It faces a White House veto because Mr. Clinton believes the bill, which would lift the Depression-era barriers between banks, securities firms and insurance companies, fails to protect consumers and would hurt community lending laws.
House lawmakers, meanwhile, labored to draft a bipartisan compromise bill that also would rewrite the financial services laws. The Clinton administration, represented by Treasury Secretary Robert Rubin, indicated Wednesday its strong support for such legislation.
Both the House and Senate bills would create huge financial "supermarkets," offering consumers checking accounts, mutual funds, insurance policies and much more. 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.
Gramm's measure was adopted and sent to the full Senate by the Banking Committee, 11-9, with only the Republican senators supporting it.
"We're at an impasse before we even start," said Sen. John Kerry, D-Mass.
The committee also approved a GOP amendment exempting small banks, with less than $100 million in assets, from the community lending laws, which require banks and thrifts to lend to the poor and minorities in their neighborhoods.
"Every small banker in America chafes under" the 1977 laws, Gramm said, insisting that the government shouldn't dictate to banks what people or companies they can do business with.
In a party switch, Sen. Rick Santorum, R-Pa., voted against the amendment while Sen. Tim Johnson, D-S.D., voted for it.
Gramm said he regretted that the bill lacked the Democrats' support, and he promised to try to work out the differences. "This is the beginning of the process," he told his colleagues.
However, Gramm added, "I am increasingly convinced that the president doesn't want a bill."
In principle, the Clinton administration supports legislation to overhaul the financial services laws. But the White House has threatened to veto several versions in recent years that took an approach it rejected.
The proposal drafted by Gramm 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.
Sen. Paul Sarbanes of Maryland, the Banking Committee's senior Democrat, unsuccessfully pushed for adoption of an alternative bill he said would "put us on the path to having a presidential signature at the end of this enterprise."
Mr. Clinton "very much wants a bill," Sarbaes insisted.
In a letter this week to Gramm, Mr. 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."
Gramm, in response, insisted that his proposal would not weaken the community investment law that banks must follow, but would "restore its integrity."
Gramm's opposition to the law led him to block financial overhaul legislation in the Senate's waning days last fall. The legislation had squeaked through the House in May by one vote, 214-213.
Under his new proposal, banks would not have to get a satisfactory community-lending rating from the government to conduct new financial activities within holding companies.
Written By Marcy Gordon, AP Business Writer