Trying to jump-start financial reform legislation, Rep. Marge Roukema has offered a compromise to end the turf war between the Federal Reserve and the Treasury Department over bank powers.

"If we are to get a bill, we must compromise on this issue," the New Jersey Republican wrote in a letter to House Banking Committee Chairman Jim Leach released Monday. "We are scheduled to adjourn in approximately four weeks. We need to start making progress."

Rep. Roukema's plan would let direct subsidiaries of banks underwrite securities and conduct other less risky activities but confine merchant banking to holding company affiliates. The House bill would permit merchant banking in all banks' subsidiaries, while the Senate bill would let only smaller banks do so.

Banks also would be barred from investing more than $100 million in their subsidiaries. The cap is intended to prevent these units from becoming so large that they could drag down their parent banks. The House and Senate bills would limit investments in each subsidiary to the amount a bank could pay in dividends, which could be as high as $500 million for the country's largest banks.

Rep. Roukema's plan would give the Federal Deposit Insurance Corp. -- instead of the Office of the Comptroller of the Currency, a Treasury unit -- the authority to review subsidiaries' applications for new powers. The FDIC would also supervise these units.

The FDIC already does this for state-chartered banks and is more independent than the OCC, Rep. Roukema argued. "Extending this process to national banks would be logical, promote uniformity in treatment, and insulate the process from potential political interference," she wrote.

Spokesmen for the Fed and Treasury declined to comment.

Separately Monday, Rep. Leach showed he is losing patience with Fed and Treasury officials. Speaking at an Institute of International Bankers conference here, the Iowa Republican said the two agencies had been given an unprecedented "carte blanche" to craft their own solution but so far have not taken advantage of it.

"If the Federal Reserve and the U.S. Department of Treasury cannot reach agreement on this subject, it is a failure of both institutions and a failure of governance in the United States," he said. "I am personally, completely prepared to come up with an alternative."

He did not, however, comment on Rep. Roukema's proposal.

The House-Senate conference committee on the bill plans to meet Wednesday but is not scheduled to consider the bank powers issue until next week.

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