It's an unlikely twist after all the beatings that Democrats and Republicans have laid on the Federal Reserve over the past year.
Some lawmakers who set out to improve financial regulation by stripping the Fed of its powers are moving toward the grudging conclusion that the Fed should hold even more power.
The central bank was responsible for the health of the nation's largest banks and the safety of American borrowers. Its failures in both roles have been well documented.
Even so, key lawmakers on the Senate banking committee are seeking bipartisan support for a plan to house a new consumer-protection regulator inside the Fed. Separate efforts to strip the Fed of its responsibility for overseeing large banks have lost momentum.
Adding authority to the Fed has emerged as the only viable option, congressional aides said. Democrats wanted a free-standing consumer-protection agency. Republicans were willing only to tuck a new regulator inside another agency. Democrats suggested the Treasury Department. Republicans said no.
The Fed, whose leaders had largely abandoned efforts to retain a role in consumer protection, was left as the last candidate.
"A few days ago, the Fed was in some degree of disfavor. The talk was giving it less power, not more," said Sen. Mike Johanns (R-Neb.). "So what an unusual phenomenon has developed over the last few days."
The latest proposal, by Sens. Christopher J. Dodd (D-Conn.) Bob Corker (R-Tenn.), was greeted with horror Tuesday by liberal lawmakers and a broad coalition of trade unions and consumer-protection and other advocacy groups. Sen. Byron L. Dorgan (D-N.D.) called it "a terrible idea." Rep. Barney Frank (D-Mass.) said it was "almost a bad joke."
Several Democrats on the banking committee also expressed reservations, including Sens. Sherrod Brown of Ohio, Jeff Merkley of Oregon and Charles E. Schumer of New York.
"In my 20 years of trying to get the Federal Reserve to properly protect consumers, it has been an uphill, and very often unsuccessful, battle," Schumer said. "I am very leery of any consumer regulator being placed inside the Fed."
Dodd, chairman of the banking committee, has been negotiating with Corker to craft a package of financial reforms capable of winning 60 votes in the Senate, where Democrats control 59 seats.
The negotiations have stalled for months on the question of how to better protect borrowers from abuse by lenders. The two senators are in broad agreement on a proposal to place a presidential appointee inside the Fed with an independent budget and a mandate to write rules protecting mortgage and credit card borrowers and other bank customers. Those rules would be enforced by existing banking regulators.
The key remaining issue is whether the new regulator could impose rules over the objections of banking regulators, who are charged with preserving the safety of financial institutions. Dodd and Corker are also negotiating how broadly the rules would apply to financial institutions that aren't banks.
Sen. Evan Bayh (D-Ind.) described the plan Tuesday as "the best hope of actually getting something done."
Aides to two Republican senators said they were open to Corker's proposal.
The House has passed financial reform legislation, including a free-standing consumer-protection agency, but House Majority Leader Steny H. Hoyer (D-Md.) said Tuesday that he was open to other approaches to protect consumers.
Finding common ground has not been easy. Republicans opposed creating a free-standing agency, saying that it would create too much bureaucracy and could expose banks to contradictory instructions from banking and consumer regulators. Republicans also objected to putting the consumer division inside Treasury because it could subject regulators to political influence, some GOP aides said.
Many Democrats expressed skepticism for housing the consumer regulator inside an agency primarily devoted to regulating banks, such as the Federal Deposit Insurance Corp., because of concerns that the regulator would prioritize the health of banks over that of customers.
Dodd said Tuesday during an interview on MSNBC's "Hardball" that the location of the regulator was less important than the scope of its authority. He said there was no final agreement to place the regulator inside the Fed.
"What is most significant is, what powers will it have, and will we be able to do something about what happened to consumers in recent years," Dodd said.
Corker's office said in a statement that "talks are continuing to go well."
Dodd's embrace of the Corker plan could put the White House in a difficult position. President Obama proposed removing consumer protection from the Fed but keeping the Fed as the primary regulator of the financial system.
Now, some Republican senators say they might support keeping the Fed as a banking regulator if it also remains in charge of consumer protection. In effect, that could force the White House to pick between its two stated priorities.
Some Republicans say Congress could achieve the long-standing goal of gaining more oversight of the Fed if it takes on new responsibilities for protecting banks and consumers.
Lawmakers said work on other parts of the regulatory reform bill was progressing well. Consensus was forming around a proposal to set up a special bankruptcy proceeding for financial companies that are not banks.
Additionally, a council of regulators could decide whether the FDIC could take over and liquidate failing firms whose collapse would threaten the entire financial system.