The House Banking Committee on Wednesday continued its drive to knock down the barriers between banks and nonfinancial firms.

On a close vote, 25-23, the committee agreed to allow commercial firms to earn up to 15% of their U.S. revenue from banking assets.

Nonfinancial firms could own only one banking institution; any bank acquired by a commercial firm would have to have at least $500 million of assets and have been in business at least five years.

Supporters of the measure described it as a mirror image of a provision passed Tuesday that would allow banks to own a limited amount of nonfinancial assets. That amendment, however, had much broader support, passing on a 35-19 vote.

Members who voted for the new provision said they would create a two-way street for banks and nonfinancial firms.

"This seems like a question of simple equity," said Rep. John LaFalce, D-N.Y. "It's going to be beneficial to consumers and will bring more capital into the financial services industry."

Rep. Bill McCollum, the Florida Republican who sponsored the amendment, predicted securities and insurance companies would kill the entire reform bill if some mixing of banking and commerce were not permitted.

"If we don't do this, our bill is not going to move," he said.

But House Banking Committee Chairman Jim Leach, who has opposed any mixing of banking and commerce, complained the measure would add unacceptable risks to financial system.

"I think we're opening up a Pandora's box of problems," he said. "Taxpayers and the federal safety net may not be adequately covered. What happens if a commercial firm goes under?"

Rep. Leach also complained that the measure would not allow the Federal Reserve Board to have adequate supervision of commercial firms affiliated with banks. Rep. McCollum noted, however, that Fed approval would be required for any merger between a bank and a commercial firm.

Outside the hearing room, the American Bankers Association's chief lobbyist, Edward L. Yingling, complained that commercial companies buying banks would face less scrutiny than bank holding companies. "There is a difference in regulation," he said. "I think bankers would be troubled by it."

Robert Davis, director of government relations for America's Community Bankers, said the 15% cap on the revenue commercial firms could derive from banking assets is too low.

"The majority of successful unitary thrifts provide between 20% and 30% of their parent companies' income," he said. "They don't fit the limits of this bill.

Lawmakers are expected to decide whether to eliminate the thrift charter as part of the reform bill.

The committee also approved an amendment that would require banks to offer low-cost checking accounts in order to affiliate with securities, insurance, and nonfinancial companies.

Under the plan, sponsored by Rep. Maxine Waters, D-Calif., fees for the so-called "lifeline accounts" could not exceed banks' costs. Institutions, however, would be able to limit the number of checks allowed each month.

Rep. Waters said banks must be pressured to offer the accounts because all government payments will be made electronically in a few years. "Today, 20% of all low-income people don't have an account where these funds could be deposited," she said.

Mr. Yingling denounced the provision.

"We are totally opposed," he said. "This is a tremendous negative in the bill. Over time it could grow to become another Community Reinvestment Act."

By agreeing to the measure, committee Republicans showed that they are willing to attach some consumer provisions to the bill in order to win bipartisan support. In the last two weeks, Democrats have threatened to oppose the entire legislation if pro-consumer measures aren't included.

Other provisions passed by the committee Wednesday would:

Allow cross-marketing between bank insurance subsidiaries and insurance underwriting affiliates.

Establish an advisory council that would make recommendations to Congress and regulators for enhancing access to financial services.

Permit the Federal Reserve Board to transfer oversight of holding companies "not significantly involved in nonbanking activities" to other banking regulators.

Expand membership of a national regulatory committee to include a state banking regulator and a state securities supervisor.

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