BANK ISSUES DISCUSSED AT DEMOCRAT COFFEE.

Byline: David E. Sanger and Stephen Labaton The New York Times

When President Clinton, his Treasury secretary and the country's top bank regulator met in May at a Democratic Party-sponsored coffee with some of the nation's most powerful bankers, at least three big issues, worth billions of dollars in potential profits for the financial industry, were on the table.

The bankers were particularly angry about an administration-backed plan that would require them to bail out the savings and loan industry, their competition, Treasury Secretary Robert Rubin said Thursday. They also debated proposed regulations and legislation that would determine whether banks would be able to expand into other businesses.

Describing his role in the meeting for the first time, Rubin stressed that, on the savings and loan issue, the Clinton administration ``came out against the position of the bankers, on the merits.'' Congress passed a law a few months later that required the banks to contribute to the savings deposit fund for the savings and loan industry, though in lesser amounts than the administration first proposed, and Clinton signed the legislation in September, weeks before the election.

Rubin said the fact that the decision went against the bankers supported Clinton's contention at a news conference on Tuesday that while he used the coffees to give major contributors and other potential supporters a hearing, the sessions did not guarantee them a favorable result.

But members of Congress and even some administration officials have criticized White House discussions of important policy issues at meetings arranged by fund-raisers.

These concerns have now jeopardized the Cabinet nomination of Alexis Herman, whose Office of Public Liaison at the White House organized the session with the bankers. Herman was nominated earlier this month to head the Department of Labor.

Herman decided not to attend the meeting with the bankers when she belatedly discovered that it was sponsored by the Democratic National Committee. There is no indication, however, that she informed Rubin or other administration officials.

``I don't know what I knew'' about the sponsorship of the meeting by the Democrats, Rubin said in an interview Thursday. ``I prepared for it as a full discussion of policy issues between the president and the financial services industry'' and even brought a briefing paper prepared by his staff.

``I never thought of this meeting as political,'' said Rubin, who also said he has no memory of seeing Donald Fowler, the Democratic National Committee's chairman, and Marvin Rosen, the committee's finance chairman, at the meeting. He said he does not doubt they were there, as they have said.

Because he did not regard the meeting as a political event, Rubin said, it did not strike him as strange that Eugene Ludwig, the top bank regulator and Clinton's friend for more than 30 years, attended.

``We have a lot of meetings with the financial community,'' he said.

At a press conference on Tuesday, Clinton said that in retrospect it was inappropriate for Ludwig to attend a Democratic Party function because Ludwig regulates most of the bankers who were at the session. Rubin concurred on Thursday. Ludwig was the first to make that point. He said last Friday that he was sorry he participated in the meeting when he later learned the Democrats sponsored it.

Saving the savings and loan insurance fund was not the only issue confronting the bankers when they came to Washington that morning.

Many were also lined up either for or against a bill that would have limited the comptroller of the currency's ability to give banks an entree into the insurance business. The bill, authored by Iowa Republican James Leach, the chairman of the House Banking Committee, was opposed by the administration.

Similarly, the bankers were divided over a proposal to overhaul the regulations that expanded the ability of some banks to go into the securities business. That proposal was adopted by the comptroller after the November presidential election.

Billions of dollars were at stake on both issues, and the details were the source of infighting among banks, insurance companies and securities firms.

After the White House coffee broke up, many of the bankers held a separate session, which no government officials attended, at which they decided to oppose Leach's bill. Ultimately they were successful. A month later, the legislation died before it even reached the floor of the House, paving the way for the Treasury to announce a series of new initiatives that gave nationally chartered banks greater latitude to enter new businesses.