With the Senate Banking Committee's vote on financial reform legislation put off until September, lawmakers are negotiating to make the controversial bill more amenable to bankers.

The latest talks have focused primarily on altering the provisions governing insurance activities, which the banking industry contends are biased against it.

Industry lobbyists said they are encouraged by the overtures but remain doubtful the legislation can be enacted this year.

"There does seem to be a real commitment among the chairman and the Republicans on the committee to work with us to produce a better product," said Edward L. Yingling, chief lobbyist for the American Bankers Association. "We would still have a lot of concerns to be met, and there is still very little time to produce a bill."

Besides changes to insurance provisions, committee Republicans also are said to favor stripping a provision from the House version that would require banks to offer low-cost accounts.

Yet lobbyists report no progress on one of the major sticking points holding up the legislation-the dispute between the Federal Reserve Board and the Treasury Department over whether new financial powers should be housed in holding company units or bank operating subsidiaries.

Any attempt to ameliorate bankers always creates the risk of alienating the insurance and securities firms and a handful of large banks that already back the bill. Committee Chairman Alfonse M. D'Amato told representatives of insurance companies and agents Monday that they must accept compromises favorable to banks, lobbyists said.

Supporters responded positively. "We applaud the new negotiations, and we think there is plenty of room to make this bill more acceptable to banks," Banc One Corp. lobbyist Annie Hall said.

Some opponents, such as Chase Manhattan Corp. and Fleet Financial Group, are reportedly softening their stances. But Chase lobbyist L. Thomas Block says the bank has always been willing to compromise but has seen nothing yet that would change the "antibank and unacceptable" limits on bank sales of insurance.

"We can't support it until the insurance provisions are taken care of," Mr. Block said.

Exactly how the insurance provisions might be fixed remains unclear.

In a meeting late last week with Senate Banking Committee member Phil Gramm, R-Tex., banking lobbyists listed several priorities that would amount to gutting the bill's insurance title. They included:

Eliminate provisions that curb the Supreme Court's landmark Barnett ruling that protects bank insurance sales from discriminatory state laws. That would include dropping the bill's use of an Illinois law as a model statute for state insurance laws.

Preserve the deference that federal courts give the comptroller of the currency's decisions on bank powers when they are contested by state insurance regulators.

Remove the requirement that banks must buy an insurance agency to initiate insurance sales in a state. At the request of Sen. D'Amato, the New York Bankers Association hosted compromise talks Monday among New York- based banks, state regulators, and insurance industry lobbyists.

One deal under consideration is replacing the Illinois law with a compromise struck last year among New York bankers, insurance companies, and agents. The New York law is narrower than the Illinois law, primarily requiring consumer disclosures and preventing tying of loans and insurance products, said Michael P. Smith, president of the New York Bankers Association.

"The banking and insurance industries in New York are in harmony as it relates to New York law," he said. "Maybe that could act as a catalyst for resolving the contentious insurance issues."

The same group plans to reconvene next week, he said.

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