Fresh off a tense exchange with a ballroom full of community bankers, U.S. bank regulator Sheila Bair again tried on Tuesday to sell the benefits of the new financial reform law.

This time around, she was met with applause, not groans.

She continues to be a voice of reason and a leader worth listening to, James MacPhee, chief executive of Kalamazoo County State Bank, said when introducing her before the Independent Community Bankers of America (ICBA) annual convention.

Small banks have expressed concern that the law and the new Consumer Financial Protection Bureau, set to open its doors in July, will add regulatory costs, making it harder for them to survive.

Bair, head of the Federal Deposit Insurance Corp, and Obama administration consumer czar Elizabeth Warren, each told the group on Tuesday they should set aside their worst fears about the Dodd-Frank financial reform law.

It is a good law and one which I think will strengthen, not weaken, community banks, Bair, whose five-year term atop the FDIC ends in June, told the ICBA.

The remarks come a week after Bair had a tense back-and-forth with another group of community bankers in Washington.

At the American Bankers Association (ABA) event last week, Bair got exasperated when bankers hit her with a litany of complaints about new restrictions on overdraft fees and about regulation in general, including the Dodd-Frank financial reform law.

The room of community bankers loudly groaned when Bair said the reform law and the consumer agency are packed with advantages for small banks.

The Dodd-Frank law and the consumer bureau, in particular, are under attack from Republicans in Congress, who argue it will layer onerous rules on a struggling economy and prove a burden for smaller institutions.

Bair, describing herself as a market-oriented Republican, urged the ICBA audience on Tuesday to give the law a chance.

She made the case that it includes specific benefits for small banks because, among other things, they will pay about $5 billion less annually in fees to the FDIC insurance fund used to pay the cost of bank failures. Bigger banks will pay a higher share.

Warren also told the convention that reforms will help small banks compete against larger banks -- not strangle their businesses.

Warren argued the new consumer bureau she is setting up will simplify regulations on products such as mortgages and seek to crack down on non-bank lenders that went largely unregulated during the 2007-2009 financial crisis and are accused of shady lending practices -- steps that will benefit community banks.

I know that you want a regulatory structure that doesn't require an army of lawyers, she said. Big banks may be able to afford to hire all those lawyers, but you cannot.

The ICBA and ABA are two of the major U.S. banking groups and are rivals in some respects. The ABA represents banks of all sizes while ICBA only represents community banks.

The ICBA has been more supportive of the law than the ABA.

Last week Bair told the ABA conference there may be a conflict when a group represents banks of all sizes, because what is good for large institutions may not be in the best interest of smaller banks.

On Tuesday she took a veiled shot at the ABA without naming the group.

You are never confused about who you represent, she told the ICBA audience. That has been a key to your considerable effectiveness in Washington.

(Reporting by Dave Clarke; Editing by Dave Zimmerman and Gerald E. McCormick)