Obama Names Warren to Consumer Advocate Post

Last Updated 2:04 p.m. EM

President Barack Obama has named Elizabeth Warren a special adviser to oversee creation of a new consumer protection bureau, dodging a fight with Senate Republicans who view her as too critical of Wall Street to be confirmed as the agency's chief.

He called Warren "one of the country's fiercest advocates for the middle class."

At the White House this afternoon Mr. Obama said that the new Consumer Financial Protection Bureau will empower Americans with clear and more concise information to aid their financial decisions.

The bureau (whose creation was bitterly opposed by the financial industry) will have vast powers to enforce regulations covering mortgages, credit cards and other financial products.

"Never again will folks be confused or misled by the pages of barely-understandable fine print that you find in agreements for credit cards or mortgages or student loans," he said.

"The bureau is going to crack down on the abusive practices of unscrupulous mortgage lenders. It will reinforce the new credit card law that we passed banning unfair rate hikes, and ensure that folks aren't unwittingly caught by overdraft fees when they sign up for a checking account. It will give students who take out college loans, clear information and make sure that lenders don't game the system. And it will ensure that every American receives a free credit score if they are denied a loan or insurance because of that score.

"For years, financial companies have been able to spend millions of dollars on their own watchdogs - lobbyists who look out for their interests and fight for their priorities. That's their right," he said. "But from now on, consumers will also have a powerful watchdog, a tough, independent watchdog, whose job it is to stand up for their financial interests, for their families' future."

Mr. Obama has spoken glowingly of Warren as a possible leader of the bureau, created in response to the 2008 financial meltdown. But the White House feared her lack of support in the financial industry would have set the stage for contentious Senate hearings that could have derailed her nomination.

Warren, a 61-year-old Harvard University professor who describes herself as "not a Washington person," will report to both the president and Treasury Secretary Timothy Geithner. Because she is not being named the bureau's permanent director, Warren can assume her duties immediately.

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.

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.

The financial regulation law that President Obama signed earlier this year gives the Treasury Department the authority to run the consumer protection bureau while the nomination of its director is pending. Control must be transferred to the new bureau within a year, but the secretary has the latitude to seek an additional six months to complete the creation of the agency. That means Warren could perform her new duties into 2012.

Hours before President Obama's official announcement, Warren wrote in a post on the White House blog that the purpose of the bureau is to ensure that people should be able to read their credit card and mortgage contracts and "know the deal."

"They shouldn't learn about an unfair rule or practice only when it bites them, way too late for them to do anything about it," she wrote. "The new law creates a chance to put a tough cop on the beat and provide real accountability and oversight of the consumer credit market."

Sen. John Kerry, D-Mass., praised Warren's tenure as Chair of the Congressional Oversight Panel. "Elizabeth held Wall Street's feet to the fire and oversaw the return of tens of billions of dollars to the American people from the big banks. She's the right person to do this job now."

Kerry added, "In an age when average Americans hate bail-outs and are sick and tired of seeing the big guys play by a different set of rules, Elizabeth has been the person holding them accountable."

Senate Banking Committee Chairman Chris Dodd, who has 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. We need to build consensus to this bureau."

President Obama plans to eventually name a permanent director, though an announcement isn't thought to be imminent.