L. William Seidman, chairman of the Federal Deposit Insurance Corp., yesterday attacked several parts of the Bush administration's sweeping banking reform proposals, including one that would virtually eliminate the FDIC's role in overseeing the banks whose deposits it insures.

Seidman, testifying before the House Budget Committee, also reiterated his view that his agency could borrow enough money to cover the cost of failed banks over the next two years and keep the FDIC's bank insurance fund solvent. He estimated that up to $20 billion in borrowed money might be needed, with payments of both interest and principal financed by an increase in the deposit insurance premium.

Under the banking reform plan, unveiled this week by the Treasury Department, all savings and loan associations and all national banks as well as the holding companies that own them would be supervised by a new Federal Banking Agency that would be part of Treasury. All state-chartered banks and their holding companies would be overseen by the Federal Reserve. Currently, FDIC has some supervisory say over all banks and primary responsibility for state-chartered banks that are not part of the Federal Reserve System.

The Treasury plan, Seidman said, "is an invitation to controversy and uncertainty and is unwise. There is really no way to resolve differences between" the Treasury Department and the Fed.

"It looks to me like an invitation to civil war, regulatory civil war. The Treasury would be under the administration and the Fed would be free -- it would be half-free and half-slave. It never worked before and I don't think it will work well this time," Seidman said.

"With respect to the FDIC, it would take away essentially all of our powers to protect the insurance fund," he continued. "One thing you need to protect the taxpayer is an agency who can protect the insurance fund and has the power to do so."

The FDIC chairman has long been at odds with Treasury Secretary Nicholas F. Brady and White House officials over how best to protect the bank insurance fund. Seidman has announced his intention to leave office sometime this year.

Meanwhile, representatives of several major banking associations met here again yesterday for several hours but broke up without reaching agreement on their banks' role in recapitalizing the insurance fund, an official of one of the associations said. The representatives are also trying to formulate a proposal for a new fund that could provide money for failing banks that might not go broke if they got prompt assistance.

"There is a lot of progress being made, {but} there really isn't an agreement at this point," the official said.

Seidman told the committee he could not yet give a comprehensive response to the entire package of proposals because of their sweeping nature and their complexity.

"There are many things in there that we favor," Seidman said, adding that he could not be more precise now because the proposals "are excessively complex. I just see in my mind thousands of pages of regulations that will be necessary" to implement them.

In general terms, Seidman fully endorsed the proposal to lift most restrictions on interstate branch banking, a change he said that would allow the banking industry to operate more efficiently. Large nationwide banks might offer small local banks more competition but would hardly put them out of business, he predicted.

Seidman also said the administration failed to place adequate limits on the so-called "too big to fail" doctrine, under which all creditors of a failed large institution, not just insured depositors, are protected by the bank insurance fund to prevent damage to the entire banking system.

"We should limit too-big-to-fail. ... Frankly, I don't think the Brady proposal does that."

The FDIC chairman stressed that the banking system changes should be approached carefully, especially any changes in deposit insurance, because of depositor fears about the safety of their money, even in insured accounts.

"My number one priority is not to jeopardize the liquidity and lending ability of the banking system," he said.