Elizabeth Warren: Obama Stooge or Wall Street Scourge-in-Waiting?

The Obama administration's move to usher Elizabeth Warren into the Consumer Financial Protection Bureau through the back door is having the desired effect: confusion.

Reports suggest the President will ask the Harvard Law School prof to set up -- but not run -- the organization, which is charged with guarding people against financial abuse and deception. Obama tomorrow is expected to name her as a "special adviser," an equally murky designation.

The maneuvering seems to bear the fingerprints of White House Chief of Staff and avid triangulator Rahm Emanuel. First, it avoids the Dems having to horse-trade to muster enough votes in the Senate to get Warren confirmed, a process that could've taken months and isn't certain to succeed. Second, giving her a role in the CFPB throws a bone to liberals (like me), many of whom think she's the best person for the job. With Republicans expected to gain some congressional seats in November, that could come in handy at the polls for an administration whose relations with the Left are, at best, frosty.

Third, although Wall Street will kvetch that Warren has anything to do at all in Washington, bankers can take comfort that she didn't get the most coveted job as director of the CFPB. And that, no matter how hard the administration spins it, is a victory for the financial industry, which fears Warren's rep as a staunch consumer advocate. Under Dodd-Frank, Obama could've handed her the top job directly in a so-called recess appointment. But that would've given her only one year at the helm, rather than the five-year term the bureau director gets if confirmed by the Senate.

Despite Warren being bypassed for that position, however, business groups are still squawking:

"By not allowing Ms. Warren's nomination to be considered through the regular order of the full Senate confirmation process, the administration has circumvented one of the very few checks on a big new agency that already has been given an unprecedented concentration of regulatory powers," said David Hirschmann, president of the U.S. Chamber of Commerce's Center for Capital Markets Competitiveness. "This maneuver is an affront to the pledge of transparency and consumer protection that's purported to be the focus of this new agency."

Of course, in a real affront to consumer protection, the CoC tried for months to dynamite the CFPB during the fight over financial reform. And it's hard not to chuckle at the group's call for "transparency" given its expertise in the use of "astroturf" public interest groups to simulate real grassroots activism.

The Warren ploy is having more success fracturing opposition by banking industry critics. Some, like Yves Smith at Naked Capitalism, see the move as a cynical way to marginalize Warren:

[T]he end game seems obvious: keep her in orbit through mid-terms to prevent a hissy fit from her many fans, then name a more bank friendly permanent director (the argument no doubt being that her effectiveness is compromised by her not being confirmed, and with the odds high that the elections will put more Republicans in Senate seats, the Administration will argue its hands are tied). However, this timetable could be optimistic; as a special advisor, she serves at the pleasure of the Administration and will be a lame duck as soon as a permanent director candidate is put forward.

Consumer advocates also expressed disappointment that Warren isn't being nominated to lead the CFPB. While acknowledging that Senate Republicans would oppose the move, David Arkush of lobbying group Public Citizen said in a statement that she is "confirmable" and that "a fight over her confirmation is worth having."

But other libs are more encouraged. Robert Kuttner, co-editor of The American Prospect, describes Warren's new position as a "huge win" for consumers and for Obama:

This way, Warren will be able to get the agency quickly up and running in a manner that serves both consumers and progressive politics. Early directives to bring greater simplicity and transparency to credit documents will be extremely popular. Politically, the carping by the banking industry and its Republican allies will remind the public which side the GOP is on....
And as Warren continues to be the remarkably popular champion of struggling families, it will become more difficult to deny her the job on a permanent basis if she wants it. And it will be more costly, even for a more Republican senate in the next Congress, to make her their nemesis.

We'll see about that. As it stands, Warren will be deprived of important authority, including the right to sit on the federal government's new council of financial regulators. A bigger obstacle might be her other boss as special adviser: Tim Geithner. The Treasury chief is widely reported to have tried scuttling Warren's candidacy to lead the CFPB. If the two clash, Obama is unlikely to undermine his own Treasury Secretary to side with a little-known, if popular, consumer watchdog.

I share Smith's skepticism about Warren's appointment, but I'll wait to see who the administration drafts to lead the CFPB before carping in earnest. Political gamesmanship aside, the real question is whether consumers, who desperately need a strong advocate in financial services, ultimately benefit.

Image from Flickr user David_Shankbone
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Alain Sherter

Alain Sherter covers business and economic affairs for CBSNews.com.

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