That proposal was opposed by former House Ways and Means Committee Chairman Bill Thomas, a California Republican, and by groups including the California Bankers Association, the Florida Bankers Association, and the Conference of State Bank Supervisors, which warned of a flight of capital from U.S. banks if the rules were adopted.

Opposing The Rules

Andrew Quinlan, president of the Center for Freedom and Prosperity, which lobbied against the 2001 rule, said his group would again lead efforts to oppose it.

"The regulation is designed to accumulate information that can be provided to foreign governments, which means the regulation puts the interests of overseas tax collectors above U.S. law and before the interests of the American economy," Quinlan said on his Web site.

The Commerce Department says non-U.S. citizens have $10.6 trillion passively invested in the U.S. economy, including about $3.6 trillion held by banks and securities brokers. A 2004 study by George Mason University in Fairfax, Virginia, concluded the proposed Clinton rules would have led to a loss of $88 billion in capital from U.S. banks.

Scott Talbott, senior vice president for government affairs at the Financial Services Roundtable, a Washington group representing large banks such as Bank of America Corp. and Wells Fargo & Co., said his group shares concerns about capital flight. "We're concerned about it because it will create a competitive disadvantage for U.S. banks," he said of the Obama administration's proposed regulation.

Proposal Shelved

The Clinton rule was shelved in July 2002 by the administration of President George W. Bush, which replaced it with a more limited proposal requiring banks to report interest paid to residents of 13 European countries, Australia, and New Zealand.

Pamela Olson, a partner at Skadden Arps in Washington who served in the Treasury Department in 2002, said the Bush administration had decided to scale back the proposed Clinton rule because the IRS had no use for the account information as the accounts aren't taxable.

"At that point in time it seemed clear to us that there wasn't a reason to gather information" that would not be used to share with other governments with which the U.S. didn't already have information exchange agreements, she said. "There was no reason to scare people needlessly."