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

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

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

The White House retreat followed a report that, according to an internal Salvation Army document, the White House had made a "firm commitment" to issue a regulation protecting government-funded religious charities from hiring discrimination laws. At the same time, the Salvation Army agreed to 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 a month to support the effort.

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

Rep. John Conyers Jr., D-Mich., the ranking Democrat on the House Judiciary Committee, and Jerrold Nadler, D-N.Y., ranking Democrat on the Constitution subcommittee, sent a letter to the White House demanding information.

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

"I'm troubled by secret deals. I'm troubled by any deal that would not show 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 imperil the president's efforts to get something passed."

Sen. Joseph Lieberman, D-Conn., a potential ally of Bush's on the faith-based legislation, said the White House's consideration of the gay discrimination exemption "puts a cloud over the president's desire to extend the faith-based initiative program. Unfortunately it might terminally wound it in the Congress."

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

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