The role of the Federal Reserve Board tops the list of contentious issues House Commerce Committee members are trying to resolve before they vote Thursday on financial reform legislation.

Rep. Paul Gillmor, R-Ohio, the panel's vice chairman, is working on an agreement with ranking Democrat John Dingell to roll back the Fed's authority over financial holding companies. Rep. Dingell's endorsement is necessary for the bill to gain bipartisan support, but the Michigan Democrat has opposed efforts to reduce the Fed's power.

Facing longer odds, Rep. Rick Lazio, R-N.Y., is expected to sponsor an amendment that would let banks own a limited amount of nonfinancial businesses.

"Without the ability to evolve, banks will be condemned to stagnation and death," he said.

Under legislation approved Friday by House Commerce's finance subcommittee, the Fed could examine any bank holding company affiliate, including securities and insurance companies that buy banks.

However, during the last week's balloting, Rep. Gillmor argued that the central bank should not examine nonbank holding company affiliates unless regulators say the federal payment system is at risk.

Rep. Gillmor also wants to eliminate the Fed's authority to set holding company capital requirements. Industry sources were optimistic that a deal would be reached to limit the Fed's examination authority, but predicted a tough fight over efforts to end its power to set capital requirements.

Fed Chairman Alan Greenspan has repeatedly told lawmakers that an "umbrella" regulator must set capital rules to ensure holding company safety and soundness.

But Edward L. Yingling, chief lobbyist for the American Bankers Association, said other regulators impose sufficient capital standards on holding company affiliates.

"This is going to be a more difficult issue to resolve, but there's a strong argument that you don't need capital requirements for holding companies if you already have them for individual operations," he said.

Last week, Rep. Rick Lazio withdrew a proposal that would let banks earn up to 10% of their revenue from commercial operations. Under that plan, banks would not be allowed to own commercial business with consolidated net assets greater than $750 million.

Rep. Lazio said he would consider decreasing the amount of nonfinancial earnings permitted to banks, but threatened to oppose the bill if some mixing of banking and commerce isn't allowed.

Last week, the finance subcommittee defeated on a 15-9 vote Rep. Lazio's proposal to allow unitary thrift holding companies to keep all the commercial businesses they owned at the time of the bill's enactment.

The New York Republican acknowledged that that vote does not bode well for efforts to let banks enter commercial businesses.

Still, he said he hopes to persuade lawmakers that the broader reform package will not be enacted if his plan is defeated.

"The Clinton administration has threatened to veto the bill," he warned.

(Though the administration has consistently backed mixing banking and commerce, no one at the Treasury Department is talking veto-yet.)

And although a host of other provisions are vigorously opposed by banks, industry sources predicted those issues will not be settled until Republican leaders reconcile differences between the Commerce panel's bill and legislation passed by the Banking Committee in June.

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