A last-minute legislative switch has cost Texas banks their chance to sell insurance from anywhere in the state, and they now must wait two years before trying again.

Gov. George W. Bush Jr. was expected to sign a bill passed this year by state lawmakers that would have broadened the insurance powers of state- chartered banks. Instead, he vetoed the legislation this week after an unrelated amendment was added that he said "would have jeopardized public safety."

That amendment would have taken bail bondsmen off the hook for suspects who flee. The veto means that Texas bankers will now have to wait until the next legislative session, which is not until 2001.

"It is a very unfortunate situation," said Christopher L. Williston, president and chief executive of the Independent Bankers Association of Texas. "We spent as much time and effort on this as anything the whole session, and now we are sunk."

Texas banks were granted limited power to sell insurance in 1997 but only through branches in towns with fewer than 5,000 people.

The vetoed bill was the result of a compromise between banks and insurance agent trade groups and would have let state banks sell insurance anywhere in the state.

Catherine A. Ghiglieri, commissioner of the Texas Department of Banking, said she was "stunned, and very disappointed" by the veto. She said the legislation was needed to keep state-chartered institutions competitive with national banks.

The Office of the Comptroller of the Currency, which regulates national banks, has permitted them to sell insurance since 1996, when the Supreme Court ruled that the agency could override state laws restricting bank sales of insurance.

"This bill was important because it is so easy for national banks to get around the town-of-5,000 rule," Ms. Ghiglieri said. "It is a real shame."

The bill, similar to legislation enacted this year in Florida, came after years of discussions between bankers and insurance agents. It would have made Texas the 35th state to grant broad insurance powers to its financial institutions, according to the Conference of State Bank Supervisors.

Insurance agents would also have benefited under the legislation. Ernie Stromberger, executive director of the Independent Insurance Agents of Texas, said his members were excited about a provision that would have allowed "reciprocal" licensing, letting agents sell insurance in certain other states.

And if banks were allowed to sell insurance, some might be interested in buying agencies, enhancing "the value of any agency that is in the market to sell," Mr. Stromberger added.

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