WASHINGTON (Reuters) - Main Street lenders emerged from a meeting with U.S. President Donald Trump this week confident that his vision for an overhaul of banking regulation would set up a favorable environment for their industry.

A member of the Independent Community Bankers Association listens to remarks from U.S. President Donald Trump in the Kennedy Garden at the White House in Washington, U.S., May 1, 2017. REUTERS/Jonathan Ernst

Reducing lending rules for the industry, a key source of credit for small businesses and farmers that has been shrinking and struggling under post-financial crisis regulation, is one of the few things both political parties as well as the president can agree on.

“They understand our business model, and have an appreciation for the fact that community banks are unique,” Rebeca Romero-Rainey, chief executive of Centinel Bank of Taos, New Mexico, said of the administration.

Trump has suggested resurrecting a form of the Depression-era Glass-Steagall law to separate capital markets operations from traditional lending. He has not consistently defined what that would look like but has floated the idea of an actual breakup of large banks, a prospect that bosses of Wall Street lenders have downplayed.

Signs have emerged however that at the very least Trump and his team are interested in creating a system that involves fewer rules for smaller banks.

“The President’s pro-growth agenda, including instituting what he has called a ‘21st century Glass-Steagall,’ will allow these banks to spend less time complying with unnecessary requirements, many of which were designed to police much larger entities, and more time, infusing their communities and local small businesses with capital,” White House spokesman Sean Spicer said this week.

The influence of the industry was on display this week when Trump and his senior lieutenants feted community bankers at the White House ahead of their annual conference on Monday, a show of access and acceptance not seen in recent administrations.

More than 1,600 community banks, or a quarter of the industry, have disappeared since the enactment of the Dodd-Frank financial reform law in 2010, data from the Federal Deposit Insurance Corporation showed.

Bipartisan support to arrest that trend is unsurprising. While community banks may not have the lobbying firepower of Wall Street, they are a powerful political force given their presence in every congressional district across the country.

“Democrats and Republicans have long agreed that small, well-managed banks shouldn’t be bogged down with needless red tape,” said Senator Sherrod Brown, the top Democrat on the Senate Banking Committee in a statement to Reuters.

“Democrats are ready and able to continue working with Republicans to tailor the rules where it makes sense, but not if it means hurting consumers or resurrecting risky Wall Street behavior.”

A bill to neutralize much of the post-crisis legislation designed to rein in Wall Street that community bankers say saddled them with outsized regulations is expected to fail amid opposition from Democrats.

That measure, from Republican Representative Jeb Hensarling, is expected to pass the House sometime this summer, but is unlikely to gain momentum in the Senate where Democrats’ votes are necessary to pass.

But more modest proposals to ease the regulatory burden on community banks could be successful. Senate Banking Chairman Mike Crapo, a Republican who will play a key role in shepherding any changes to financial rules through Congress, has said he would like to focus on community banks as a key part of his panel’s agenda.

“They’re looking for a system that’s just proportionate,” said Romero-Rainey, who will take over as head of the Independent Community Bankers of America trade group in May 2018.

FED ADVOCATE

Community banks, typically privately owned institutions with less than $10 billion in assets and often with fewer than 100 employees, are a world away from Wall Street banks.

The community banks often lack large compliance departments and have technology budgets a fraction of those at big banks, and have struggled to keep up with reporting requirements and regulatory scrutiny under post-crisis rules, even with some exemptions created by Congress.

To be sure, even without legislative change, the big banks are also expecting regulatory relief as Trump appointees in the Federal Reserve, Treasury and other agencies are able to influence how existing rules are interpreted.

Meanwhile, for the first time the community bankers are expecting to have an advocate at the Fed. The Trump administration is looking for candidates to fill a seat on the Federal Reserve Board designated for someone with experience in community banking.

That spot, created by law in 2014, has sat vacant and President Obama’s selection stalled out in the Senate.