The author of a sweeping Wall Street reform bill in the Senate backed away on Wednesday from a confrontation with another powerful Senate committee chairman over swaps market regulation.

In a move to defuse tension with fellow Democrat Blanche Lincoln as a crucial vote approached, Christopher Dodd dropped plans to pursue an amendment that would have killed Lincoln's proposal to force banks out of the swap-trading business.

The maneuver by Dodd, who is trying to hold Democrats together in support of his massive bill, came as Senate leaders announced a delay in a key procedural vote that had been set for 2 p.m. on Wednesday.

The bill was still on track for passage, but that looked more likely to come on Thursday or Friday as senators pressed for time to offer a flood of amendments.

The bill, a top priority of President Barack Obama, would tighten rules for banks and capital markets to prevent a recurrence of the 2007-2009 financial crisis, which tipped the economy into a deep recession and triggered taxpayer bailouts of Wall Street firms.

Political momentum has been running heavily against Wall Street, which has fought for months to kill or weaken the bill only to see lawmakers further tighten the rules.

Politicians from both parties want to show voters they are getting tough on Wall Street before November elections.

Dodd, banking committee chairman, has fended off proposals from fellow Democrats that could upend the financial industry, but analysts expect the final legislation will still cut into profits for banks and others on Wall Street.


The final bill will contain fundamentally tough reforms, creating many headwinds to banks' profitability, analysts at FBR Capital Markets wrote in a research note.

The Senate will vote, for instance, on an amendment from Democrat Sheldon Whitehouse that would allow states to limit credit-card interest rates, Dodd said.

The amendment could crimp profits of national card issuers like JPMorgan Chase & Co and Bank of America Corp.

In another example of risk for banks, Democrats have kept in play an amendment toughening the Volcker rule. Republicans had been blocking it from coming to a vote, but its Democratic backers kept it alive with a parliamentary tactic.

The amendment from Democrats Jeff Merkley and Carl Levin would limit regulators' leeway to water down the rule first proposed in January by Obama and White House economic adviser Paul Volcker. The rule would bar banks from doing risky proprietary trading unrelated to customers' needs and get them out of the hedge fund business.

Few Republican amendments to weaken the bill remained. Among the most significant was a proposal by Senator Sam Brownback to exempt automobile dealers from a new consumer-protection bureau, which Republicans argue could saddle small businesses with onerous regulations.


Dodd's move on the Lincoln provision meant Democrats still had some decisions to make on regulating OTC derivatives.

As drafted now, the Dodd bill contains Lincoln's proposal to force banks to separate their lucrative swap-trading desks from their core operations. Dodd floated a compromise on Tuesday to suspend the Lincoln provision for two years.

But he backed down after Lincoln, chairman of the Senate Agriculture Committee, said she would fight to defend her plan and after markets complained that Dodd's compromise would cast a two-year cloud of uncertainty over the derivatives market.

Lincoln faces a tough electoral challenge from the left in her home state of Arkansas. Some analysts had expected her to quietly drop her rule after Tuesday's primary Senate election.

But she failed to win 50 percent of the vote against Lieutenant Governor Bill Holder, setting up a June 8 runoff and pressuring her to maintain a strong anti-Wall Street stance.

Dodd could try to remove the provision further down the road when Senate negotiators try to reconcile their bill with one approved by the House of Representatives in December.

(Reporting by Kevin Drawbaugh and Andy Sullivan; Editing by Kenneth Barry)