Industry lobbyists face a tough call on how to play the community reinvestment controversy in the looming showdown on financial reform.

Senate Banking Committee Chairman Phil Gramm has relented on a provision that would exempt small rural banks from the Community Reinvestment Act, and has agreed to require a bank to have a "satisfactory" or better CRA rating to merge with an insurance or securities company.

But that may not be enough for Democrats negotiating the final version of the bill, or for the White House, which has repeatedly threatened a veto if any harm would come to the CRA. Democrats are expected to insist that a merging bank "maintain" a high rating.

Some lobbyists want to back the Democrats, arguing that the tougher language makes it harder for President Clinton to justify a veto. If lawmakers can satisfy the White House's objections on the CRA and privacy, the president may feel political pressure to sign the bill even if the legislation sides with the Federal Reserve Board in its turf fight with the Treasury Department over powers for direct subsidiaries of banks.

"I would rather give (Clinton) 'maintain' and dare him to veto on the subsidiaries," said one lobbyist, speaking on condition of anonymity. Others dismiss the suggestion. "We are not going to lobby Phil Gramm on that issue, because philosophically we are supportive," said Edward L. Yingling, chief lobbyist for the American Bankers Association. The CRA and operating subsidiaries are politically charged issues that lawmakers and White House officials will have to settle behind closed doors, he said.

The fight over the unitary thrift is getting tense.America's Community Bankers, the thrift trade group, last week tried to recapture its lobbying edge after a failed attempt at merging with the American Bankers Association. It issued a toughly worded letter to members accusing the commercial banking lobby of using "guerrilla warfare" tactics. And it blasted a recent proposal by Rep. Marge Roukema, R-N.J., to make the Office of Thrift Supervision a division of the Office of the Comptroller of the Currency, merge the deposit insurance funds, and prohibit commercial firms from buying unitary thrifts.

"Make no mistake, thrift opponents are attacking what they think is their easiest target, the unitary, but the hidden agenda has always been elimination of your thrift charter," the ACB letter warned. "It does not take great insight to see the end game: increased bank powers and elimination of a safe, healthy competitor."

In an Oct. 8 letter to ACB president Paul A. Schosberg, Rep. Roukema accused the group of "a complete mischaracterization" of her proposal. Far from eliminating the thrift industry, she said, her plan would protect it by abolishing the law that the bank and thrift charters must be merged before the funds could be combined and by preserving federal preemption of state laws that interfere with thrift powers.

"Many of the provisions in this proposal are strongly supported by your members," she argued, such as giving rebates on premiums when the combined insurance fund's reserve ratio exceeds 1.5% and restoring $980 million to the thrift fund by repealing its special reserve.

Kenneth L. Robinson, president of the National Association of Federal Credit Unions, does not plan to retire until April 1, but more than 100 people have already applied for his job. The trade group's board plans to hire his replacement by Jan. 1. Some ex-lawmakers are reportedly interested in the post, including former Democratic Rep. William H. Orton of Utah, who was working the hallways last week to lobby as many of the 450 people at NAFCU's annual legislative affairs conference as possible.

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