WASHINGTON — The future of a bill to ban commercial ownership of industrial loan companies may well rest in the hands of Sen. Richard Shelby, the Senate Banking Committee's lead Republican.

Though the panel has scheduled a vote for Wednesday on legislation from Chairman Chris Dodd, observers said its outcome has never been more uncertain.

If Sen. Shelby supports the measure, he could bring with him several other GOP members, and help ensure the legislation is taken up by the full Senate. If the Alabama Republican opposes the bill, however, it would effectively guarantee the bill would not be approved by the chamber in its current form.

"Where he comes down on this bill is going to be of critical importance," said Camden Fine, the president of the Independent Community Bankers of America, which is a strong supporter of the legislation.

Democrats have enough votes on the panel to pass a bill without any Republican support. But the Senate's closely divided nature means that few partisan bills are ever taken up, and they generally die after leaving committee.

Just which way Sen. Shelby is leaning right now appears impossible to tell. Some sources said he is liable to oppose the bill on the grounds that it does not go far enough. They said he objects to a provision that would exempt automakers from the ILC ban and another measure that would designate the Securities and Exchange Commission as a consolidated holding company regulator.

Staff members for Sens. Dodd and Shelby were in discussions on ways to resolve both issues, sources said.

"If Dodd can come to some sort of agreement with Shelby, I can guarantee that it's a bill that looks dramatically different than the discussion draft looked," said one lobbyist, who spoke on the condition of anonymity.

Sen. Shelby could alternately vote to support the bill without changes, but he could not use his status to attempt to persuade other GOP members of the committee and get the bill taken up by the Senate, sources said. That could leave fellow Republicans taking cues from Sen. Robert Bennett, R-Utah, the panel's No. 2 Republican, who opposes the bill, albeit for opposite reasons from Sen. Shelby.

Sen. Bennett has argued the bill goes too far in restricting ILC ownership, and he has appeared open to less stringent measures, including banning interstate branching by commercially owned ILCs.

Sen. Bennett's opposition is another obstacle any bill must overcome. Unless it wins broad support among Republicans, Sen. Bennett could put a hold on the legislation, effectively delaying consideration of it until his concerns are resolved.

When Sen. Dodd previewed a draft version of his bill late last year, the conventional wisdom was that the Connecticut Democrat would have to strike a deal with Sen. Bennett for it to move forward. Instead, Sen. Dodd's staff has negotiated with Sen. Shelby's staff, and left the Utah Republican out of the loop.

"Senator Bennett has not been part of the talks between Senators Dodd and Shelby, so he is unable to comment on any of the details of those discussions," a spokeswoman for Sen. Bennett said.

The uncertainty has added fuel to speculation that Sen. Dodd may be attempting to pass a bill out of committee, rather than get it enacted.

"The question is: Is the goal just simply to move it out of the committee … or is it to actually get something passed into law?" said a former Senate Banking Committee staff member, who spoke on the condition of anonymity. "The way it's headed right now is only to get it out of committee."

So far, at least, Sen. Shelby, who is known to play his cards close to the vest, has given few clues about his thoughts on ILCs.

"I don't know that we'll know until the markup on Wednesday," said another lobbyist, also speaking on the condition of anonymity. "We have to see both how many Republicans are supportive and how outspoken they are. Obviously, Shelby is important to that. If he supports the bill, that's a big signal to the rest of the committee. If he doesn't, that's a different kind of signal."

Sen. Shelby has made it clear he agrees with critics of the ILC industry — who have been prompted by the high-profile applications of Wal-Mart Stores Inc. and Home Depot Inc. — who are calling for restrictions on commercial ownership. (Both retailers have since pulled their applications.)

At a Senate Banking hearing in October, Sen. Shelby said commercial ownership of ILCs created the "potential for conflicts of interest on the part of the commercial owners of a bank which would jeopardize the bank's federally insured deposits."

But he added concerns. A House ILC bill passed in May would have established the SEC as a consolidated supervisor of ILC holding companies that specialize in securities. The SEC has used a consolidated program to authorize firms under a European Union model for umbrella companies.

But Sen. Shelby said the bill should not "ratify the SEC's consolidated supervisory entities program as an afterthought to the ILC debate."

Likewise, he is said to oppose allowing automakers an ILC carve-out, believing that a ban on commercial ownership should be comprehensive. Other Republicans also sounded hesitant at the hearing about allowing some firms to remain authorized by the loophole but closing the door to others.

"There was a lot of discussion about addressing the overall problem and not putting a patch on it," said Oliver Ireland, a partner at Morrison & Foerster LLP. Sen. Dodd's bill "looks to me like a patch. There were other Republicans who were also interested in the overall problem. I would think that Sen. Shelby would be talking to them as well about where they were and how this fits into bigger issues."

Still, backers of the legislation — most notably community bankers — said they think Sen. Shelby will ultimately be in their camp.

"He's always been a proponent of the separation of banking and commerce, and I don't see that changing," said Mike Washburn, the president and chief executive of the $251 million-asset Red Mountain Bank in Birmingham, Ala. "When the smoke clears, and the legislation comes out, I think he's going to remain in support of it."

A spokesman for Sen. Shelby declined to comment on progress in negotiations with Sen. Dodd's office.

"Sen. Shelby will continue to work with Chairman Dodd on the issue," the spokesman said.

Talking with reporters last week, Sen. Dodd said he was "hopeful we'll get some pretty broad-based support on the committee."

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