Congress should not let nonfinancial firms acquire banks, Sen. Paul Sarbanes, D-Md., said Tuesday.

"I'm not in favor of breaching the line between banking and commerce," the Senate Banking Committee's ranking Democrat said in an interview.

Tearing down the barriers would lead to conflicts of interest, consolidation of economic power, and would restrict the availability of credit, he said.

Sen. Sarbanes predicted financial reform efforts would get bogged down if lawmakers and the Clinton administration insist on legislation allowing common ownership of banks and nonfinancial firms. "There's plenty to be done in the area of financial modernization without raising that large issue," he said.

Treasury Department officials and Senate Banking Committee Chairman Alfonse M. D'Amato have said they favor lifting restrictions on what sort of company may own a bank.

Separately, two other Democrats warned that farmers and small businesses would face a credit crunch if nonfinancial firms are allowed to acquire banks.

Sens. J. Robert Kerrey, D-Neb., and Kent Conrad, D-N.D., asked the administration in a January 24th letter to back off plans to permit common ownership of banks and commercial firms.

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