Bush’s Banking Plan Hits Snag in the House : Legislation: A committee chairman is skeptical about some key points in the proposed overhaul, and that may delay action.

Rep. John D. Dingell, chairman of the House Energy and Commerce Committee, is trying to slow the legislative momentum of the Bush Administration’s proposed overhaul of the banking system.

By doing so, the Michigan congressman is going against the wishes of his party leadership.

Speaker Thomas S. Foley (D-Wash.) wants to shepherd a comprehensive banking bill through the House before Congress recesses in early August.

Assuming that the House Banking Committee acts by early July as planned, that would leave Dingell’s panel with only a few weeks to review the legislation before a House recess in August.

In an 11-page letter to Foley, released Monday, Dingell argued that he needed more time. He did not specify how much.

If Dingell’s long-expected move to try to assert more jurisdiction over the legislation is successful, it would hurt the banking package’s chance of passing intact.

Dingell is skeptical about key elements, including permitting commercial and industrial firms to own banks and allowing banks to affiliate with securities firms and insurance companies.

In the letter, Dingell raised a number of objections to mixing banking with insurance and the securities business, but he warned particularly about the “profound, negative effects on our economy” of allowing commercial companies to own banks.

“This complex and dangerous proposal should not be railroaded through without . . . scrutiny,” he said.

The Senate Banking Committee is expected to act on banking legislation as early as this month, allowing time for a Senate vote before the August recess.

But Dingell’s objections in the House threaten to cause a repeat of 1988, when a jurisdictional wrangle between Dingell’s panel and the House Banking Committee scuttled legislation mixing the securities and banking businesses.

If Dingell achieves a substantial delay, it could dim prospects of a broad-based reorganization of the banking system for years.

The Administration overhaul includes provisions replenishing the ailing Federal Deposit Insurance Corp. with taxpayer-backed borrowing.

If the broad-based bill were delayed several months or more, members of Congress likely would press to enact a bill dealing only with the FDIC.

That would leave the overhaul bill without a “must pass” provision, possibly delaying serious consideration of the overhaul until the next banking crisis.

In a separate development, the House Banking Committee chairman, Rep. Henry B. Gonzalez (D-Tex.), said in a letter that his panel will consider a dramatic reorganization of the regulatory system, combining four agencies into one.