Industry groups are expected to stop far short of endorsing proposed financial reform legislation in a hearing today before House Banking's financial institutions subcommittee.

Though most organizations support financial modernization, major disagreements remain. For example, lawmakers are likely to hear differing views on mixing banking with nonfinancial businesses, choosing a regulator for diversified financial firms, and merging the bank and thrift charters.

Rep. Marge Roukema, the New Jersey Republican who will preside over today's hearing, has introduced legislation that would allow bank holding companies to earn up to 25% of their revenue from nonfinancial business.

American Bankers Association president-elect William T. McConnell, in remarks prepared for the hearing, is expected to endorse Rep. Roukema's compromise approach.

While most banking groups, including the ABA, support Rep. Roukema's compromise position, groups like the Securities Industry Association and the Investment Company Institute want to go even further.

However, thrifts oppose Rep. Roukema's bill outright because it would eliminate current law that allows a single thrift to be owned by a nonfinancial firm.

F. Weller Meyer, president and chief executive officer of Acacia Federal Savings Bank in Falls Church, Va., is expected to tell lawmakers that limits on nonfinancial activities would unfairly force companies to sell their thrift operations.

Such divestiture is "a harsh prescription without any compelling public policy rationale," according to Mr. Meyer's prepared remarks.

Mr. Meyer, representing America's Community Bankers, is expected to criticize new charter proposals that would force thrifts to sell real estate investment and other businesses not allowed to national banks.

Adding to the disputes, Marcia Z. Sullivan, director of government relations for the Consumer Bankers Association, said her group will oppose attempts to bar bank loan officers from selling insurance.

The Independent Bankers Association of America is vehemently opposed to any mixing of banking and commerce.

By letting nonfinancial conglomerates acquire banks, Congress would set the stage for rapid consolidation and dampening of credit for small business and agriculture, according to the group.

"Our economy has prospered because of diversification, not concentration," wrote IBAA executive vice president Kenneth A. Guenther in a Feb. 7 letter to Treasury Secretary Robert E. Rubin.

On Thursday, the financial institutions subcommittee will hear from industry regulators. A third hearing is scheduled for Feb. 25, when former Federal Reserve Board Chairman Paul A. Volcker and consumer groups are slated to testify.

House Banking Committee Chairman Jim Leach, whose own legislation would forbid banks from mixing with commercial firms, has said he wants to finish work on a financial modernization bill by May. He plans to bring the legislation to a vote in the House by July 4.

Senate Banking Committee Chairman Alfonse M. D'Amato has pledged to introduce a broader bill that would eliminate barriers between banks and nonfinancial firms. Although his bill is expected soon, he has not said when hearings will begin.

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