Clinton administration officials claim the contentious question of mixing banking and commerce is a political call that only Congress can make.

When he takes a seat Tuesday before the House Banking Committee, Treasury Secretary Robert E. Rubin will give lawmakers two seemingly cut- and-dried options: allow banks to invest in nonfinancial companies or don't.

But though Mr. Rubin will try to pass these off as alternatives, both options mix banking and commerce.

Under his Option A, bank holding companies could invest some percentage of domestic gross revenues in nonfinancial businesses. (The administration is leaving it to Congress to set the limit, though 25% has been floated.)

After two years, nonfinancial firms could no longer enter the banking business via the unitary thrift holding company. Existing unitary thrifts would be grandfathered.

Under Mr. Rubin's Option B, bank holding companies would be barred from investing in any nonfinancial assets. Nonfinancial firms could continue to charter unitary thrifts.

Policymakers must choose between writing new laws to steer the future of financial ownership and regulation and simply ratifying the existing piecemeal system.

"The irony is we've always had banking and commerce," said Sam Baptista, president of the Financial Services Council. "What we're talking about are questions of degree and creating a structure that recognizes the realities of the marketplace versus one that basically is sticking your head in the sand."

According to Mr. Baptista, and many others who have spent the last decade lobbying for financial reform, recognizing what's happened in the market means permitting broad affiliations among financial and nonfinancial firms.

"Do you seize the initiative, recognize the realities of the market, and try to position the banking system-not for the next two years, but for the next 20 years?" asked Paul A. Schosberg, president of America's Community Bankers.

While nonfinancial firms already have access to retail deposits through a unitary thrift holding company, entry into the wholesale banking market also would be made possible under the Treasury's reform plan.

Woofies, or uninsured wholesale financial institutions, could be chartered as a state or national bank by any type of company, including nonfinancial concerns.

So the question for those who oppose banking and commerce is which option is better.

Option A at least limits the amount of cross-industry mergers. In addition to the revenue cap, the Treasury's plan would bar banking companies from merging with any of the 1,000 largest nonfinancial firms.

If Congress chooses Option B, it would be sanctioning unitary thrift holding companies, a move likely to entice even more nonfinancial companies to buy or charter thrifts.

The American Bankers Association is fighting Option B. If the thrift charter is retained and exploited by nonfinancial firms, Congress would be putting banks at a competitive disadvantage.

"Option B represents a congressional ratification of the unitary thrift concept, which means you'd have two parallel banking systems, one with greater flexibility and fewer costs," explained ABA chief lobbyist Edward L. Yingling.

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