WASHINGTON - Treasury Department aides were negotiating Monday with congressional Republicans and representatives of the Securities and Exchange Commission and the Commodity Futures Trading Commission on draft legislation to protect banking products - particularly swaps contracts - from regulation by the nonbank regulators.

Senate Banking Committee Chairman Phil Gramm on Thursday proposed an amendment to the Gramm-Leach-Bliley Act that would explicitly bar the futures commission from regulating bank products as currently defined by the financial reform law. The proposal would also require the agency to seek permission from the Federal Reserve Board to regulate "any new banking product."

The House passed the Commodity Futures Modernization Act in October, but critics charge that it would insufficiently protect bank products from regulation by the futures commission and thus drive American business overseas.

Representatives from the futures exchanges have agreed to Sen. Gramm's new version of the legislation, which supporters hope can be revived with the Treasury Department's blessing and attached to an appropriations bill. Treasury officials, who would not comment Monday on the status of the negotiations or on the sticking points, have taken the lead on the bill for the Clinton administration.

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