The Obama Administration is about to find out what happens when you offer a short leash to a voluble watchdog. Rather than nominate the outspoken Elizabeth Warren to head the newly created Consumer Financial Protection Bureau, the White House plans to install the Harvard law professor at the Treasury Dept., with the interim assignment of overseeing the establishment of the agency. Obama aides hope this maneuver will avoid a confirmation battle with Senate Republicans while not alienating Warren's backers in labor and consumer protection circles.
Warren, who declined to comment, is expected to take the compromise job. If so, she would report both to President Barack Obama and to Treasury Secretary Timothy Geithner, with whom she has clashed in her role as head of the Congressional Oversight Panel monitoring the $700 billion bank bailout. An announcement could come by Sept. 17, Administration aides say.
The prospect of Warren being supervised by the more circumspect Geithner—as opposed to her heading her own agency—is precisely what makes the idea more palatable to the banking industry. The bureau would be "starting off with a very strong hand of oversight," says Wayne Abernathy, an executive vice-president at the American Bankers Assn. "That would be a very good thing."
Congress has instructed that the consumer bureau be fully launched within 18 months. Its director will have a five-year term and will be removable only for cause, such as malfeasance. The agency's funding, expected to be $400 million a year or more, is based on the budget of the Federal Reserve, not a special congressional appropriation. Its work won't be subject to approval by the Administration. "The choice of a head will be one of the most consequential regulatory decisions that the President makes," says Michael Greenstone, director of the Hamilton Project at the Brookings Institute and a former chief economist with the White House Council of Economic Advisers.
If she accepts the interim appointment, Warren would oversee a lot of nuts-and-bolts administration. Offices and phone lines have to be set up, thousands of employees hired. That's all before the agency gets to its main mission: writing and enforcing regulations for financial companies.
Given Warren's penchant for passionate critiques of the industry, she could be counted on to try to use the Treasury job to hold hearings, go on television, and generally keep the spotlight on credit card and mortgage abuses. Still, some of her fans are spoiling for a fight. Obama, says Lynn Turner, a former chief accountant at the Securities and Exchange Commission, "should do what the Republicans would have done, nominate her for the head of the consumer bureau and dare the opposition to vote no."
The bottom line: The White House has a plan for installing consumer advocate Elizabeth Warren in an interim position at Treasury.