WASHINGTON -- The unfolding government securities scandal ensnaring Salomon Brothers Inc. could help derail pending bank reform legislation and may sidetrack lawmakers, at least for the moment, from considering further regulation of municipal securities, industry sources said yesterday.

Bank lobbyists said the Salomon situation could throw more cold water on measures to overhaul the financial industry, which faced an uphill battle in both the House and the Senate even before the alleged skulduggery by Salomon traders.

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