Senate Banking Committee Chairman Phil Gramm used Federal Reserve Board Chairman Alan Greenspan's visit to Capitol Hill Wednesday to cement their alliance against the White House on financial reform.

President Clinton has promised to veto the legislation unless it lets banks underwrite securities and do merchant banking through operating subsidiaries, but Sen. Gramm and Mr. Greenspan want larger banks to conduct these higher-risk activities only through holding company units.

Delivering his semiannual report on the economy to the Senate panel, Mr. Greenspan reprised his testimony last week before the House Banking Committee. In questions later, Sen. Gramm asked the Fed chairman whether he could compromise on the controversial operating subsidiary question.

"I want to be absolutely sure no one is confused: If the choice were op- subs or no bill, you would say no bill," Sen. Gramm said.

"That's correct," Mr. Greenspan responded. "As important as it is to get the Glass-Steagall Act repealed, it is far more important that it be done correctly."

Financial reform has passed both the House and Senate. Differences between the two bills must be reconciled by a conference committee. The House has yet to name its negotiators because the Banking and Commerce committees continue to disagree over who should be selected. A decision is expected by Friday. The Senate last week voted to send all 20 Banking Committee members to the conference.

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