WASHINGTON -- In a change of heart, the Clinton administration has decided to introduce major banking legisiation this year instead of next year, according to Comptroller of the Currency Eugene A. Ludwig.

Mr. Ludwig, the administration's lead bank regulator, is playing a major role in shaping the legislation. He said in an interview with American Banker that he will fight for changes that would let commercial banks compete on an equal basis with unregulated rivals.

Interstate, Insurance Plans

He will ask Congress to let banks branch interstate and sell insurance nationwide from inner-city locations. He will also ask that bank regulation be consolidated under one roof.

Originally, the administration said it would not move on major banking issues in 1993.

"As to whether there would be any appetite in Congress for banking legislation, I've got to say that my own crystal ball seems to be wrong. They seem to be up there dying to do more banking legislation," Mr. Ludwig said. "The timing [for a Clinton bank bill] looks like it is going to be this fall."

The administration still isn't set on a strategy. Yet to be decided: Should it introduce one bill or several? Should it ask for bank securities powers? Should it set community Reinvestment Act regulations for other types of financial institutions?

Wish lists like Mr. Ludwig's have been promoted by big banks for years, without much success. Things may be different this time around. Mr. Ludwig, a man few people had heard of before his nomination, appears to have an audience Capitol Hill.

One reason is he's the first national bank regulator in a dozen years to be a member of the majority party in Congress. And Mr. Ludwig, 47, isn't just ay Democrat; he is a close friend of President Clinton's.

He also seems to have gained some key allies among liberal Democrats by aggressively pursuing issues like mortgage lending bias and redlining during his first five months in office.

That some of his rhetoric has smacked of bank bashing might actually help banks. Democratic lawmakers were suspicious of Republican comptrollers because they seemed like cheerleaders set on helping banks at the expense of consumers.

"I'm not here to say. |What's good for the banks is good for America,'" Mr. Ludwig said. "I'm here to serve the public and this administration."

His tack will be to pitch bank powers in terms of what it can do for consumers and the economy. For example, if banks can sell insurance, that will bring costs down -- and that's good for customers.

System Seen at Risk

The economy needs a strong and active banking system to grow, Mr. Ludwig said in the interview, which was conducted last Friday. The country runs the risk of economic destabilization if banks are not allowed to enter other safe and sound financial services businesses, he said.

"The notion that banks are these big, powerful forces is crazy," he said. "The banking industry is a declining industry. . . . Deposits are flooding out every day into mutual funds."

Mr. Ludwig dismissed concerns that the industry could become too concentrated with interstate branching. There are too many other financial service providers, he said.

He is also unconvinced that interstate will harm community banks. "Interstate branching, if you look at what has happened in California and New York ... has not been the doom of the small bank," he said.

Mr. Ludwig's insurance powers strategy is interesting. He does not plan to go for broad legislation allowing banks to sell insurance anywhere. Instead he wants authority to let banks peddle policies from branches in poor neighborhoods.

"Do I see Citibank or B of A or whatever opening a branch in inner-city L.A. and selling insurance all over the country? Yes, and indeed I think that would be great," he said.

"Insurance is a labor-intensive business. If they open an office in South Central Los Angeles to sort of coordinate insurance sales all over the country, you would have hundreds of hundreds or even thousands of thousands of jobs."

Right now, the OCC allows banks to sell insurance from towns with fewer than 5,000 people to customers anywhere.

"Do you go up [to Capitol Hill] and seek full service insurance powers? You shouldn't need it. If you can sell from towns of 5,000 or from the inner city, that should be enough," Mr. Ludwig said.

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