Published: May 06, 2010 12:36 PM EDT

WASHINGTON (AP) - A partisan fight over consumer protections and a dispute over how intrusive Congress can be in overseeing the Federal Reserve loom as obstacles to the Senate's efforts to rein in Wall Street.

Republicans offered a weaker alternative to consumer protection measures that are central to President Barack Obama's Wall Street regulation plan. And a bipartisan group of senators, led by Vermont independent Bernie Sanders, was next in line with an amendment that would require the Federal Reserve to undergo a thorough audit by Congress' investigative arm, the Government Accountability Office.

Votes on those measures could come as early as Thursday. The Republican plan would limit the enforcement power of a proposed consumer protection bureau and make its rules subject to approval by a top banking regulator. It would create a division of consumer protection within the Federal Deposit Insurance Corp. to oversee nonbank mortgage companies and write consumer regulations.

The FDIC would have to sign off on those rules. In contrast, the Democratic plan backed by the Obama administration would create an independent bureau within the Federal Reserve to police lending and other customer financial service transactions. It would have a freer hand to enforce its regulations.

"It creates one of the most important, one of the most powerful, all-powerful individuals in the entire federal government," Sen. Roger Wicker, R-Miss., said, objecting to the autonomy Democrats would give the head of the bureau.

In another departure from the pending Democratic bill, the Republican plan would continue the practice of having federal laws override state laws. Under the Democratic proposal, states would be allowed to write and enforce tougher laws, a provision opposed by the financial industry.

Creating a new consumer financial protection entity within the government is a central piece of the Obama administration's regulatory package. Obama has said he would veto legislation that contained consumer protections he deems too weak.

White House spokeswoman Amy Brundage called the Republican proposal "nothing more than a lobbyist-influenced defense of the status quo and an attempt to water down the consumer protections" in the bill.

"We will not accept this," she said. Republicans have complained that the Senate Democratic proposal, which is not as ambitious as the administration's, would be too sweeping and create a patchwork of state rules.

After the Senate disposes of the Republican consumer protection amendment, it is scheduled to debate and vote on Sanders' proposal to audit the Federal Reserve. The measure has populist support from across the political spectrum, from tea party activists to liberals and labor organizations.

The Federal Reserve and the Treasury oppose the measure, arguing it could interfere with the Fed's independence, a crucial element if the Fed is to carry out unpopular but economically essential policies.

The Fed's decisions on interest rates can have immense consequences and its secretive nature often confounds and frustrates lawmakers. The House version of the financial regulations bill also requires a GAO audit of the Fed. "How often do you have some of the most progressive members in Congress - and I include myself within that fold - working with some of the more conservative members?" Sanders observed Wednesday.

The Senate was also expected to vote on a proposal by Sens. Jon Tester, D-Mont., and Kay Bailey Hutchison, R-Texas, that would let small community banks pay a smaller assessment than large banks toward the Federal Deposit Insurance Corp.'s deposit insurance fund. The measure has widespread support.