Harvard professor will lead consumer agency formation

WASHINGTON – President Barack Obama is naming 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.

Obama had 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 set the stage for contentious Senate hearings that could have derailed her nomination.

The bureau will have vast powers to enforce regulations covering mortgages, credit cards and other financial products.

Hours before 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 are 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.”

The financial industry and the U.S. Chamber of Commerce mounted a fierce campaign to kill the consumer bureau while Congress assembled the legislation. Bank officials argued that regulators who guard the safety and soundness of banks should retain authority over consumer protections because they could best determine what regulations would help or hurt financial institutions. The chamber argued the bureau would ultimately increase costs to consumers by imposing rules on any business that extends credit.

The business and banking community especially opposed Warren as director, believing that as an architect of the idea she would establish an aggressive agency.

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, said a person familiar with her thinking who insisted on anonymity.