Two staunch congressional opponents of bank securities powers are attempting to delay a proposed rule that would make it easier for bank companies to sell their own mutual funds.

In April, the Federal Reserve Board tentatively approved an interpretive rule that would let full-service brokerage firms owned by bank holding companies recommend funds managed by affiliates.

The Office of the Comptroller of the Currency already permits broker-dealer subsidiaries of national banks to recommend their own funds.

In late May, however, Reps. John D. Dingell, D-Mich., and Edward J. Markey, D-Mass., sent a letter to Fed Chairman Alan Greenspan questioning the regulator's authority to ease restrictions on banks' securities activities.

The Fed has yet to schedule a final vote on rule. A spokesman denied that the delay had been caused by pressure from the powerful congressmen, but several attorneys and bankers said they saw a direct correlation.

Probe Threatened

Rep. Dingell is chairman of the House Energy and Commerce Committee, which has jurisdiction over the Securities and Exchange Commission. Rep. Markey heads the the subcommittee on telecommunications and finance.

In their six-page letter the legislators threatened to "begin an examination of the activity of the board in regulating securities affiliates" if it liberalizes the mutual fund rules and takes other steps to dismantle "firewalls" between a bank and its securities affiliates.

"It is our belief that the actions proposed, if taken, will inevitably result in ... the mixing of securities products and insured and other traditional products and services of banks," the congressmen wrote.

The Fed is still working on final language for the interpretive rule, said spokesman Joseph Coyne. "Eventually it will get out."

Another staff member, who demanded anonymity, said he expected final approval of the rule and subsequent publication in the Federal Register "soon."

Rule 'Very Important'

Most bank-associated broker dealers are subsidiaries of national banks, not holding companies. But several bankers and attorneys said that passage of the proposed Fed rule will enhance mutual fund sales for holding company brokerage units. "We think it's a very important development for us," said Jim Daniel, president and chief operating officer of Barnett Securities Inc., a unit of Jacksonville-based Barnett Banks Inc. "Obviously, recommending funds managed by our own trust company would be a nice addition to our product line."

Mr. Daniel estimated that the brokerage's 85 employees could generate $200 million of additional sales of Barnett's proprietary Emerald funds if the Fed adopted the rule.

Barnett's brokers and investments officers sold $485 million of mutual funds last year, mostly from third-party fund companies, but are prohibited from recommending the bank's own funds unless a customer initiates the discussion.

Mary Kay Stern, vice president in charge of investment management products at Norwest Bank of Minnesota, said brokers at Norwest Investment Services have been constrained by the current rules. A change in the Fed rule would allow brokers to "actually make a suitable recommendation," she said.

If the regulations are loosened, banks would have to increase their disclosures to ensure that customers know mutual funds are not insured by the Federal Deposit Insurance Corp. But bankers seemed unconcerned about the tradeoff.

Said Ms. Stern: "Disclosure is something you'd make anyway."

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