President Barack Obama named Wall Street critic Elizabeth Warren a special adviser Friday and tasked her with setting up a new agency to look out for consumers in their dealings with banks, mortgage companies and other financial institutions.
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, standing alongside Warren and Treasury Secretary Timothy Geithner in the Rose Garden.
Obama credited Warren with developing the concept of the consumer agency, and said, “It only makes sense that she should be the architect.”
Obama did not nominate Warren to be the bureau’s director, however. Instead he is creating a role that allows her to avoid a lengthy confirmation fight with Senate Republicans who view her as too critical of Wall Street and big banks. The business and banking community also opposed Warren as director, believing she would make the agency too aggressive.
Warren designed the advisory role during long conversations with White House officials, a person familiar with her thinking said. The person insisted on anonymity to discuss private conversations.
The 61-year-old Harvard professor can assume her duties immediately, leading a team of Treasury officials already laying the groundwork for the bureau. Obama said Warren would eventually help him choose the agency’s chief.
The financial regulation law creating the bureau gives the Treasury Department authority to run it while the nomination of its director is pending. The bureau won’t write rules restricting mortgages or credit cards until it assumes power from other agencies – a move planned for July 21, 2011, according to a memo Friday from Geithner.
Until then, it will be hiring staff, creating the new offices and conducting research to inform later rule-making activities, the memo says. That means Warren may not get much say in the two bureau powers banks fear the most: onsite monitoring of the largest banks, and writing rules to restrict products deemed unfair or deceptive.
Senate Banking Committee Chairman Chris Dodd, who had questioned whether Warren would have enough support to win confirmation, said Thursday the White House was within its rights to name Warren as an adviser and expert.
But he added on Bloomberg television, “We need a director. We’ve got to have someone who is confirmable. The law requires that there be a director of this bureau of consumer financial protection and that that nominee be confirmed by the Senate.”
Asked whether Warren would effectively be serving in that capacity, Dodd replied: “You can’t do that. You’ll end up with too much opposition. … I’d be totally opposed to someone on a backdoor operation here.”
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 Rose Garden announcement.