The House will vote tonight on a massive bill to overhaul the financial services industry and allow mergers among banking, securities, and insurance firms.

The Rules Committee cleared the bill on Tuesday, agreeing to allow separate votes on amendments on operating subsidiaries and bank entry into commercial businesses.

Debate is expected to start by midmorning, and there should be a final vote at about 10 p.m. "It is going to be very contentious," predicted Rules Committee Chairman Gerald B.H. Solomon.

Lawmakers will vote on two amendments to soften proposed restrictions on operating subsidiaries.

The first, known as the LaFalce-Vento amendment, would let operating subsidiaries underwrite securities and engage in merchant banking. It also would eliminate a provision that would have weakened the ability of the comptroller of the currency to successfully challenge efforts in court by states to restrict national bank powers.

The other, known as the Baker amendment, would only permit operating subsidiaries to underwrite securities. But it would also exempt banks with less than $100 million of assets from the Community Reinvestment Act and prohibit the sale of unitary thrifts to nonfinancial companies.

Commerce Committee Chairman Tom Bliley and other lawmakers urged their colleagues to vote against any operating-subsidiary amendments.

"Numerous amendments have been filed that would permit banks to engage in risky securities and insurance-underwriting activities through operating subsidiaries," Rep. Bliley wrote in a letter to fellow lawmakers. "Don't get burned again-one savings and loan bailout was enough."

Lawmakers also will vote on competing amendments regarding the ability of banks to enter nonfinancial businesses. The bill currently would permit banks to earn up to 5% of their gross revenue from commercial activities. The so-called Roukema amendment would expand this to 10% and let the Fed raise the limit on a case-by-case basis to 15%.

The other amendments, sponsored by House Banking Committee Chairman Jim Leach, would bar banks from entering commercial businesses and give thrifts 10 years to divest any of their commercial businesses.

The Rules Committee also agreed to allow a vote on an amendment backed by the heads of the Banking and Commerce committees as well as by Rep. John Dingell, the ranking Democrat on the Commerce Committee, that would restrict the ability of banks to collect brokerage commissions and require regulators to study whether rules on consumer fee disclosures are adequate.

Earlier Tuesday, flanked by top Democrats on the House Banking Committee, Treasury Secretary Robert Rubin reaffirmed the Clinton administration's adamant opposition to the reform bill.

"We are strongly opposed to the bill in its current form," Mr. Rubin said, repeating his threat to recommend a presidential veto unless national bank powers are broadened.

He said the legislation "over time would, in our judgment, undermine or greatly shrink the scope of the national banking system" and "therefore undermine the ability of this or any future elected administration to have a meaningful role in banking policy."

The President needs authority over banks to craft economic policy, he said. He noted that President Clinton was able to reform the Community Reinvestment Act and mount a response in 1993 to the credit crunch using the executive branch's regulatory influence over the banking system.

Mr. Rubin showed little hint of budging, but offered to work with Congress to develop "a good financial modernization bill."

Rep. John J. LaFalce, D-N.Y., also lashed out at the proposed bill as flawed. "In its current form, this bill reduces competition, fuels concentration, leaves smaller- and medium-size banks at a serious competitive disadvantage, and flatly discriminates against national banks."

All sides predict a close vote. "I would say it is a toss-up," Rep. LaFalce said.

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