WASHINGTON - Two District of Columbia council members are moving to bar Merrill Lynch & Co. from underwriting any district bond offerings until an independent investigation is conducted on the firm's side deal with Lazard Freres & Co. to generate interest rate swaps.

Merrill Lynch served as the counterparty in two district swaps in September 1991 and March 1992, when the firm's swap marketing and fee-splitting agreement with Lazard Freres & Co., the district's financial adviser, was in effect.

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