pending Glass-Steagall repeal legislation.

The talks were aimed at a compromise that would let banks affiliate with insurance companies under a holding company but bar the Comptroller of the Currency from giving banks new insurance powers.

However, the affiliation provision would require Congress to preempt state laws, and that drew opposition Thursday from insurance groups, including the Independent Insurance Agents of America.

"The agents' new hard-line position is a big step backward," said Philip S. Corwin, a lobbyist for the American Bankers Association.

"It's hard to see any basis for an agreement if financial service holding companies with insurance operations cannot exist in all 50 states," added Mr. Corwin, who attended Thursday's meeting.

Robert A. Rusbuldt, vice president of federal affairs for the insurance agents, said his industry's position coincides with a bill introduced by Commerce Committee Chairman Thomas J. Bliley Jr., R-Va.

"The whole purpose of that bill is to make it clear that state insurance law is prevalent on these bank insurance issues," Mr. Rusbuldt said. "What this means to ongoing negotiations, I don't know."

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