WASHINGTON -- A key House panel on Thursday approved an amendment offered by Rep. Ron Paul (R., Texas) to give federal watchdogs massive new authority to audit the Federal Reserve.

The approval came as the House Financial Services Committee concluded weeks of debate on a sweeping financial-overhaul bill to create a new council of regulators to wind down large institutions that pose a risk to the economy. A final committee vote on the bill will be postponed until after Thanksgiving.

Mr. Paul's amendment removes restrictions on the Government Accountability Office's auditing authority, giving auditors access to every item on the Fed's balance sheet. He for more than 20 years has championed significantly neutering the Fed.

Meanwhile, Committee Chairman Barney Frank (D, Mass.) said he wants to work with members of the Congressional Black Caucus over the Thanksgiving break before a final committee vote to resolve their concerns about the economic situation for their constituents. "The issues are being addressed are not internal to this bill but affect the broader economic situation," Mr. Frank said.

The proposal to deal with systemic risks is a critical part of the administration's financial plan. It also may be the most difficult because of the competing agendas of regulators and policy makers' desire to use a deft touch with still-shaky financial institutions.