Lawmakers today begin casting the most crucial votes in the financial reform legislation's long and tormented history.

Never before has a bill to remove the barriers separating the banking, insurance, and securities industries advanced to a House-Senate conference committee vote. Yet rarely have its prospects been more uncertain.

How the 66-member panel settles tough amendment fights on four key issues -- unitary thrifts, privacy, new bank powers, and the Community Reinvestment Act -- will determine whether legislation will be enacted this year or be dead on arrival at President Clinton's desk. The final vote could occur as early as tonight; if not, consideration would resume Friday.

So far, partisan bickering has prevailed.

Republicans -- without input from Democrats -- blended the House and Senate versions of the bill and released their "compromise" Tuesday. That prompted catcalls from the minority party both about contents of the legislation and the process for drafting it. Talking tough, Clinton administration officials threatened a veto four times in the space of a week.

"This is the first time I've ever seen financial modernization legislation become partisan," said Karen Shaw Petrou, president of the ISD/Shaw Inc. consulting firm. "In the past, industry factions stopped the bill."

The administration continued to hammer away at the Republican bill on Wednesday for weakening CRA and denying banks needed powers.

Treasury Secretary Lawrence H. Summers extolled the virtues of the reinvestment law in a luncheon speech to the Enterprise Foundation. "The agenda here is not to expand CRA to other financial institutions, but we cannot permit anything that would in form or substance result in the erosion of the CRA."

Comptroller of the Currency John D. Hawke Jr. blasted the Republican restrictions, saying banks ought to be able to perform merchant banking and other new activities in direct subsidiaries because profit margins on loans are tight and banks need alternative revenue sources.

"Legislation that would shut off new opportunities to expand noninterest income can only serve to foster a concentration of earnings in revenue from conventional lending and consequently to increase the level of credit risk in the system, as banks are forced to compete more vigorously for the dwindling pool of good credits," Mr. Hawke wrote House Banking Committee Chairman Jim Leach.

Capitol Hill staffers and industry lobbyists predicted a battle royal today over limits on unitary thrifts.

The Republicans skirted the issue by barring nonfinancial companies from chartering thrifts, but remaining silent on whether commercial companies could purchase thrifts from existing unitary holding companies.

Rep. Leach, Sen. Tim Johnson, D-S.D., and Rep. Steve Largent, R-Okla., are expected to offer an amendment that would ban the mergers of nonfinancial firms with existing unitaries.

The American Bankers Association and Independent Community Bankers of America are rallying behind this proposal. "That will be our primary effort," said Edward L. Yingling, the ABA's chief lobbyist.

But Senate Banking Committee Chairman Phil Gramm and House Commerce Committee Chairman Thomas J. Bliley Jr. are expected to counter with an amendment that would let unitary thrifts be sold to companies that are "primarily engaged in" financial services. But companies that derive less than a set amount of revenue, say 65%, would have to get approval from the Federal Deposit Insurance Corp.

Rep. Ken Bentsen, D-Tex., is expected to offer an amendment that would allow unrestricted sales of unitary thrifts.

Meanwhile, lawmakers and activists from across the political spectrum said Wednesday that they would not give up on adding increased consumer privacy protections to the bill.

Sen. Richard C. Shelby, R-Ala., Sen. Richard Bryan, D-Nev., and Rep. Edward J. Markey, D-Mass., said they would introduce an amendment to prohibit financial services companies from sharing consumers' personal financial data with third parties or affiliates unless they receive a customer's written permission.

"The banking bill has become a privacy bill," Rep. Markey said. "Increasingly the public doesn't care about the banks if the banks don't care about the individuals."

Six financial services trade groups -- including the ABA, Securities Industry Association, and the American Insurance Association -- immediately attacked the proposal in a letter to Representatives Leach and Bliley and Sen. Gramm.

"It will result in broad industry opposition to this legislation," the letter said. "Such amendments will completely undermine a primary purpose of the legislation -- to increase innovation, provide greater convenience to consumers, and decrease costs."

On CRA, Democrats are expected to demand restoration of a House provision that a bank that has merged with an insurance or securities company must maintain a "satisfactory" or better CRA rating. Under the latest bill, the bank needs such a rating only when it files a merger application. However, Democrats may offer to lighten the penalties for failing to keep a strong CRA rating, which in the House bill included divestiture.

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