reform legislation, Senate Banking Committee Chairman Phil Gramm said Monday that privacy protections may be a necessary part of the bill.

Speaking at a National Association of Federal Credit Unions conference here, the Texas Republican said that forcing banks to disclose how they handle confidential data is the best way to protect customer privacy. He said such a law would enable consumers to consider the quality of privacy policies when choosing financial institutions. "I don't have to do banking with you if I don't like your policy," Sen. Gramm said.

The Senate Banking chief reiterated his desire to tackle privacy issues in a separate bill, but he acknowledged Monday for the first time that strong resistance from other lawmakers and the Clinton administration may force him to give in.

The House bill contains "the most sweeping" privacy protections ever contemplated by Congress, he told reporters after his speech, and "I just can't pretend it's not there." (The House bill, among other things, would require banks and other financial institutions to have and disclose privacy policies and would let customers block information sharing with third-party marketers; the Senate version lacks these provisions.)

"Only a fool doesn't recognize there might be" privacy language in the final bill, which is being hammered out by a House-Senate conference committee, he said. "We are looking at the provisions in case my position does not end up prevailing."

But Sen. Gramm remains adamantly opposed to letting customers stop their bank from transferring data to third parties, but not to affiliates. That approach would favor diversified holding companies, which could trade information freely among sister companies, while hurting community institutions that lack these units and rely on partnerships with outside firms.

"I don't want to discriminate against American financial services institutions because they are small," Sen. Gramm said, adding later that he was undecided about whether the solution was to let customers block transfers to both third parties and affiliates, or neither.

Speaking at the NAFCU conference later, House Banking Committee Chairman Jim Leach voiced similar concerns about the privacy provisions imposing a competitive disadvantage on community banks, but he said exemptions already in the bill such as one permitting unhindered information swaps between banks and their check printers might be sufficient.

Both lawmakers, responding to complaints by Democrats, promised that the minority party would have ample opportunity to offer amendments to the Republican bill due out this week.

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