WASHINGTON — Growing indications that President-elect Bush will nominate University of Chicago law professor Kenneth Dam to be the No. 2 official at the Treasury Department have renewed industry concerns that the agency’s potential leaders lack hands-on experience in financial services.

Industry observers said that if Mr. Dam is nominated, the under secretaries of domestic finance and international economics will have substantial sway in determining the agency’s approach toward banking companies and financial markets.

“This makes the under secretary positions really critical,” said Karen Shaw Petrou, managing partner of Federal Financial Analytics. The deputy secretary in this case will probably focus on broad policy, while the under secretaries would be key to the day-to-day outlook.”

Industry sources have for days predicted Mr. Dam will be nominated deputy secretary. Mr. Dam is a longtime friend of Treasury Secretary-designate Paul O’Neill, the chairman of Alcoa who recruited him to serve on its board in 1987. Mr. Dam was deputy secretary of state during the Reagan administration and was executive director of the Council on Economic Policy in 1973. He has also been president and chief executive officer of United Way of America.

Despite his broad resume, several observers had said that Mr. Dam shares some of Mr. O’Neill’s weaknesses, including a lack of experience on either Wall Street or in banking.

That perception fueled earlier rumors that Securities and Exchange Commission Chairman Arthur Levitt would be named deputy secretary. Industry sources said Mr. Levitt had pitched the idea to Vice President-elect Richard Cheney.

If Mr. O’Neill — who was scheduled to begin Senate confirmation hearings today — is confirmed along with Mr. Dam, analysts said, the new administration would have to pick subordinates with significant financial markets experience.

But industry sources said that lobbyist Joseph Seidel and banking lawyer John Dugan, neither of whom have such experience, have been mentioned for the post of under secretary of domestic finance.

Mr. Seidel is director and senior legislative and regulatory affairs counsel of Credit Suisse First Boston’s office here, which opened Jan. 1. He is also one of the Bush administration’s transition advisers for matters related to the Treasury Department. Previously, Mr. Seidel was a partner in the law firm of Williams & Jensen. He also served as general counsel to the House Banking Committee from August 1987 through December 1996.

Mr. Dugan is a partner at the law firm of Covington & Burling. Mr. Dugan was assistant secretary for domestic finance at the Treasury Department under former President Bush, and helped guide the 1989 savings and loan bailout through Congress. Earlier, Mr. Dugan had been the Republican general counsel of the Senate Banking Committee. He has also been mentioned as a possible Bush pick for comptroller of the currency.

Neither Mr. Seidel, whose office said he was out of the country, nor Mr. Dugan returned calls seeking comment.

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