Senior Obama administration officials criticized a key provision of a Senate plan to overhaul the regulation of financial services, warning Friday that removing bank-oversight powers from the Federal Reserve would be a mistake.

The Fed "is the agency best equipped for the task of supervising the largest, most complex firms," said Deputy Treasury Secretary Neal Wolin. Stripping away those powers could prevent the central bank from gathering "timely and complete information in a crisis," he said.

Austan Goolsbee, a member of the White House Council of Economic Advisers, said the Fed should retain a central role in supervising the banking sector and that moves to merge oversight into a single agency could cause industry "nervousness."