WASHINGTON - Under legislation approved Tuesday by the House Banking Committee, community groups could no longer use the Community Reinvestment Act to delay mergers and other business plans.

The amendment to the regulatory relief bill before the committee, approved on a straight party line vote of 25-17, calls on regulators to take CRA compliance into account when examining banks. But agencies would no longer be able to hold up applications when antipoverty groups protest.

Also on Tuesday, banking committee chairman Jim Leach met with his panel's Republican members and said afterward that they were closer to agreement on a revised amendment to bar regulators from approving new insurance powers for national banks.

The restriction on the Comptroller of the Currency is so controversial that Rep. Leach is in danger of losing the votes of Republicans he needs to pass the bill. However, it has the support of House Speaker Newt Gingrich.

"I have some more modifications on the insurance language," said Rep. Leach. "It will be helpful."

Bankers hailed the CRA amendment approved Wednesday.

"A lot of our banks are extorted by community groups during the applications process," said Ron Ence, director of legislative affairs for the Independent Bankers Association of America.

"This has been a fundamental problem that community banks have had, and they have paid hundreds of thousands of dollars to community groups.

Rep. Bill McCollum, R-Fla., the amendment's sponsor, said community group protests have been "a very onerous burden" for banks.

"There is no good reason to make the application for a new branch a focus for the Community Reinvestment Act," he added. "I don't think that is an appropriate tool."

However, Democrats blasted the measure, saying it effectively guts the reinvestment law.

"There is effectively no more Community Reinvestment Act," said Rep. Joseph Kennedy 2d, D-Mass.

Since the regulatory relief bill was introduced earlier this year by Rep. Doug Bereuter, R-Neb., Republicans have "step by step, inch by inch, gone about eliminating CRA," he added.

"This is making it much too easy to circumvent CRA," added Rep. Thomas Barrett, D-Wis.

Other Democratic members argued that by simply taking CRA performance into account in overall evaluations of an institution, a poor CRA rating could be overshadowed by other factors.

"A very bad CRA rating could be outweighed by good work elsewhere" in a bank's performance, said Rep. Barney Frank, D-Mass.

Community group representatives said that the amendment makes it more likely that President Clinton will veto the bill if it passes Congress.

"This amendment is a real tragedy, but it's the beginning of a fight that will lead down the road to a veto," said Allen J. Fishbein, general counsel for the Center for Community Change.

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