Collapse of Talks Casts Doubt on Bank Reform Legislation : Finance: Analysts say lack of a compromise will only intensify the battle between the bank and insurance lobbies.

Extensive negotiations to permit banks to affiliate with insurance companies collapsed Thursday, the chairman of the House Commerce Committee said, casting uncertainty over a major bank reform bill.

Rep. Thomas J. Bliley Jr. (R-Va.) had spearheaded talks in recent days to resolve the central dispute in the bill moving through the House: whether banks should be able to expand further into the insurance field.

“The parties are too far apart, and their commitment to their respective positions too firmly held, for such an approach to succeed at present,” Bliley said.

Bliley, speaking as two Commerce subcommittees were resuming hearings on the reform bill, said continuing the bank and insurance talks “would only jeopardize this window of opportunity to enact historic legislation modernizing our financial services industries.”

But industry analysts say the lack of a compromise could only complicate the bill’s prospects and intensify the battle between the bank and insurance lobbies.

The Commerce subcommittees are considering a bill sponsored by House Banking Committee Chairman Jim Leach (R-Iowa) that would repeal laws separating Wall Street firms and commercial banks. The bill passed the Banking Committee last month. It would streamline rules for these new hybrid institutions, which could offer a multitude of services.

Bankers say they cannot compete effectively under existing laws, written in the aftermath of the Depression, particularly against non-banking companies that can issue credit cards and home mortgages without the burden of bank regulations.

The insurance lobby objects to Leach’s bill because it does not rein in the Office of the Comptroller of the Currency, which regulates national banks and has allowed them to sell insurance and annuities.