WASHINGTON--The White House on Tuesday abruptly ended itsconsideration of a regulation that would have allowed religiouscharities to discriminate against gays, after Democratic leaders in theSenate warned that such a move would imperil Bush's core "faith- based"initiative.

Earlier in the day, White House officials said they were considering arequest from the Salvation Army, the nation's largest charity, to issuea regulation that would protect government-funded religious charitiesfrom state and local laws barring workplace discrimination, including onthe basis of sexual orientation.

But Tuesday evening, after the matter caused a furor in Washington andwas denounced by Democratic lawmakers, the White House issued astatement saying it "will not pursue the (Office of Management andBudget) regulation proposed by the Salvation Army and reported today."

The White House retreat followed a report that, according to an internalSalvation Army document, the White House had made a "firm commitment" toissue a regulation protecting government-funded religious charities fromhiring discrimination laws. At the same time, the Salvation Army agreedto use its clout as the nation's largest charity to boost Bush's"faith-based" initiative. The charity plans to spend up to $110,000 amonth to support the effort.

Even after the White House backed down, Democratic leaders in the Housesaid they would proceed with an investigation into whether the WhiteHouse had agreed to allow the Salvation Army and other charities todiscriminate against gays, in exchange for the Salvation Army's supportof the initiative.

Rep. John Conyers Jr., D-Mich., the ranking Democrat on the HouseJudiciary Committee, and Jerrold Nadler, D-N.Y., ranking Democrat on theConstitution subcommittee, sent a letter to the White House demandinginformation.

Despite the administration's swift response to the controversy, thepresident's effort to fund religious charities -- one of his corelegislative initiatives -- may have suffered irreparable damage. Senate Majority Leader Tom Daschle, D-S.D., said Tuesday he was "veryconcerned" about the matter.

"I'm troubled by secret deals. I'm troubled by any deal that would notshow the kind of tolerance that I think we should show in this country.So clearly it raises a lot of questions and I think may actually imperilthe president's efforts to get something passed."

Sen. Joseph Lieberman, D-Conn., a potential ally of Bush's on thefaith-based legislation, said the White House's consideration of the gaydiscrimination exemption "puts a cloud over the president's desire toextend the faith-based initiative program. Unfortunately it mightterminally wound it in the Congress."

Gay-rights groups reacted angrily to news of the Salvation Army'sclaims, and opponents of the initiative hoped the flap would sink Bush'sproposal. Ralph Neas, president of the liberal group People for theAmerican Way, said the matter "offers strong evidence that theadministration's so-called 'faith-based' proposal would imperilfundamental rights."