DENVER, SEPT. 25 -- A closely watched hearing into the banking activities of President Bush's son Neil opened today with a former senior vice president of Silverado Banking, Savings and Loan Association testifying that he would have handled a $900,000 transaction differently had he known more about Neil Bush's business dealings.

On a day when protesters demonstrated against Bush on the steps of the Denver federal courthouse, Russel Murray provided the government with its first important piece of evidence in its attempt to prove that Bush failed to adequately disclose conflicts of interest while serving on Silverado's board. The Office of Thrift Supervision (OTS) is seeking sanctions against Bush, contending that he put his interests above those of the now-failed thrift.

Murray was the first witness to testify in what is expected to be a week-long hearing leading up to a December recommendation by an administrative law judge on whether the OTS can issue a "cease and desist" order against Bush. Such an order would aim to prevent Bush, who resigned from Silverado's board in August 1988, from engaging in conflicts of interests should he again serve as a director of a financial institution. The final decision on whether to issue the order rests with the director of the OTS, Timothy Ryan.

Murray told an administrative law judge that if he had known more about Bush's business ties to developer Kenneth Good, he would have sought legal advice before acting on Bush's request for a $900,000 line of credit for Good.

But Murray also said more information from Bush would not have made any difference to him in handling another transaction with Good. Murray testified that he would have recommended Silverado take a partial payment of $3 million from Good and forgive the remainder of $11 million in loans, even if he had known that Good at the same time had pledged to infuse $3 million into Bush's oil and gas firms. Murray said he knew from analyzing Good's finances that the developer could not fully repay his loans.

"His ability to pay any money to anyone was suspect," Murray said.

The hearing in a packed federal courtroom took place against the backdrop of two dozen shouting demonstrators, who gathered on the courthouse steps carrying signs that read "Give it back, Neil" and "Yes Neil, it is wrong to steal."

"I'm angry because I just paid cash on the line for my son's education for four years and now I've got to bail out these crooks," said Nancy Butler, who helped organize the demonstration for a group called Colorado Taxpayers for Justice. "We're mostly middle-class people and we're going to have to pay for this."

The hearing is unusual, not only because of the defendant's prominence, but because every other thrift or bank director who faced a cease and desist order in the past seven years settled the charges without a hearing, according to OTS officials. The hearing is mostly devoted to cross-examination by Bush's attorney, James E. Nesland, of regulators or banking experts who have submitted written testimony for the OTS.

Bush, one of three defense witnesses, is expected to testify Thursday. He did not attend today's hearing.

The government has experienced some difficulty in obtaining witnesses because of an ongoing criminal investigation into Silverado and a civil suit filed Friday by the Federal Deposit Insurance Corp. against Bush and 10 other Silverado directors or officers. The suit, which seeks $200 million in damages, alleges that Silverado's directors were negligent in protecting the thrift from loan and investment losses. The thrift's failure is expected to cost the government's insurance fund about $1 billion.

Michael R. Wise, Silverado's chairman of the board, asserted his Fifth Amendment privilege against self-incrimination today in response to all questions. Florian Barth, who served with Bush on the thrift's board, failed to show up to testify, spurring attempts to compel him to appear through subpoena.

Nesland's questioning appeared to be aimed at emphasizing the lack of guidance for board members and the responsibility of Silverado's management for assuring the propriety of transactions.

Under Nesland's cross-examination, Dorothy Van Cleave, a federal regulator who examined Silverado, testified that "there is no published standard" on when a board member should abstain from voting on a transaction because of a conflict of interest.