WASHINGTON (Reuters) - President Barack Obama on Tuesday edged closer to naming Wall Street critic Elizabeth Warren as his new top consumer financial watchdog -- but with lawmakers split over how he should do it.
Obama is deciding whether to pick Warren, an outspoken consumer advocate backed by liberals but reviled by bankers, as interim chief of the new consumer financial protection agency or risk a full-blown Senate confirmation battle.
However he does it, the choice of Warren, which could be announced as early as this week, would set up a messy fight with Republicans in the heat of the November congressional election campaign.
Obama’s fellow Democrat, influential Senate Banking Committee Chairman Christopher Dodd and moderate Republican Senator Olympia Snowe weighed in against bypassing full Senate scrutiny, saying it could hurt the new agency’s credibility. But at least two other leading Democrats backed the temporary option.
Warren is regarded as the top candidate to head the Consumer Financial Protection Bureau with sweeping powers to write and enforce new regulations covering mortgages, credit cards and other financial products.
“She’s obviously in the mix,” said White House spokesman Bill Burton, acknowledging that an interim appointment is among Obama’s options. He said an announcement would come very soon but no news was expected on Tuesday.
Warren, 61, is a Harvard law professor and bankruptcy expert who has served as chairwoman of the Congressional Oversight Panel, a watchdog for the U.S. financial bailout program.
She is a hero to liberal activists and consumer groups for taking on Wall Street excesses seen as a root cause of the global financial crisis that drove the United States into its worst recession since the Great Depression of the 1930s.
But her appointment is fiercely opposed by the financial industry and many Republicans who contend she would take a heavy-handed regulatory approach that would hurt the profits and global competitiveness of banks and other financial firms.
“It opens Pandora’s Box,” said Marshall Front, chairman of the Chicago-based investment firm Front Barnett Associates LLC. “There’s going to be a lot of fury over this. I see this as being very in the face of business and it’s not going to be taken well.”
Obama, who referred to Warren last Friday as a “dear friend” and said she first conceived of the idea of the consumer agency, has a choice of naming her on either a temporary or a permanent basis.
The landmark financial reform law that created the new agency gives him the option of setting it up within Treasury on an interim basis under the leadership of an interim director.
This would prevent a bruising confirmation fight with Republicans, who are likely to paint her as an anti-business ideologue, and also enable the administration to get the consumer agency up and running more quickly.
Warren has bemoaned mortgages that are unsuitable for borrowers, the increase in the types of credit card fees, and confusing pay-day loans.
Obama sees the agency’s creation as a signature accomplishment and the administration is concerned that a delay of several months in getting confirmation for its new director could be a setback to the effort.
Another option available to Obama would be to give her a “recess appointment” after the Senate is out of session in October, but this would only let Warren serve on a temporary basis.
Dodd and Snowe pressed Obama for a formal nomination of the new bureau’s director. “Doing it sort of subterranean now, I don’t think is wise. It should be a transparent, open kind of process,” Snowe told reporters.
Dodd expressed concern that if the new consumer chief did not receive full Senate confirmation, a new Congress taking office after the November 2 election could “gut” the new bureau by not funding it.
“If you don’t have someone running it early on, it jeopardizes the existence of the consumer protection bureau,” Dodd told reporters. He said the White House told him no decision had been made on how to proceed.
But two other senior Democratic senators, Richard Durbin and Byron Dorgan, both Warren supporters, backed the idea of an interim appointment. “I would support whatever puts her in a position where she can organize this agency and get it started,” Durbin said.
If Obama decides to formally nominate Warren as the new director of the consumer bureau, she could serve for a term of up to five years. But there would be no guarantee of overcoming Republican opposition to Warren’s nomination.
Although the fight to confirm Warren would be contentious, there are some advantages to the White House in embracing such a debate.
Obama’s Democrats are at risk of crushing losses to Republicans in the November congressional elections. Warren is popular with the liberal base of the Democratic Party, and her nomination could energize them.
The White House also sees the issue as one that would resonate with middle class voters.
If Republicans were to try to block Warren, Obama and the Democrats would paint them as siding with the financial industry over ordinary consumers at risk of financial hardship caused by hidden credit card fees and predatory loans.
However, if Republicans end up making big gains in the Senate in November, it could prove even harder to confirm Warren and the White House would run the risk of leaving the consumer agency rudderless for several months.
Additional reporting by Dave Clarke, Jeff Mason and Maria Aspan; Writing by Matt Spetalnick; Editing by Tim Dobbyn
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