Industry officials and activists are squaring off over provisions in the House financial reform bill that would require public hearings for most big bank mergers.

Covered are deals that would have "substantial public impact" on the community and involve at least one institution with more than $1 billion of assets.

"I consider this one of the most important provisions in the reform bill," said Robert Gnaizda, general counsel at the Greenlining Institute, a San Francisco advocacy group. "It is more important than imposing specific reinvestment requirements on institutions."

But bankers oppose the measure, claiming the few public meetings the Fed has held under current law have been pointless. "There is no new information conveyed in these hearings," one bank lobbyist said. "The hearing is strictly a thing where the bank gets savaged by the community for several days."

First Union Corp. general counsel Marion A. Cowell Jr. has urged the American Bankers Association to fight the provision, saying it would "dramatically expand the already burdensome application process and the ability of opposition groups to challenge bank merger transactions."

However, the ABA's chief lobbyist, Edward Yingling, said the measure would be acceptable if lawmakers clarify that the Fed's decision on whether to hold a hearing may not be appealed. "We generally prefer these things not be in the bill," he said. "But the concept is something we generally could accept."

Joe Belew, president of the Consumer Bankers Association, said the provision would require multiple hearings in every big bank merger. "There is not enough discretion being given to regulators," he said. "Hearings add a tremendous amount of time and expense. They are just not necessary all the time."

Activists countered that the hearings give the community a tool for communicating directly to the chief executive and other senior bank managers. "Banks should look at this as an opportunity to learn what the needs are of their market," said John E. Taylor, president of the National Community Reinvestment Coalition.

"It is rare for a CEO to hear criticism," Mr. Gnaizda said. "That is why this would be healthy for banks."

Hearings also force banks to disclose their plans for the merged institution, he said. For instance, two banks with outstanding Community Reinvestment Act ratings could decide to dump their residential mortgage unit. "This would alert people that this merger may be a good thing or a troubling thing for my community," he said.

The provision was approved by the House Banking Committee March 11 after its sponsor, Rep. Bruce Vento, D-Minn., agreed to soften it. He originally wanted the Fed to hold a hearing in every community affected by a merger.

The fight over the House provisions has been overshadowed in recent weeks by action in the Senate, which approved its version of financial reform last week. Regarding CRA, the Senate bill would exempt small banks from the law and shield institutions with satisfactory or better ratings from merger protests. The Clinton administration has vowed to veto the bill.

The brawl over community reinvestment issues has some banking companies urging both sides not to lose sight of the fact that the House financial reform bill would permit the melding of banking, insurance, and securities firms.

"What is at stake . . . is the competitiveness of the United States financial services industry," said Michael E. Schlein, director of corporate affairs at Citigroup Inc. "There are many other issues involved, but they pale in comparison."

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