WASHINGTON - The House Banking Committee began work Wednesday on regulatory relief legislation that appears threatened by partisan bickering and industry opposition to provisions limiting national bank insurance powers.

The panel's 22 Democrats and independent Bernard Sanders are angry over a section of the bill that would scale back the Community Reinvestment Act and appear likely to vote en bloc against the measure.

"Every indication is that just about everyone will line up against it," said Rep. Floyd Flake, D-N.Y., referring to his fellow Democrats.

Only three Republican votes would then be needed to torpedo the bill, and bank industry lobbyists said Wednesday they believe they have at least that many and probably more.

Although regulatory relief is the banking industry's top legislative priority, bankers are angry over language in the measure that would bar the Office of the Comptroller of the Currency from approving new insurance powers.

"Unless banks are able to offer innovative new products, we won't be around in 20 years - no matter how much regulatory relief we get," said John Heasley, general counsel for the Texas Bankers Association.

Mr. Heasley, in town for the banking committee deliberations, said his association is strongly opposed to the bill because of the restraints on the comptroller.

Paul Equale, chief lobbyist for the Independent Insurance Agents of America, which supports the restrictions on the Comptroller's office, expressed concern about the bill's prospects.

"There's obviously a possibility" that it could be voted down by the banking committee, he said.

Likewise, Edward L. Yingling, top lobbyist for the American Bankers Association - which now opposes the measure - expressed cautious optimism that it could be defeated.

"There's a lot of concern among Republicans" about the Comptroller restraints, he said.

Despite the growing consensus that the bill is in trouble, there are a number of unknowns.

First, the banking committee will be operating for the first time in years under a procedure that bars proxy voting. In the past, proxies made it easier for chairmen and bill sponsors to predict the outcome of votes. Now, the result depends in part upon how many of the panel's 50 members show up.

That could help Democrats who want to kill the bill. Some Republicans, torn between wanting to support Chairman Jim Leach and wanting to help the banks, could decide to stay away.

Also in doubt is whether Republicans will respond to pleas from the leadership and band together behind the bill, particularly if they sense that Democrats are acting in part to embarrass the panel's GOP chairman and House Speaker Newt Gingrich. Rep. Gingrich, Rep. Leach and others orchestrated the provision limiting the Comptroller's office.

"The House Republican leadership hasn't lost a vote yet," said Ron Ence, chief lobbyist for the Independent Bankers Association of America. "This is a real test for the Republicans."

The ABA's Mr. Yingling, though, wondered if the House leadership would be willing to spend much political capital on the measure.

"They can only go to members so many times and say this is one issue on which we have to stay together," Mr. Yingling said.

One key player could be Rep. Bill McCollum of Florida, a senior Republican who opposes the restraints. If Rep. McCollum votes against the measure, he could provide cover for more junior Republicans who would be reluctant to vote against their leadership.

Rep. McCollum said Wednesday, "I haven't made a commitment."

In the short run, the brewing political storm could prompt Rep. Leach to compromise with the banking industry. Longer term, Democrats expressed optimism that they could defeat the bill.

"If it passes as it is, it's dead on arrival at the White House," said Rep. John J. LaFalce, D-N.Y.

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.