WASHINGTON - Banks may have gained an important ally in their battle against legislation that would bar the Office of the Comptroller of the Currency from expanding national bank insurance powers.

Rep. Richard Baker, R-La., is expected to offer an amendment that would delete the restraints on the Comptroller's office in a regulatory relief bill the House Banking Committee is scheduled to consider today.

Though the banking industry has railed against the proposed restraints on the agency, which were added to the bill over the weekend, some industry watchers said Rep. Baker faces an uphill battle in the face of Democratic opposition to the bill as a whole.

"The Democrats aren't going to lose any sleep about keeping (the Comptroller's prohibition) in, because the bill as a whole will be harder to pass with it included," said Karen Shaw, president of ISD/Shaw Inc., which tracks bank legislation and regulation.

"The odds are marginally in favor of keeping the Comptroller moratorium language in the bill," she added.

Today's deliberations on the measure are expected to become contentious even before the "Comptroller's moratorium" comes up. Nearly all Banking Committee Democrats are sternly opposed to the bill because of provisions such as those that would scale back the Community Reinvestment Act and increase consumers' liability in cases of credit card fraud.

Ranking Democrat Henry B. Gonzalez, D-Tex., referred to the bill, which was sponsored by Rep. Doug Bereuter, R-Neb., as "consumer grief."

"This markup is going to be a free-for-all, and the insurance issue is going to come up after hours and hours of debate on the regulatory relief provisions in the bill," said Edward L. Yingling, executive director for government relations for the American Bankers Association.

The administration, which also opposes the bill, on Monday strongly criticized the OCC restrictions. In a letter to House Banking Committee Chairman Jim Leach, Treasury Under Secretary John D. Hawke said that the Comptroller's moratorium is merely an attempt to circumvent a rift between the banking and insurance industries.

"The proposed prohibition would serve only to avoid the need to resolve an uncomfortable political standoff between banks and insurance agents, and would do so in a way that tips the balance in favor of the agents," Mr. Hawke said.

Mr. Hawke criticized the banking committee for failing to hear testimony on national banks' insurance sales.

"The proposed prohibition has thus far developed without public scrutiny - the product of private views and special interests," Mr. Hawke said.

A coalition of financial services groups,including the American Bankers Association, the Financial Services Council, and the Securities Industry Association, on Tuesday sent a letter to House Speaker Newt Gingrich, R- Ga., voicing their dismay over the Comptroller restrictions.

"Rather than promoting a comprehensive structure for modernizing our financial system, the approach currently being followed in the House of Representatives goes in the opposite direction," the letter said.

And adding to the flurry of communiques preceding today's deliberations was a letter from the Independent Insurance Agents of America, urging House Banking Committee lawmakers to oppose any amendments to remove the restraints on the Comptroller's office.

"This provision represents a delicate compromise between banking and insurance concerns over the prospective authority of the OCC," the letter said.

Jeff Meyers, spokesman for the agents, maintained that the OCC language does not roll back any current insurance powers of national banks.

"With respect to annuity sales, banks actually gain authority under this language, because such sales are expressly permitted even in those states which otherwise prohibit bank insurance sales activities," Mr. Meyers said.

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