Elizabeth Warren understands 'every American has to get a fair shake in their financial dealings,' Obama says.
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.
"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," Obama said, standing alongside Warren and Treasury Secretary Timothy Geithner in the White House Rose Garden.
"Elizabeth understands what I strongly believe: that a strong, growing economy begins with a strong and thriving middle class," the president said. "And that means every American has to get a fair shake in their financial dealings."
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.
An Oklahoma native who was a state high school debate champion, the 61-year-old Warren was the architect of the consumer bureau, calling three years ago for the creation of an agency that would consolidate the consumer protection powers now spread across numerous financial regulatory agencies.
"Elizabeth is the best person to stand this agency up," Obama said.
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. Reps. Darrell Issa, R-Calif., and Spencer Bachus, R-Ala., in a letter to White House counsel Bob Bauer, said that by giving Warren responsibilities at the White House and Treasury, Obama was undermining congressional oversight because she could avoid testifying before House or Senate committees. "This is unprecedented," they wrote.
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 Program. She stepped down from the panel just after Friday's announcement.
House Financial Services Committee Chairman Barney Frank, a fan of Warren's, said she told him a few months ago that she thought it was more important that she help set up the agency than be its first director. Frank, D-Mass., said he made that point to Obama adviser David Axelrod.
"That doesn't mean she doesn't want the job, only that the setup is important and that sacrificing the ability to have her there to set it up so as to preserve her ability to be the full-time director would be a bad trade," Frank said in an interview.
Frank disagreed with House Banking Committee chairman Christopher Dodd, D-Conn., who has said that even with Warren in her new role, the White House needs to move quickly to nominate a new director.
Frank said Warren now has until the end of the president's first term — in January of 2013 — to set up the agency. Asked whether Obama should nominate a director soon, Frank replied: "Why?...The administration has found a way to put the best possible person in charge of it. I'm satisfied with that for now."
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.
David Hirschmann, a senior vice president at the Chamber, said Warren's arrangement prolongs the uncertainty that has some lenders skittish about extending credit.
"If you're a credit provider, you're sitting there wondering what types of products you're offering will be second-guessed later as unfair, deceptive or not approved," Hirschmann said. "If you don't know what the speed limit is on the road and you knew there were cops out there trying to catch you, that would make you reluctant to drive."
Travis Plunket, legislative director for the Consumer Federation of America, said Warren will be crucial in setting the bureau's priorities, its culture and its regulatory tone. But, he added: "I don't see it as substituting for the need to get a director nominated and confirmed."