Stung but not defeated by President Clinton's veto last month, a group of banks and other financial services companies are hoping to work out a deal to create a tax break for U.S. financial firms operating overseas.

Companies such as Citibank, Household International, and Ford Motor Credit, as well as the American Council of Life Insurance, are working to get administration support for a measure that would allow them to defer taxes on income earned by offshore units.

President Clinton, in the first use of line-item veto authority that Congress granted last year, struck the measure from the Balanced Budget Act passed in July.

The President's surprise move appeared to drag the banking industry into what is expected to be a high-profile court battle over the line-item veto's constitutionality. But financial industry lobbyists say they aren't itching to rumble.

Instead, they hope President Clinton and Treasury Secretary Robert E. Rubin are in a mood to negotiate. Lobbyists representing major lenders- including Denise G. Ferguson of American Express Co., Jeffrey Levey of Citicorp, and Hal A. Doersam of Household International-have begun talks with lower-level Treasury staffers.

"Mr. Rubin said deferral is the right thing, so we're taking them at their word," said one lobbyist who asked not to be identified.

When he vetoed the provision, the President said the measure would have encouraged fraud.

Despite the negotiations, ACLI spokesman Kenneth Vest would not rule out a battle if an agreement is not reached. In addition to pushing for a veto override, he said, the industry could argue in court that the measure isn't eligible for a line-item veto.

NationsBank Corp.'s pending takeover of Barnett Banks Inc. could make it easier for Congress to pass financial reform legislation.

By absorbing its leading rival in the red-hot Florida market, NationsBank would also be eliminating one of the steadfast opponents to various financial modernization plans introduced on Capitol Hill in the past two years.

"Barnett has been one of the naysayers from day one," said one lobbyist at a money-center bank. "This deal is likely to be beneficial to chances for legislation, because one of the principal foot-draggers is no longer around."

NationsBank, on the other hand, has remained at the negotiating table to develop a deal the banking, insurance, and securities industries could accept. The Charlotte, N.C., company has a burgeoning securities operation and would benefit greatly from legislation allowing cross-industry mergers.

Lobbyists Jack Lichtenstein and David Miller of Federal Legislative Associates, are hoping to revive an industry coalition that vainly opposed a new tax on frequent flier miles.

This week the lobbyists put out feelers to the coalition's members-some 20-odd banks, credit card issuers, airlines, hotels, and rental car companies-to find out whether the group wants them to push Congress to remove the levy next year.

The new tax, passed as part of the balanced budget package, requires credit card issuers to pay a 7% excise tax on mileage points they purchase from airlines.

Mr. Lichtenstein said it's too early to say how many will actually stay on board, but his sales pitch is well honed.

"The full weight of this tax is hidden," he said. "It's a special tax that draws on marketing incentives and may set a precedent for the future."

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