American Bankers Association president R. Scott Jones telephoned America's Community Bankers chairwoman E. Lee Beard to schedule a "clandestine meeting" for March 10, to discuss a merger of the two trade groups.

"I called her because I started thinking we really have a better than fifty-fifty chance to have financial modernization passed this year," Mr. Jones said.

In a conference call Monday announcing the deal, Mr. Jones said he had concluded that Congress would soon settle "one way or the other" the dispute that has divided the two groups-whether commercial companies should be allowed to buy unitary thrifts-and that the banking industry must be unified, Ms. Beard agreed.

The two ultimately broadened their top-secret discussions to include officers of both boards, who met here in April and then reconvened in Chicago in May and June. Those meetings built "considerable trust" between the two groups, Mr. Jones said.

Talks were kept confidential from other board members and staff, except when the negotiators informed ABA executive vice president Donald G. Ogilvie and ACB president Paul A. Schosberg two weeks ago.

An eight-member committee will hammer out a final deal by yearend. The ABA's representatives are Mr. Jones, president-elect Hjalma E. Johnson, first vice president Donald R. Mengedoth, and treasurer Harley D. Bergmeyer. ACB has tapped Ms. Beard, first vice chairman William A. Fitzgerald, second vice chairman David A. Bochnowski, and past chairman Cornelius D. Mahoney.


House and Senate Republican leaders met Tuesday in House Speaker J. Dennis Hastert's office but made little progress on picking the conference committee to compromise on financial reform.

Attending were Senate Majority Leader Trent Lott, Senate Banking Committee Chairman Phil Gramm, House Banking Committee Chairman Jim Leach, and House Commerce Committee Chairman Thomas J. Bliley Jr.

House leaders agreed to take the first procedural step Tuesday by calling up the Senate bill, replacing its contents with the House version, and sending it back to the Senate. But that does not necessarily mean the House bill gets the upper hand. Reps. Leach and Bliley are still arguing over the makeup of the House delegation, and Sen. Gramm and Rep. Leach disagree whose turn it is to be conference committee chairman.


Miffed that small banks tried to stall the House reform vote two weeks ago, Rep. Leach put the hard sell on the Iowa Independent Bankers over the weekend.

"No part of the financial community has been more mis-served by delay in passage of modernization legislation than community banks," Rep. Leach told bankers from his home state at a convention Saturday in Lake Okoboji, Iowa.

He tried to undo the perception that the bill would benefit only the Citigroups and Chase Manhattans of the world. Rep. Leach argued that the legislation would allow small banks to offer the kinds of investment and other products that their big competitors already have.

"Without new legislation, larger banks will continue to plumb law and regulation at the expense of less empowered community institutions," he said. "In this battle of Davids versus Goliaths, HR 10 is intended to be the community bankers' slingshot."

Record industry earnings are masking the huge profitability gap between big and small institutions, Rep. Leach warned. A recent Federal Deposit Insurance Corp. report, he said, showed that return on assets at the average small bank was 23 basis points lower than at the typical large bank in the first quarter.

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