Saturday, September 18, 2010

Wall St critic Warren to shape consumer watchdog

WASHINGTON: President Barack Obama named Wall Street critic Elizabeth Warren on Friday, Sept 17 to oversee creation of a new consumer financial protection agency, drawing praise from liberals and an outcry from Republicans and the financial industry.

Obama announced Warren as a special adviser to steer the new agency's establishment, not as its director, allowing him to avoid a bitter Senate confirmation fight. Republicans accused him of circumventing congressional oversight.

Calling Warren "one of the country's fiercest advocates for the middle class," Obama made clear the outspoken Harvard University professor would take the lead in shaping the powerful new watchdog, a centerpiece of the sweeping regulatory overhaul he signed into law in July.

"From now on, consumers will ... have a tough, independent watchdog whose job it is to stand up for their financial interests, for their families' future," Obama said in the White House Rose Garden with Warren at his side, as he highlighted her working-class roots as a janitor's daughter.

With congressional elections looming in November, the White House hopes Warren's appointment will have populist appeal to voters resentful of Wall Street excesses, seen as a key cause of the deepest U.S. economic downturn since the Great Depression.

But the financial industry and many Republicans opposed Warren's selection, worried that she will bring a heavy-handed regulatory approach that could crimp business profits and global competitiveness.

The Consumer Financial Protection Bureau, which is Warren's brainchild, will have broad powers to write and enforce rules covering mortgages, credit cards and other consumer financial products.

She has until July 2011 to get the agency up and running, according to a federal government notice.

Warren, 61, becomes an assistant to the president and special adviser to Treasury Secretary Timothy Geithner. Obama said she would have direct access to him.

"She will also play a pivotal role in helping me determine who the best choice is for director of the bureau," Obama said. The White House said Obama hopes to name the agency's chief in the next several months but declined to say whether Warren would be a candidate.


Warren, whose grandmother drove a wagon in the Oklahoma land rush, said in a White House blog post that the new agency would act as a "tough cop on the beat" and declared that the time for financial "tricks and traps" was over. She did not speak at the Rose Garden ceremony.

Supporters hailed her appointment.

"I would like to congratulate American consumers, because nothing could be better news for them in terms of being protected in financial matters like home mortgages, bank accounts, and credit cards," said Representative Barney Frank, Democratic chairman of the House Financial Services Committee.

Warren's critics saw her appointment differently.

"The Obama administration's first priority should be ensuring that our financial institutions are operated in a safe and sound manner," Republican Congressman Spencer Bachus said. "Instead they resort to a calculated political ploy to appoint a passionate, but inexperienced, advocate to run a new agency with unprecedented power."

Matt McCormick, a portfolio manager and banking analyst with Bahl & Gaynor, said Warren's appointment was more political than focused on correcting financial industry ills.

"I really doubt she will have the ability to bring people together considering the political nature of her appointment. It is troubling," said McCormick.

There is also potential for friction with Geithner, whom Warren clashed with when she headed the watchdog agency overseeing the government's $700 billion financial bailout program.

But Geithner attended her appointment ceremony and, in a statement issued later by the White House, praised her as a consumer protection pioneer.

While she may have the president's ear, there are questions about whether bypassing the confirmation process will put legal constraints on what she can accomplish.

The U.S. Chamber of Commerce slammed the method of her appointment "an affront to the pledge of transparency and consumer protection."

Obama used Friday's announcement to underscore financial reform -- an effort Republicans and Wall Street largely opposed and voters have mostly ignored as they fret over a rough economy saddled with near double-digit unemployment.

The White House hopes Warren's appointment will not only appeal to the middle class but also help energize the president's liberal base before the Nov. 2 election, when his Democratic Party faces the threat of big losses in both chambers of Congress.

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