Two days ahead of the official start of a conference on regulatory reform legislation, lawmakers were staking out positions on key issues and hinting at potential compromises.

Sen. Susan Collins, R-Maine, the sponsor of a provision that would eliminate the use of trust-preferred securities as Tier 1 capital, said she is open to grandfathering in existing trust-preferreds or phasing in her requirement.

Still, she did not appear to be backing down from the main thrust of her amendment, saying the Federal Deposit Insurance Corp. had convinced her that trust-preferreds were not appropriate for counting toward capital.

"I'm taking a look at all of these suggestions," Collins said in an interview. "I will say that it's clear to me from talking to the FDIC chairman that trust-preferred is a debt instrument and cannot easily be converted into common equity, and therefore I don't think it should qualify as Tier 1 capital. Having said that, I recognize that there is a need for a transition period, and that's what we are taking a look at."

Collins, who supported the Senate bill and will be a crucial swing vote to achieve 60 votes in the chamber to prevent a filibuster on the final bill, would not say whether she would oppose the legislation if her amendment were dropped. The conference committee is to start work Thursday and finish by month's end.

"I'm not going to just make a judgment on what a bill is going to be out of conference when the conference hasn't begun," she said.

Other conferees also laid out their priority issues.

Sen. Charles Schumer, D-N.Y., who has been uncharacteristically quiet during the debate, said he prefers the House version of a stand-alone consumer agency.

"I agree with the House position myself," he said of the consumer agency.

But he declined to take a stance on a controversial provision in the Senate bill that would force banks to spin off their derivatives units.

"We'll see what happens there. I'm looking at the whole package," he said.

Sen. Tom Harkin, D-Iowa, another conferee, said he continues to support the derivatives provision but left open the possibility of addressing it in a different way. Many observers have said the final bill will drop the spinoff requirement and instead add more explicit language to the Volcker Rule to ban proprietary trading.

"I don't believe banks ought to be dealing in derivatives, OK? That is for investment banks but not for banks that are covered by the Federal Reserve or FDIC. They should not be allowed," Harkin said.

When pressed for alternative ideas, he said he wished he could repeal the Gramm-Leach-Bliley Act of 1999, which broke down the walls between banking and commerce.

"I know where we ought to go," he said. "As far as I'm concerned, anything short of reestablishing Glass-Steagall is not true reform."

The other Maine Republican, Sen. Olympia Snowe, who supported the Senate bill and will be needed for final passage, said she was fighting to ensure her protections for small businesses stay in the final bill. But when asked whether a stand-alone consumer agency would cause her to oppose the bill, she said she was not sure.

"I don't know. I'd have to think about that," she said.

Senate Banking Committee Chairman Chris Dodd and House Financial Services Committee Chairman Barney Frank met Tuesday to discuss the conference process.

Speaking afterwards with reporters, Frank said the conference would be transparent.

"I don't think there is any question this is going to be the most open conference people can remember," said Frank.

Earlier in the day, Dodd said the two have already made significant headway on working through the differences between the bills, though he said he could not divulge any specifics. "Obviously, we are trying to wade through as much of this as we can," the Connecticut Democrat told reporters.

He confirmed plans to use the Senate bill as the base text and said Frank would chair the conference committee.

"We are having good conversations and sharing with each other," Dodd said. "It's been a long time since we've had a conference around here, so we've got to go back and figure out how the hell you operate one."

This story was reprinted with permission from American Banker.

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