Consumer advocate to set up watchdog agency

"President Obama on Friday named Elizabeth Warren, a consumer advocate and Wall Street adversary, to oversee creation of an agency to regulate banks, lenders and credit-card companies. Sidestepping a Senate confirmation fight — for now — Obama stopped short of nominating Warren to head the new Bureau of Consumer Financial Protection. Instead, his action will let the Harvard Law School professor and expert on bankruptcy to move quickly to shape the bureau.

The interim role for Warren, 61, averts a political problem for Obama in this election season. Rejecting her would have angered many party liberals. Liberal and consumer groups had lobbied hard for her, along with some lawmakers, including Rep. Barney Frank, D-Mass., chairman of the House Financial Services Committee.  Senate Republicans view Warren as too critical of Wall Street and big banks. The business and banking community opposed her as director of the new bureau, contending she would make the agency too aggressive.

The creation of the bureau was a central piece of the legislation overhauling the financial-regulatory system that Obama signed into law in July. Its genesis was an article that Warren wrote a year before the near-collapse of the financial system in 2008, a crisis blamed, in part, on abusive mortgage practices.  The new bureau is charged with writing and enforcing new rules covering the largest banks to the smallest storefront payday lender. Lenders will face new restrictions on the type of mortgages they write and won't be rewarded for steering borrowers to higher-cost loans. The bureau also is to protect borrowers from hidden fees and abusive terms."