Capitol Hill is the scene of a cat-and-mouse game between credit unions determined to expand their membership and banks committed to blocking them.

A full-page advertisement in Roll Call, the twice-weekly newspaper for lawmakers, caricatured three banking and thrift trade groups as bloated cats in pinstripe suits, sitting on a pile of money gorging themselves with cake. Credit union members appear as tiny, frightened mice.

"Banks want to have their cake and eat us, too," reads the ad by the Credit Union National Association and the National Association of Federal Credit Unions. "Fat cat bankers are trying to swallow up America's credit unions.

"Support legislation that will protect our right to choose where we borrow money and invest our savings."

The Credit Union Campaign for Consumer Choice, begun in mid-December, aims to raise $8.5 million from credit unions and millions more from vendors and other trade groups. For example, CUNA Mutual Group, a insurance company for credit unions, has donated $500,000.

Proceeds are earmarked for advertising, legal, and lobbying expenses. For example, the trade groups have hired high-price help from public relations giant Hill & Knowlton.

"This is only the beginning," said Daniel A. Mica, CEO of the Credit Union National Association. "We are no longer just skirmishing. We are now in a life-or-death battle."

Banking leaders denounced the credit unions' rhetoric, claiming they only oppose illegal expansions.

"They are trying to paint themselves as the good guy," said Kenneth A. Guenther, executive vice president of the Independent Bankers Association of America.

"It's much easier to scare their membership by saying we are out to get all credit unions," said Donald G. Ogilvie, executive vice president of the American Bankers Association. "Nothing could be further from the truth."

The rivalry between banks and credit unions had been simmering for years, but it boiled over last summer when a federal appeals court decided members of occupation-based credit unions must share a single common bond. Four North Carolina banks brought the suit in 1990 against AT&T Family Federal Credit Union, which serves employees at more than 150 unrelated companies.

The National Credit Union Administration has appealed to the Supreme Court, which is due to decide by Feb. 18 whether to take the case.

This legal loss has forced credit unions to shift the battle to Congress and public opinion. Industry trade groups have drafted legislation, backed by the NCUA, that would allow federal credit unions to serve multiple groups.

Banks will fight to preserve their court victories. James H. Chessen, the ABA's chief economist, said lawmakers must decide how many people should have access to subsidized financial institutions.

"Ultimately, every man, woman, and child will have credit union services paid for by the American taxpayer," he said, noting banks paid $20 billion in federal income taxes in 1995 while credit unions paid nothing.

While it's clear credit union membership will be a topic of hot debate- House Banking Committee Chairman Jim Leach has predicted it will be the most contentious financial services issue this session-it's unclear whether any legislation will be approved.

Rep. Leach has pledged to hold hearings on the issue and maintains an "open mind." But Sen. Alfonse M. D'Amato, chairman of the Senate Banking Committee, has said nothing on the topic yet.

NCUA Chairman Norman E. D'Amours said many lawmakers will remain on the sidelines until the Supreme Court acts on the AT&T Family case.

In contrast to the credit unions, the banking industry's reaction has been muted.

"We are not going to respond volley for volley," said Robert P. Schmermund, spokesman for America's Community Bankers.

Ronald K. Ence, IBAA's director of legislative affairs, said brochures and print ads are in the works and could be ready by spring. Trade group executives are expected to decide on a budget by next week, said Mr. Ence, adding that it would be "a drop in the bucket" compared with what the credit unions are spending.

Banks have been outgunned by credit unions on lobbying and public relations in the past. "The credit unions have historically been a much stronger lobbying industry than banks," Mr. Ence admitted. "We frankly haven't been able to energize our customers as much as they have."

In 1991, for example, 15,000 people converged on Washington to oppose legislation merging the NCUA into the Treasury Department. The credit union groups have no plans for a rally this year, but CUNA claims 3,000 credit union directors and managers will lobby their congressmen during a national meeting here in late February.

"You will see anything and everything we possibly can to win this battle," Mr. Mica pledged.

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