Congressional handicappers are giving long odds that Congress will pass financial modernization legislation this year, or in the two-year life of this Congress. While the reportedly imminent nomination of Undersecretary of the Treasury John D. Hawke is a positive sign, partisan rifts may be too strong.

In comments at an insurance agents’ conference in Washington, Rep. Jim Maloney, D-Conn., a member of the House Banking Committee, warned that the key issue remaining is the role that the Treasury Department will play in the future of banking industry regulation.

He predicted that, "If the Treasury is not involved, Secretary Bob Rubin will recommend a veto of the bill to the president." Maloney, a supporter of the insurance industry, called the expansion of bank regulatory powers "dangerous and contradictory.

"Congress should not legislate advantages to one group or another," he said. His comments were made at the National Association of Professional Insurance Agents annual legislative conference, held in Washington last week.

Sen. Phil Gramm, R-Texas, chairman of the Senate Banking Committee, has committed himself to a financial modernization bill by the end of February and will meet with the panel’s ranking minority member, Sen. Paul S. Sarbanes, D-Md., this week to see if a bipartisan approach can be forged. And Reps. James A. Leach, R-Iowa, chairman of the House Banking Committee, and John J. LaFalce, D-N.Y., ranking minority member, have prepared different versions of financial modernization legislation. Three days of intense hearings on the issue will be held in mid-February, Leach said last week. Gramm has not yet planned hearings.

Isaac B. Lustgarten, a partner in Schulte Roth & Zabel in New York, said his talks with House Banking staffers indicate the Leach bill will be little changed from "the final state" of the legislation last fall, when a filibuster by Gramm and other Republicans effectively killed the bill.

But in a private briefing, those attending the conference were told to be pessimistic that the Gramm model will succeed. "The approach that Gramm is taking will only lead to ‘disaster,’" one congressional staffer told the agents’ group. "They are ramming this through," he said.