House Panel Seeks Curbs on Bank-Insurers : Legislation: A subcommittee voted to make it more expensive and less desirable for banks to affiliate with insurance companies.

A House panel waded into the heart of the Bush Administration’s banking reform bill on Tuesday, debating how the nation’s financial system should be structured and how banks should fit in.

Meeting in its fourth session on the bill, the House Banking financial institutions subcommittee voted to restrict banks from expanding further into the insurance industry except through a complicated corporate structure that involves two holding companies.

The structure, adopted by voice vote on an amendment by Reps. Frank Annunzio (D-Ill.), Chalmers Wylie (R-Ohio) and Doug Barnard Jr, (D-Ga.), would make it more expensive and less desirable for banks to affiliate with insurance companies.

While discouraging banks from expanding into insurance, the measure would preserve the existing insurance business of many state-chartered banks.

The Administration, favoring a greater degree of combination between the two industries, had opposed the amendment. But Assistant Treasury Secretary Jay Powell said its adoption was not a serious defeat.

“Our bill can still move forward as a comprehensive package, even with that amendment,” he said.

On another matter, the panel directed federal bank regulators to devise uniform standards for real estate lending. The measure, by Rep. John LaFalce (D-N.Y.), is intended to prevent banks from continuing to make the kinds of risky commercial real estate loans now troubling many banks in New England and the rest of the East.

The 36-member subcommittee postponed action on several of the most controversial proposals before it, delaying debate until the full 52-member banking committee meets next month.

Rep. Jim Leach (R-Iowa) withdrew an amendment that would have deleted the Administration’s proposal to allow commercial companies such as General Motors and Sears to own banks. Leach said he believed that the amendment had a better chance of passing in the full committee.

He also said he would try again on another amendment, which would have allowed only strongly capitalized banks to establish branches across state lines and to enter the securities business.

It was defeated on a 19-12 vote. The Administration’s proposal, which was preserved in the bill, also aims at restricting new privileges to stronger banks. However, it allows regulators more leeway in applying that principle.

One far-reaching proposal, opposed by the Administration, received praise from many panel members before its sponsor, Rep. Charles Schumer (D-N.Y.), agreed to delay debate until the full committee session.

Schumer would re-establish controls on the interest rates banks pay on deposits.