The White House last night rejected a proposed compromise on community lending offered by Senate Banking Committee Chairman Phil Gramm (R-Tex.), dimming the chance for final passage of landmark legislation to overhaul banking law that has been in the works for two decades.

The message was formally conveyed to Gramm and other Republicans around 10 p.m.

"No agreement had been reached. No proposal has yet been put forward that the president can accept," a Treasury spokesman said. "While there remain a number of serious issues, the major issue is that there has not yet been a proposal that would prohibit a bank with an unacceptable [community investment] rating from taking advantage of the new powers provided under the bill."

The announcement ended a day of intense discussion between Gramm and Treasury Secretary Lawrence H. Summers. The two men spent most of the day on the third floor of the House Rayburn Building--sometimes face to face, sometimes in different offices with aides shuttling to and fro--trying to hammer out an agreement on a few provisions concerning the 1977 Community Reinvestment Act, which requires banks to lend to underserved people and areas.

Gramm dislikes the law but the White House has held firm to its threat to veto any financial legislation that it believes weakens CRA. Last night Clinton officials repeated that threat, increasing the chance that the bank overhaul legislation will pass Congress only to be killed on the president's desk.

Earlier in the day, both sides had described the talks as having narrowed differences, but both also had said key disagreements remained.

"We had extensive discussions for seven hours straight, and we have a proposal on the table," Gramm had said earlier in the day. "It is a proposal, not an agreement. It is a proposal I can live with. The Treasury secretary is going to have to go back and talk to his people and look at the proposal and basically decide whether the answer is 'yes' or 'no.' "

The answer last night was clearly no. Other remaining issues include: whether agreements between banks and community investment groups must be made public; whether banks for wealthy individuals that don't carry federal deposit insurance will come under CRA jurisdiction and whether small banks should be examined for CRA compliance every five or three years.

Congressional negotiators trying to craft a final bill decided yesterday to push a meeting scheduled for yesterday afternoon to today, reasoning that the White House and Gramm might have reached an agreement by then. The negotiators are trying to reconcile two versions of a bank bill passed by the House and Senate earlier this year. The legislation would make it easier for banks, insurers and securities firms to merge and cross-sell products.

Summers and Gramm have been trying to craft a deal since Tuesday afternoon. Rumors that they had reached an agreement, then that they hadn't, flew back and forth, tying up phone lines between lobbyists from some of the country's biggest financial companies all day.

But by late night it became clear that talks had ended at an impasse.

CAPTION: Sen. Phil Gramm (R-Tex.) was told that his plan has been rejected.