Once considered the biggest winner under the Obama administration's regulatory revamp plan, the Federal Reserve Board is likely to lose substantial power if reform legislation is enacted, as expected.

Ideas that were considered extreme not long ago, including stripping the central bank of its supervision powers and subjecting its monetary policy decisions to government review, have gained substantial momentum.

"Change is coming," says Vincent Reinhart, the former head of the Fed's division of monetary affairs who is now a resident scholar at the American Enterprise Institute. "They would be better off accepting that and trying to manage the process rather than being defensive."

Speaking recently at the Economic Club of Washington, Fed Chairman Ben Bernanke stressed the importance of the Fed's role as a supervisor and reiterated his opposition to a plan that would expose the central bank's monetary policy decisions to review from the Government Accountability Office. Lawmakers are also want to take away the Fed's power to write and enforce consumer protection laws, moving that authority to a new agency.

With populist anger running deep and Congress preparing for midterm elections, observers say it is becoming more likely that the Fed's scope will be narrowed.

"It's becoming more clear that the Fed is going to lose some political battles and I'm not just talking about consumer protection, which is small potatoes at this point," says Brian Gardner, an analyst at Keefe, Bruyette and Woods. "The Fed is going to have a tougher time arguing against these measures."

First, there is a reform package that includes a provision championed by Rep. Ron Paul (R-TX )that calls for the GAO audits. The measure cleared the House Financial Services Committee in November with strong bipartisan support.

The big question is how the Senate will respond. Similar legislation offered by Sen. Bernie Sanders (I-Vt.) has won just two co-sponsors: Democratic Senators Russell Feingold of Wisconsin and Blanche Lincoln of Arkansas.

But other lawmakers seemed to signal their support of the bill's goals recently. "I would encourage you again to consider what type of openness or audit ... would be appropriate in order to reassure the American people that we're not looking at another Fannie Mae situation," Sen. Jim DeMint, (R-S.C.), told Bernanke. "We were told not to worry ... everything is OK, and now we saw what it did. We can't allow that to happen to the Federal Reserve."

The Fed is vigorously opposing legislation sponsored by Senate Banking Committee Chairman Chris Dodd, (D-Conn.) which would take the central bank out of bank supervision entirely. "Our involvement in supervision is critical for ensuring that we have the necessary expertise, information and authorities to carry out our essential functions of promoting financial stability and making monetary policy," Bernanke said during his speech.

But lawmakers from both parties appear skeptical. "If we were to go back, Mr. Chairman, and review the minutes and transcripts of all the FOMC meetings between 2003 and 2008, I wonder what fraction of the time would have been devoted to issues involving supervision and regulation of ... holding companies," Sen. Richard Shelby, the top GOP member of the panel, recently asked Bernanke during his reconfirmation hearings. "Was it half the time? Was it a fourth of the time?"

Bernanke initially responded that in a typical meeting "there would be very little discussion of supervision" but quickly clarified. "Recently we've talked about it quite a bit because of the financial crisis," he said. "But it depends on the situation."

Jaret Seiberg, an analyst with Washington Research Group, a division of Concept Capital, says, "typically you would expect something like this to moderate. So far we're not seeing that."