WASHINGTON - The nation's two largest bank trade groups are facing a rebellion from state affiliates angry over a legislative package that includes a moratorium on new bank insurance powers.

Frustrated by what they see as the "inside the beltway" mentality of the American Bankers Association and the Independent Bankers Association of America, the state associations are urging their members to lobby Congress directly.

On Monday, executives from more than 40 state bankers associations made a conference call to the ABA to express their displeasure.

The participants were not polled to determine which would actively oppose the bill, but none expressed support, said Roger M. Beverage, president of the Oklahoma Bankers Association and chairman of the ABA's state association division.

The IBAA is facing opposition from state affiliates in Texas, Kentucky, Illinois, Indiana, Ohio, Kansas, and Oklahoma, according to Christopher L. Williston, head of the Independent Bankers Association of Texas.

"What started out as a good, clean bill has been turned into a protectionist effort by the insurance agents to kick our butts," Mr. Williston said. "It's too high a price to pay."

He chairs the Conference for Community Bankers Association Executives, which represents state associations affiliated with the IBAA.

The ABA has maintained a "no position" stance on the legislative package, which includes a major regulatory relief initiative and a separate measure that would repeal the Glass-Steagall Act. The Independent Bankers group has offered grudging support.

But leaders of the rebellious state groups are arguing that the legislation will restrict their ability to add important insurance products at a time when they are being asked to pay $600 million a year to help with the rescue of the thrift insurance fund.

"If bankers are saddled with a new tax, they need a way to earn new revenue," said Mr. Beverage.

House Banking Committee Chairman Jim Leach, R-Iowa, has expressed sympathy for the bankers, but said they must accept the moratorium as part of a political tradeoff to get the bill through the House. A House vote on the package is slated for Oct. 26.

Lobbyists for the trade groups agree that they must pay some price for regulatory relief and Glass-Steagall repeal, though they have expressed hope that the insurance moratorium can be jettisoned from the bill.

However, Mr. Beverage and others argue that the legislation isn't worth the price of the Comptroller's moratorium.

In that role, he has asked state ABA and IBAA affiliates to send joint letters to push member banks to lobby Congress against the bill.

Without new insurance products, banks' earnings will be slashed by the payments on the Fico bonds issued for the thrift bailout, Mr. Beverage said.

"This is not just a bank CEO issue. It affects every bank employee and shareholder in the United States. That $12 billion is going to come out of their pockets in terms of salaries, benefits, and dividends," Beverage said.

Some analysts have estimated that the bank share of the thrift fund rescue - $600 million a year over 22 years - has a present value of $12 billion.

Mr. Beverage said an offer by Rep. Leach last week to lessen the Fico burden is not enough, because banks are already losing market share in loans and other traditional bank products, and new business lines are necessary.

Mr. Beverage said he hopes the state associations will sway the ABA to fight the House package. The ABA board of directors will take a vote on the proposal when it is completed, though no date has been set. The opposition of state associations will likely be a factor in that vote, said Edward L. Yingling, the ABA's chief lobbyist.

"The input of the state associations will be very important," he said. "Now it is clear that bankers at the grass-roots level are very concerned about the overall situation with banking legislation.

Kenneth Guenther, executive vice president of the IBAA, said he will meet with the state association executives at their annual meeting this weekend in Austin, Tex. Whether the IBAA will reassess its support for the Glass-Steagall/regulatory relief package is "a premature question," he added.

But the trade group's chairman, Texas banker John Shivers, said he is worried that opposition to the current proposal may lead to even more restrictive proposals later.

"The Leach bill is the best of the worst," said Mr. Shivers, who is past president of the Independent Bankers Association of Texas and chairman of Southwest Bank in Fort Worth. If the House effort fails, he said he believes the Senate will attempt a bill that is even less favorable to banks.

"I would hate to see state bank executives oppose Chairman Leach, who is the only chairman in years who is at least semi-friendly to banks," Mr. Shivers said.

In an effort to defuse the anger of state banking associations, Rep. Leach is scheduled to speak to representatives from several of the organizations today via a telephone conference, a House Banking staffer said.

Bob Harris, president of the Texas Bankers Association, which is affiliated with the ABA, said his organization is already opposed. "Regulatory relief is irrelevant if the industry doesn't have new product authority," he said.

Though Glass-Steagall repeal would allow banks to add new underwriting income, few have the expertise to enter that business, Mr. Harris said.

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