Consumer advocate to set up watchdog agency
President Obama on Friday named Elizabeth Warren, a consumer advocate and Wall Street adversary, to oversee creation of an agency to regulate banks, lenders and credit-card companies.
WASHINGTON — President Obama on Friday named Elizabeth Warren, a consumer advocate and Wall Street adversary, to oversee creation of an agency to regulate banks, lenders and credit-card companies.
Sidestepping a Senate confirmation fight — for now — Obama stopped short of nominating Warren to head the new Bureau of Consumer Financial Protection. Instead, his action will let the Harvard Law School professor and expert on bankruptcy to move quickly to shape the bureau.
The appointment will allow Warren, "a janitor's daughter," as Obama called her in a Rose Garden introduction, to recruit staff and initiate policies for regulating mortgages, student loans and other consumer-credit products. She also will have a voice in picking the first director, he said. The favorite among administration officials is Michael Barr, an assistant secretary of Treasury for financial institutions who is an authority on financial regulation and on services for low- and moderate-income households.
The interim role for Warren, 61, averts a political problem for Obama in this election season. Rejecting her would have angered many party liberals. Liberal and consumer groups had lobbied hard for her, along with some lawmakers, including Rep. Barney Frank, D-Mass., chairman of the House Financial Services Committee.
Senate Republicans view Warren as too critical of Wall Street and big banks. The business and banking community opposed her as director of the new bureau, contending she would make the agency too aggressive.
Calling Warren "one of the country's fiercest advocates for the middle class," Obama said she would ensure the Consumer Financial Protection Bureau ends abusive practices.
"Never again will folks be confused or misled by pages of barely understandable fine print that you find in agreements for credit cards or mortgages or student loans," he said.
The creation of the bureau was a central piece of the legislation overhauling the financial-regulatory system that Obama signed into law in July. Its genesis was an article that Warren wrote a year before the near-collapse of the financial system in 2008, a crisis blamed, in part, on abusive mortgage practices.
"Basically, the Consumer Financial Protection Bureau will be a watchdog for the American consumer, charged with enforcing the toughest financial protections in history," Obama said.
Warren was named an assistant to the president, a designation held by senior White House advisers. She will also be a special adviser to Treasury Secretary Timothy Geithner and report jointly to him and the president. The job has the official status of a Cabinet undersecretary, but the title of special adviser to the president gives her direct access to the Oval Office.
While Geithner nodded vigorously in approval as he stood with Obama and Warren at the Rose Garden introduction, his dealings with her have been the subject of much speculation.
Warren, as chairwoman for the past two years of the congressional panel that oversees the $700 billion bank-rescue fund, the Troubled Asset Relief Program (TARP), has often been critical of Geithner and his department for management of the program.
She stepped down from the panel just after Friday's announcement. She will begin her new job immediately and receive a salary of $165,300 a year, officials said, equivalent to the compensation of an undersecretary at the Treasury. She will have her own staff and is expected to rapidly expand beyond the several dozen employees already working on the creation of the bureau.
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.
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 Friday when asked if she would be a candidate.
Obama has had a difficult time winning Senate approval for even noncontroversial nominees, and the administration believed that anyone nominated to the director's job — especially Warren — would linger without Senate action for months.
Under the financial-regulation law, Treasury will have the powers delegated to the bureau until a permanent director is nominated and confirmed by the Senate to a five-year term. In July the bureau, which will nominally be part of the Federal Reserve, will assume the regulatory power for consumer rights now vested in a range of agencies, including the Fed, the Federal Trade Commission, the Federal Deposit Insurance Corporation and the Department of Housing and Urban Development.
Republicans criticized Obama for circumventing a Senate confirmation. Sen. John Thune, of South Dakota, chairman of the Republican Policy Committee in the Senate, said, "This appointment lacks transparency and represents the latest power grab by the president to expand the reach of an intrusive government into the lives of Americans."
Material from The Washington Post is included in this report.
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