Republican party lawmakers on Tuesday took a more conciliatory tone toward Democratic proposals to crack down on Wall Street as the U.S. Senate delayed debate on a financial reform package until next week.

The change in rhetoric could signal the two sides are moving closer to a deal after months of wrangling over how to overhaul regulations in the wake of the financial crisis.

Senate Banking Committee Chairman Chris Dodd said lawmakers have reached agreement on 80 to 90 percent of the reform bill, and was hopeful remaining gaps could be bridged.

We are all optimistic that this can be fixed, said Senate Republican Leader Mitch McConnell.

Democrats are seeking at least one Republican vote in the Senate to overcome procedural hurdles to the financial reform bill and are trying to build on widespread anti-bank sentiment ahead of November mid-term elections.

Democrats are trying to use problems in the banking sector as leverage for reform, including last week's move the U.S. Securities and Exchange Commission to charge Goldman Sachs with fraud. Britain's financial regulator also launched its own probe on Tuesday.

President Barack Obama will speak in Manhattan on Thursday on the need for reform. The full Senate had been expected to begin debate on the reform bill that day, although a Democratic party aide said on Tuesday debate would be delayed until next week.

Last week, all 41 Republicans in the 100-seat Senate said they would oppose the Democrat bill as currently written.

But several Republicans said on Tuesday they hoped Dodd and Senator Richard Shelby, the top Republican on the Banking Committee, could hammer out a compromise before debate begins.

This bill can get 70 votes, but the rhetoric needs to calm down, said Republican Senator Mike Johanns.

Republican Senator Olympia Snowe, who was wooed by Treasury Secretary Timothy Geithner on Monday to support the bill, said she is hopeful compromises could yield bipartisan support.

We're not drawing any lines in the sand, Snowe said.

The first test of Republicans' resolve may come on Wednesday, when the Senate Agriculture Committee considers a derivatives bill that would force big banks out of the $450 trillion derivatives market.

Both Democrats and Republicans used a Capitol Hill hearing on the 2008 collapse of Lehman Brothers on Tuesday to talk about the bill.

Democrat Paul Kanjorski said the investment bank's practices point to the need for financial reform.

But Spencer Bachus, the top Republican on the House Financial Services Committee, warned regulators should not be given more powers when they didn't use them well in the lead-up to the financial crisis of 2008.


Citigroup Chief Executive Vikram Pandit, head of the third-largest U.S. bank, on Tuesday spoke out in support of a strong consumer protection authority, part of reforms.

Striking a contrite tone at the firm's annual meeting, Pandit said the financial industry strayed from its basic principles, contributing to the financial crisis.

A key sticking point in the Democrat plan is a proposed fund designed to help pay for the dismantling of troubled financial firms. Republicans have said it amounts to a standing bailout fund that will be used to prop up insolvent Wall Street firms deemed too big to fail, putting taxpayers at risk.

House Democratic Leader Steny Hoyer said on Tuesday the fund was not central to the bill.

The Senate Banking bill has proposed a $50 billion fund, while the House bill passed in December called for large firms to pay up to $150 billion into such a fund. The new fund would be in addition to the Federal Deposit Insurance Corp. which also restructures and shuts down smaller banks.

Community bankers, which hold political clout, continue to argue the fund is vitally important.

Some lawmakers such as Democrat Charles Schumer would also like to include in the bill a tax on banks proposed by Obama to recoup government bailout funds.

Finance ministers from the G20 nations will meet in Washington this week to consider global reforms, including a proposal by the International Monetary Fund for two new taxes on banks to fund future bailouts.

(Additional reporting by Kevin Drawbaugh, Rachelle Younglai, Clare Baldwin, Karey Wutkowski, Thomas Ferraro, Donna Smith, Glenn Somerville, Sumeet Desai, Christopher Doering, Charles Abbott;)