WASHINGTON ( TheStreet) -- Key senators were nearing a deal on legislation to overhaul financial regulations which includes creating a new consumer-protection division within the Federal Reserve , reports say.

Senate aides told the Wall Street Journal that Democratic Sen. Christopher Dodd, chairman of the banking Committee, and Republican Sen. Bob Corker of Tennessee are selling the agreement to other members of their parties.

"Senator Dodd is keeping members informed on how things are progressing as he has throughout this process," his spokeswoman told the Journal. "We do not have an agreement yet. He hopes to have a consensus bill in the coming days."

The bill would mark a breakthrough agreement between senators from both parties who have been bitterly divided over new financial rules.

Holding up an agreement was whether a government consumer watchdog should be free from bank regulators to write rules govern everything from credit cards to mortgages, the Associated Press reports.

The Senate Banking Committee was closing in on a deal that would house the watchdog entity inside the Fed but give it autonomous power to write regulations, three people familiar with the talks told the AP.

Dodd is likely to introduce the bill in the Senate later this week, but it remains uncertain whether the White House will accept the proposal. "The president remains strongly committed to an independent agency whose singular focus is advocacy for consumers," an administration official told the Journal.

A Fed-housed consumer entity would fall short of Barack Obama's initial demand for a stand-alone Consumer Financial Protection Agency that would replace the consumer oversight now assigned to bank regulators, AP notes.

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