Treasury Secretary Robert E. Rubin is expected Wednesday to endorse a Democratic version of financial reform that would permit broad powers for national bank subsidiaries.

Rep. John J. LaFalce, the ranking Democrat on the House Banking Committee, has crafted a streamlined alternative to the bill introduced last month by the panel's chairman, Rep. Jim Leach.

Rep. LaFalce plans to introduce his bill at a news conference Wednesday- the same day that House Banking is scheduled to begin three days of hearings on Rep. Leach's bill. Mr. Rubin is scheduled to attend the press conference to show his support for Rep. LaFalce's bill, a spokeswoman for the congressman said Monday.

Among other things, the LaFalce bill would let bank operating subsidiaries underwrite securities and conduct merchant banking activities, an aide said. However, bank subsidiaries would be barred from underwriting insurance or developing real estate.

Support from Mr. Rubin is significant because it makes the LaFalce plan a stronger contender. It also would be the first time in the past two years that the administration has moved beyond threatening a veto to endorsing a specific bill.

"The administration and the Democrats have not always been together on this issue," said Karen Shaw Petrou, president of the ISD/Shaw consulting firm here. "Having a specific statutory vehicle blessed by committee Democrats strengthens Treasury's hand and Democrats.'"

Last year the Clinton administration threatened to veto the reform bill that passed the House and ultimately stalled on the Senate floor, because it would have curbed direct operating subsidiaries of banks.

Like the current Leach plan, that legislation would have required securities and insurance underwriting and merchant banking activities to be housed in holding company units. Direct bank subsidiaries would have been confined to insurance and other sales activities, and to powers already granted to national banks.

The LaFalce bill, which is more than 50 pages in length, would also repeal the Glass-Steagall Act separating investment and commercial banking and amend the Bank Holding Company Act to permit cross-ownership of banks and insurance underwriters. It calls for functional regulation and consumer protections such as anti-tying provisions and disclosures about the risks of uninsured bank products.

It also broaches the banking and commerce issue by letting a bank holding company own commercial businesses provided they produced no more than 15% of annual revenue.

Earlier drafts of the LaFalce plan avoided controversial insurance sales rules, but a LaFalce aide said some provision may be added.

The lawmaker does not plan to change the law governing unitary thrift holding companies.

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