By DAMIAN PALETTA

• FEBRUARY 12, 2010

WASHINGTON—Republican Sen. Bob Corker bucked his party Thursday and began negotiations with Democrats on overhauling financial regulation.

Winning the first-term Tennessee senator's support is perhaps the White House's best chance of passing a financial-overhaul bill this year. Democrats need one Republican to reach the 60 votes required to pass legislation in the Senate. Democrats hope Mr. Corker's support also could bring along other centrist Republicans.

Mr. Corker's involvement means the Federal Reserve could play a bigger role in any overhaul, because the senator has been less critical of the central bank than other leading Republicans. He also opposes creating a stand-alone consumer-protection agency, an idea already on life support, but might agree to propose other policies governing products such as mortgages.

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Sen. Bob Corker

His move comes less than a week after Senate Banking Committee Chairman Christopher Dodd (D., Conn.) said he had reached an "impasse" with the panel's ranking Republican, Richard Shelby of Alabama. It essentially leapfrogs Mr. Corker over the Senate's long-established pecking order, and prompted fuming from his Republican colleagues amid a hyperpartisan moment in Washington.

Mr. Corker now finds himself in a position similar to Maine Republican Sen. Olympia Snowe, who was heavily courted, ultimately unsuccessfully, by Senate Democrats for her health-care vote.

In closed-door meetings, Republican lawmakers urged Mr. Corker not to vote for Mr. Dodd's bill without other Republicans, people familiar with the matter said. Many Republicans warned against the risks of breaking ranks.

"I think for us to be effective, we need to stick together," Sen. Judd Gregg (R., N.H.) said earlier in the week.

Mr. Corker has said more effort should be put into a bipartisan deal. On Thursday, he said if Democrats and Republicans worked on their own bills, it would lead to a "train wreck."

Mr. Corker said he was taking the step because the financial system needed to be repaired. He stressed the need for new rules to prevent failing financial companies, such as Lehman Brothers Holdings in 2008, from wrecking the broader economy.

As for new consumer-protection rules, which have proven to be the biggest sticking point in negotiations between Democrats and Republicans, Mr. Corker said he wouldn't agree to anything that lacked a "balance" between protecting consumers and allowing banks to extend credit.

There's no certainty that Mr. Corker will reach a deal with Mr. Dodd. The banking panel could hold a vote on a financial-overhaul bill by early March.

"The likelihood that we have a chance of succeeding is in no small measure because there's a senator named Bob Corker willing to see things through," Mr. Dodd said in an interview.

Since joining the banking panel two years ago, Mr. Corker, 57 years old, has made himself an unlikely player in negotiations in areas including the Troubled Asset Relief Program, the U.S. automotive sector and now financial regulations.

Mr. Corker started his own construction company when he was 25 and first ran for the Senate in Tennessee in 1994 (he lost in the Republican primary to Bill Frist). Subsequently, he served as Tennessee's finance commissioner and then was elected mayor of Chattanooga, the post he held before he won the Senate seat in 2006, the year Democrats gained control of Congress.

Mr. Corker's growing profile has translated into fund-raising prowess. He has raised more money from the banking and securities industries than any of the committee's other Republicans, according to the Center for Responsive Politics. He has also raised more than all but three of the 13 Democrats.

"Business guys want to get a deal done," Mr. Corker said. "And they want to understand the various issues around that, so you end up in that sweet spot that's a win-win."

Mr. Corker's willingness to talk has led to a close partnership with Sen. Mark Warner (D., Va.). Messrs. Warner and Corker negotiated for weeks over how to regulate systemic risk. They also discussed how to break up failing financial companies without using taxpayer-funded bailouts. (Emphasis added)

At one point, when talks appeared to be hitting a snag, Messrs. Warner and Corker convened a "beer summit" with staff at a Capitol Hill restaurant to break the logjam.

"Both of us were willing to take a few arrows from each of our respective sides if were going to get a good bill," Mr. Warner said.

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