Consumer agency won’t be led by Elizabeth Warren, source says

July 16, 2011

The White House has ruled out naming controversial Harvard law professor Elizabeth Warren to lead the agency that she has spent the past year setting up, according to a person familiar with the matter.

President Obama is slated to nominate someone to lead the Consumer Financial Protection Bureau early this week as it prepares to officially open for business Thursday. The administration has considered several candidates since the agency was created last year and recently looked at one of Warren’s top deputies, Raj Date, as a possibility. A spokeswoman for the CFPB declined to comment.

The decision to pass over Warren is a blow for liberals who have championed her for the job. Rep. Barney Frank (D-Mass.), who sponsored the financial reform legislation authorizing the bureau and is among Warren’s staunchest supporters, has said he would be upset by the move. In June, 89 House members sent a letter to Obama urging him to appoint Warren.

The development is also sure to upset progressive groups that have circulated online petitions garnering hundreds of thousands of signatures drafting Warren for the position. Stephanie Taylor, co-founder of the Progressive Change Campaign Committee, said overlooking Warren was a “real loss.”

Consumer advocates have dubbed her one of the “fiercest defenders” of the agency, which she is also credited with inventing. Last year, Obama named her to set up the bureau and hire its staff.

But Warren’s strong rhetoric on the “tricks and traps” by financial firms has made her a polarizing figure. Republicans have also raised broader concerns about the structure of the agency. Instead of a single director to lead the bureau, they have called for a five-member commission. They are also pushing for changes to the bureau’s funding.

That will make it difficult for the White House to put anyone in the job. The administration’s nominee must be confirmed by the Senate, and the GOP has vowed to block any candidate — Warren or otherwise.

“They still haven’t addressed our concerns about the lack of transparency and accountability,” said Don Stewart, a spokesman for Senate Minority Leader Mitch McConnell (R-Ky.).

If no director is in place when the bureau opens, it will be unable to exercise many of its powers, including the ability to write new rules and oversee financial firms other than banks.

“By waiting so long, they now guarantee a director-less agency for the foreseeable future,” said Richard Hunt, president of the Consumer Bankers Association. “A confirmed director, preferably as part of a commission, would level the playing field.”

Although she will not lead the new bureau, Warren’s mark will still be felt. She handpicked its senior staff, campaigned to sell the agency to industry groups and bore the brunt of criticism against it. Last week, she defended the agency through a testy House committee hearing that lasted four hours.

“We have all seen the consequences of a regulatory system in which no single regulator has the authority and the comprehensive tools necessary to ensure that the consumer financial markets work for American families,” Warren wrote in prepared testimony. “As a country, we are all paying the price for a consumer credit system that was broken.”

Ylan Q. Mui is a financial reporter at The Washington Post covering the Federal Reserve and the economy.
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