WASHINGTON -- Bankers won a round in the fight for product diversity when the Senate Banking Committee was forced to delay until next year a vote on legislation that would curb bank insurance powers.

Ten of the panel's 19 members must be present to form a quorum and only five members -- all Democrats -- were present for any period of time.

Members on both sides of the aisle were said to be unhappy about the prospect of voting on so controversial a bill in the. waning days of the congressional session.

However, Sen. Donald W. Riegle, D-Mich., chairman of the banking committee, promised the panel would return to the legislation in January. The panel's ranking Republican, Sen. Alfonse M. D'Amato of New York, has given assurances he would participate then, Sen. Riegle said.

Death Knell for Plan

Sen. Christopher J. Dodd, D-Conn., a strong proponent of interstate branching and the author of the insurance amendment banks opposed, said the delay may have effectively killed interstate branching for the current two-year session. of Congress.

"We have essentially 25 weeks of legislative work next year," he said, noting that the congressional year would be short because of elections.

"Like it or not, interstate will fail," he added.

For some banks, that may be good news. The Independent Bankers Association of America opposes interstate branching in general and was particularly upset with the Sen. Riegle's draft legislation.

That bill would have given banks free rein to purchase banks in other states, even if those states objected. States would still have been permitted to opt out of branching, meaning that new entrants would have been required to maintain separately chartered banks.

Industry Opposition

Virtually all of the industry opposed Sen. Dodd's insurance amendment, which they said as even more restrictive than legislation he attempted to move in 1991.

"It even regulates the ability of a bank to transfer a telephone call" to its insurance department, said Edward L. Yingling, chief lobbyist for the American Bankers Association.

The Dodd amendment would have taken other steps to separate banks from their insurance affiliates. For example, banks would not be permitted to share letterhead with their insurance department, Mr. Yingling said.

A law that permits national banks to sell insurance in towns of under 5,000 persons would be repealed and institutions with federal charters would instead be given only those powers available to state-chartered banks. National banks already engaged in such activities would be grandfathered.

The Dodd amendment would also have removed the authority of the Comptroller of the Currency to authorize new insurance powers as "incidental to banking." It would treat annuities as insurance products, available to banks only if authorized by states.

Sen. Riegle cited Republicans as the cause of the delay, saying they had "indicated they do not want to deal with this legislation at this time."

But a spokesman for Sen. D'Amato said the boycott was supported equally by both parties.

"Clearly there was a bipartisan majority that felt it was premature to mark up these two pieces of legislation," said Frank Coleman, a spokesman for the senator.

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