Clinton Threatens To Veto Bank Bill By MARCY GORDON .c The Associated Press WASHINGTON (AP) -- President Clinton threatened to veto financial overhaul legislation proposed by Senate Banking Committee Chairman Phil Gramm, saying it fails to fully protect consumers and would hurt community lending laws. At the same time, Treasury Secretary Robert Rubin on Wednesday expressed the administration's ``strong support'' for a bipartisan compromise bill in the House. The Clinton administration supports in principle legislation to lift the Depression-era barriers between banks, securities firms and insurance companies. But the White House has threatened to veto several versions in recent years that took an approach it rejected. The proposal drafted by Gramm, R-Texas, is more in line with the views of Federal Reserve Chairman Alan Greenspan than those of the administration. The bill calls for most new financial activities to be conducted by affiliated companies within bank holding companies. In a letter to Gramm, Clinton said his proposal would ``undermine the effectiveness of the Community Reinvestment Act ..., a law that has helped to build homes, create jobs and restore hope in communities across America.'' In addition, Clinton wrote, the bill would ``provide inadequate consumer protection.'' His letter, dated Tuesday and released Wednesday, did not elaborate on that point. An administration official cited as an example a provision in the compromise House bill, but absent from Gramm's, that would require banks selling securities to make sure they are appropriate for a consumer's income and circumstances. The official spoke on condition of anonymity. ``I will veto the bill if it is presented to me in its current form,'' the president said. Gramm, in response, insisted that his proposal would not weaken the community investment law that banks must follow, but would ``restore its integrity.'' The 1977 law requires banks and thrifts to lend to the poor and minorities in their neighborhoods. Gramm's opposition to the law led him to block financial overhaul legislation in the Senate's waning days last fall. The legislation had earlier squeaked through the House by one vote. Under his new proposal, banks would not have to get a satisfactory community- lending rating from the government to set up holding companies to conduct new financial activities. ``Financial services modernization is of such overriding importance to the national economy that President Clinton will be compelled to sign'' the bill, Gramm said in a statement. The moves came a day before Gramm's Senate banking panel and the House Banking Committee were to vote on amendments to two separate financial overhaul bills. In the House, Banking Committee Chairman Rep. Jim Leach, R-Iowa, and Rep. John LaFalce of New York, the panel's senior Democrat, on Monday unveiled a bipartisan compromise bill. In a letter to the lawmakers Wednesday, Rubin expressed the administration's ``strong support.'' The Treasury chief said the bill ``would benefit consumers, businesses and communities.'' Both the House and Senate bills would create huge financial ``supermarkets,'' offering consumers checking accounts, mutual funds, insurance policies and much more. Ralph Nader and other consumer advocates have expressed concern that the legislation, by allowing banks, brokerage firms and insurers to merge and get more deeply into each other's businesses, could bring a dangerous concentration of economic power in fewer hands. The bills before Congress have been ``cobbled together from wish lists of the various industry groups,'' Nader told reporters Wednesday. ``In the process, the rights of consumers have been trampled or, more often, ignored.'' As an example, Nader cited the previous deletion from the House bill of a provision that would have required banks to offer low-cost, ``no frills'' checking accounts for low-income people. The Clinton administration, led by the Treasury Department, and Greenspan's Federal Reserve have long been at odds over how an overhaul of the financial services laws should be accomplished. The administration wants to let banks diversify through subsidiaries of the bank itself, not just through affiliates within the same parent holding company. That arrangement would increase the power of the Treasury's Office of the Comptroller of the Currency, regulator of nationally chartered banks. On the other side of the battle, bills letting banks into other kinds of financial activities through a holding company structure would expand the independent Fed's role in regulating financial services industries.
