WASHINGTON — The banking industry is scrambling to devise a new strategy to weaken the regulatory reform bill after Republicans failed to cut a bipartisan deal before the legislation advanced to the Senate floor Thursday.

With few lawmakers willing to fight on their behalf, industry representatives said they will have to pick and choose their issues, and were mostly pessimistic about their chances to get changes.

"The banking industry is pushing the boulder up the hill, and the hill gets steeper all the time," said Michael Bleier a partner in Reed Smith LLP. "It's clearly going to be harder to make money in the banking industry."

While trying to water down some provisions, bankers are also being forced to play defense as liberal lawmakers seek to toughen the bill. Overall, banking trade groups are pushing to limit the burdens of a proposed consumer protection bureau, protect federal preemption of state consumer laws, continue to sell derivatives and use them internally to hedge risks, eliminate risk-retention requirements and protect their turf in areas like proprietary trading.

But each group has different priorities.

The American Bankers Association, for example, wants to keep the thrift charter and incorporate concerns about mark-to-market accounting rules into systemic-risk oversight, among other things.

The Independent Community Bankers of America wants an exemption from the consumer bureau's enforcement; a requirement that federal regulators charge deposit insurance premiums on the basis of assets, not deposits, and maintenance of states' authority to set lending limits for state banks. Both the ABA and ICBA are also fighting to preserve the Federal Reserve Board's role as regulator for state member banks.

Ed Yingling, the president and chief executive of the ABA, said the Republicans' failure to broker a bipartisan compromise was an "anticipated setback" that would lead to a "chaotic and dangerous" fight on the floor.

"We think the next few weeks literally could determine the future of our industry," he said. "The problem is, you are now subject to a very chaotic process on the floor that could go on for days and days in a very negative atmosphere. There is less ability for the leadership on both sides of the aisle to control what kinds of amendments may go into the bill. So you could end up with a bill that already has many problems having even more."

Yingling said the politics makes the situation particularly bleak.

"That is a huge problem that this is largely driven by politics and the senators will be potentially attacked in the press for doing things they know is the right thing to do and yet they won't do it because they are afraid they'll be labeled as helping a special interest," he said.

Yingling was candid about what he called the ABA's "war room operation" on the bill. The association flew in bankers to lobby Capitol Hill in force on Wednesday and Thursday, he said. Should the focus turn to defeating or adopting a particular amendment, he plans to dispatch the state associations quickly to lobby intensely on that issue for 24 hours.

"We have a list of 10 or 12 areas that we are trying to meld support for, and we basically are in the process [of] putting the names of senators who have expressed an interest in any of these on the list, saying that they are, or would maybe be, supportive of amendments in this area," he said. "Then at the end of that process you have to decide which ones you think would be best to push on, which ones you think might be accepted anyway and which ones you just run out of resources on."

Two weapons in the industry's arsenal are incorporation of changes under the radar into a bill's manager's amendment. Another option is to try to seek changes when the bill is reconciled with the House's version. For the first time in years, many observers believe that, rather than ping-ponging a bill back and forth between the chambers, the legislation will go to a formal conference with the House to settle differences between the two versions.

An exception to the industry's dire standing is the ICBA, which sees itself as having an edge since it represents community bankers who are much more politically popular than the big banks.

"We are cautiously optimistic that many of our suggestions and proposals will be adopted by the Senate before the debate is through," said Camden Fine, the group's president. "I don't know that we will get all of them, but I believe we will get more than our fair share."

One of the ICBA's top priorities is a total carve-out for its members from the consumer financial protection bureau. Under the bill, institutions with less than $10 billion of assets would face back-up authority from the bureau.

"We are asking for total exemption from CFPB examinations where only the prudential regulator would do such exams ... . We don't need the CFPB to be coming in on a random basis and further burdening community banks that only have a handful of employees," Fine said.

The group also is seeking a provision that would force the Federal Deposit Insurance Corp. to charge premiums based on assets, to the disadvantage of large banks.

Richard Hunt, the head of the Consumer Bankers Association, is mostly focused on limiting the authority of the consumer bureau and shoring up preemption provisions to ensure that nationwide banks do not have to comply with 50 state laws. The industry was hoping for changes in Sen. Chris Dodd's revised bill before amendments start being offered, he said.

"I've never seen a more convoluted process on the floor," he said. "Usually when a bill of this magnitude goes to the floor, it's very structured."

Other lobbyists also sounded dubious about the prospects for defeating the anti-bank sentiment in Congress. "The industry is on red alert right now," said a lobbyist who spoke on condition of anonymity. "It's going to be hard to pass correcting amendments. It's going to be hard to stop bad amendments that are perceived as being anti-Wall Street."

One potential complication is whether Senate leaders will require a simple majority for an amendment to pass or a supermajority of 60 votes (sufficient to halt a filibuster). A 60-vote requirement would make it much harder to amend the bill Dodd brings to the floor.

Usually, a bill is watered down as it moves through the Senate. Regulatory reform, however, has become tougher, with requirements added to make banks spin off their swaps desks and get out of proprietary trading. It may get worse, some predicted.

"We are expecting a week or two of floor amendments that will make the bill much more populist in nature," said Joseph Engelhard, a senior vice president at Capital Alpha Partners. "There are about 15 amendments that we have heard of, and all but a few are along that populist vein."

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