Treasury Secretary Donald T. Regan yesterday predicted quick passage of long-awaited legislation to help banks and savings institutions combat the adverse effects of high interest rates and money market funds.

Other observers, however, say the Senate bill, scheduled to be marked up next week, is still too controversial to pass in its present form.

The Depository Institutions Amendments of 1982, introduced by Sen. Jake Garn (R-Utah), provide for a cashless bailout for troubled savings and loans and mutual savings banks, additional flexibility for federal regulators in arranging mergers, and new asset powers for banks and thrift institutions.

Regan, in an interview, called the legislation a "major step forward toward creating a level playing field among financial institutions and toward homogenization" of services. He said he was hopeful that if the Senate approved it in the next 30 or 45 days, the House would pass it as well before adjournment.

"The administration wouldn't want to see it put over until the spring of 1983," said Regan, who was instrumental in breaking the logjams that have held up this bill for a year. However, House Banking Chairman Fernand St Germain has promised to hold hearings on the Senate version before going to conference.

Under the compromise version released late Wednesday, thrifts would be able to put up to 10 percent of their assets into commercial loans by 1985. At the same time, interest rate differentials--the extra quarter point savings institutions can pay--would be phased out by Jan. 1, 1985.

In exchange, commercial banks received a pledge that a new insured account comparable to money market funds would be created within 60 days after enactment of the legislation.

In addition, banks and thrifts would be given the right to operate mutual funds through securities affiliates. Banks could also underwrite and deal in municipal revenue bonds through subsidiaries, but existing operations would not have to be moved into affiliates.

Small banks object to giving savings institutions the ability to make business loans, thus putting them in direct competition. But it is the securities powers issue that appears even more controversial.

Many members of Congress are said to be unhappy about alienating the securities industry just before the fall election by voting to give banks entry into their field.

Trade associations representing the mutual fund and securities industries indicated yesterday they would lobby hard for changes. The staff aide of a Republican member of the Senate Banking Committee confirmed yesterday that his senator was planning to introduce a substitute bill without the securities affiliates proposal.

Asked if the administration would support such a substitute, Regan shrugged and replied that a bill without this provision would not be "appropriate." After all, he said, "If a piano company Baldwin United can be in financial services, selling money market funds, real estate and commercial loans through subsidiaries, why not give the banks such powers at this time?"