Debate over financial reform moves this week to the House Commerce Committee, where significant changes are expected to tilt the legislation toward the securities and insurance industries.

But even before Commerce holds its first hearing, a key member is warning that the panel will not vote until the Senate approves its version.

"This has been the most difficult bill that I have ever worked on in my 19 years in Congress," Rep. Michael G. Oxley, R-Ohio, said last week. "It is the hope of our committee chairman, Tom Bliley, that the Senate act first this time to really show us the money."

After the Senate Banking Committee approved the bill March 4, partisan differences over Community Reinvestment Act requirements stalled the measure. Senate leaders had planned to iron out a deal the week of April 12, but have not met yet.

No progress has been made in the House since March 11, when the House Banking Committee approved the bill 51 to 8. House leaders have given Commerce until May 14 to vote on financial reform, but the committee is expected to seek an extension.

Most observers say timing is important, because financial reform needs to be enacted before Congress turns its attention to appropriations legislation this summer.

House Commerce's finance subcommittee holds the first of three hearings on the controversial legislation on Wednesday. The second is set for May 5; the third has not been scheduled.

Commerce is expected to scale back powers for bank operating subsidiaries, tighten securities regulations on banks, and rewrite other provisions in favor of the insurance industry.

The sole witness Wednesday, Federal Reserve Board Chairman Alan Greenspan, is likely to renew his argument that national banks should be required to conduct new powers in holding company affiliates, not direct operating subsidiaries.

The Fed chief is expected to urge the committee to undo the Banking Committee's compromise that would let bank subsidiaries underwrite securities and engage in merchant banking but bar them from insurance underwriting and real estate development. Mr. Greenspan wants to limit bank subsidiaries primarily to selling insurance and securities, and other relatively low-risk activities.

Rep. Oxley predicted the committee will oblige him. "The votes probably in our committee are for these arrangements being set up under a holding company," he said.

Treasury Secretary Robert E. Rubin has also been invited to testify. If Commerce guts the compromise on operating subsidiaries crafted by House Banking, the Clinton administration is expected to renew its veto threat.

Securities and Exchange Commission Chairman Arthur Levitt Jr. is expected to repeat his opposition to the bill on grounds that it shields too many securities activities of banks from SEC oversight. Rep. Oxley said the committee will try to accommodate him, adding, "The last thing I need is the chairman of the SEC publicly opposing the legislation."

For instance, the committee is considering narrowing the bill's list of securities activities that may be conducted inside the bank. That could force banks to move, or "push out," trust activities and derivatives that involve securities to holding company units or operating subsidiaries regulated by the SEC.

"Our fear is they want to push out activity that historically and traditionally has been done in the bank, particularly in the trust and fiduciary areas," said Larry P. LaRocco, managing director of the ABA Securities Association. "It would just be an assault on the whole banking industry to push out these activities ... and therefore really jeopardize the bill."

Changes in the limits on bank sales of insurance are also possible. Robert A. Rusbuldt, executive vice president of the Independent Insurance Agents of America, said his group will press to make it easier for state insurance commissioners to challenge federal regulators in court and give states more control over how banks sell insurance products than in the current bill.

That would undermine the compromise reached last year, said Edward L. Yingling, chief lobbyist for the American Bankers Association. "If you move away from that deal, it is highly likely you are going to kill the whole bill."

Whether the Commerce Committee will try to toughen or eliminate the restrictions on unitary thrift holding companies remains unclear. "We will let everybody take their best shot ... and see how it comes out," Rep. Oxley said.

On community reinvestment, Rep. Oxley said he agreed with Senate Banking Committee Chairman Phil Gramm's criticism and suggested it may be best to leave all CRA-related provisions out of the bill.

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