WASHINGTON: In a poke in the eye to the financial community, President Barack Obama on Friday named Elizabeth Warren, an aggressive consumer advocate and Wall Street adversary, to oversee creation of a new agency to regulate banks, lenders and credit card companies.
Sidestepping a Senate confirmation fight — for now — Obama stopped short of nominating Warren to actually head the new Bureau of Consumer Financial Protection. Instead, his action will let the Harvard Law School professor and expert on bankruptcy move quickly to shape the bureau.
Senate Republicans view her as too critical of Wall Street and big banks. The business and banking community opposed Warren as director of the new bureau, contending she would make the agency too aggressive. Obama praised her highly.
Billed as a big help to abused consumers, the new bureau is charged with writing and enforcing new rules covering the largest banks to the smallest storefront payday lender. Lenders will face new restrictions on the type of mortgages they write and won't be rewarded for steering borrowers to higher-cost loans. The bureau also is to protect borrowers from hidden fees and abusive terms.
Obama named Warren a special assistant to the president, giving her an influential province from which to direct the new bureau, a central element of the sweeping financial overhaul Obama signed into law this summer. The consumer bureau was one of Obama's key demands, easy for the public to grasp in an otherwise dense rewrite of complex financial rules.
Liberal groups and many consumer advocates want Warren to be named director of the new bureau. With the advisory appointment in place, White House spokesman Robert Gibbs said she would be instrumental in selecting a full-time director but hedged when asked if she would be a candidate.
Obama has had a difficult time winning Senate approval for even non-controversial nominees, and the White House believed that anyone nominated to the director's job — especially Warren — would linger without Senate action for months.
The job has the official status of a Cabinet undersecretary, but the title of special adviser to the president elevates her stature considerably and gives her direct access to the Oval Office. The designation appeared designed to quell worries among some Warren supporters that she would be subservient to Geithner.
Congressional Republicans promptly objected to the arrangement. The law gives the Treasury Department the authority to run the consumer protection bureau while the nomination of its director is pending. For now, Warren will be responsible for assembling the bureau and shifting consumer functions from regulators to the bureau. On Friday, Geithner set July 21, 2011, as the deadline for that transfer.
That means the bureau won't be able to enforce rules restricting mortgages or credit cards until at least then.
Warren would not have an immediate effect on other bureau activities. The consumer bureau, for instance, has as long as 30 months for regulations on predatory lending to take effect.
Warren has spent the past two years running the Congressional Oversight Panel, charged with monitoring the Treasury Department's handling of the $700 billion bank rescue fund known as the Troubled Asset Relief Programme. She stepped down from the panel just after Friday's announcement.
The consumer bureau was the most contentious feature of the financial regulation bill. The financial industry and the U.S. Chamber of Commerce mounted a fierce campaign to kill it while Congress assembled the legislation.
Republicans view new Obama appointee to oversee new agency with skepticism.