A Would-Be Watchdog Woos the Opposition

Liberal activists who want Harvard law professor Elizabeth Warren to lead the new consumer financial protection bureau have been winning support from lawmakers, bloggers, and editorial pages. Success may ultimately depend on whether a quieter campaign can win over detractors. In the past year she has dined with bank lobbyists, explained the new financial regulation law to analysts, and met privately with Republican senators, including Susan M. Collins of Maine and Bob Corker of Tennessee.

If President Barack Obama nominates Warren, the relationships she has been building could blunt a confirmation battle by countering criticism that her consumer crusading would make it hard to negotiate fairly with business groups. Warren's fight for the consumer agency's creation alienated many on Wall Street and elsewhere, even as she made overtures to industry. "It's perfectly natural that she would reach out to different industry groups and see what makes them tick," says Camden R. Fine, president of Independent Community Bankers, who has met with Warren half a dozen times in the last year, including for lunch at a Capitol Hill restaurant last month.

White House officials have said that Warren, 61, chairman of a panel overseeing the Troubled Asset Relief Program, is on Obama's short list, even though Senate Banking Chairman Chris Dodd has questioned whether she could muster 60 Senate votes for confirmation. Also on the list are Assistant Treasury Secretary Michael Barr and Gene Kimmelman, a former Consumers Union director who is chief counsel for competition policy at the Justice Dept.

More recently, others have mentioned the possibility that Obama might name Sheila Bair, chairman of the Federal Deposit Insurance Corp. She has strong bipartisan support on Capitol Hill and has run a large agency. Warren, however, has been the most visible: When Obama signed the regulatory overhaul law on July 21, she sat in the front row before joining White House Senior Advisor Valerie Jarrett for lunch.

As he mulls whether to nominate Warren, Obama must calculate the political cost of a confirmation battle in a difficult election year for Democrats, as well as his tattered relationship with business. "I don't think it's a fight Obama wants to wage if he doesn't think he can win it," says Mark A. Calabria, director of financial regulation studies at the Cato Institute, a free-market think tank in Washington.

Asked about Warren's candidacy, White House spokesmen pointed to earlier statements defending her qualifications. And business lobbying groups wouldn't talk about her possible nomination. "We're not commenting on any appointees right now," says Elise Brooks, spokeswoman for the Financial Services Roundtable. Warren, too, declined to comment.

Obama must decide whether she has the management skill to unite parts of seven agencies to create a bureau with more than 1,000 employees, a $400 million budget, and the power to impose rules on mortgages, credit cards, and even layaway plans. "The first director will set the direction and tone for the agency for decades," says Travis Plunkett, legislative director at the Consumer Federation. "Look at Joe Kennedy and the SEC in the 1930s. He established that agency as a vigorous Wall Street overseer," says Plunkett, referring to the Securities & Exchange Commission.

Not everyone on Wall Street is against her. Mike Mayo, an analyst with Crédit Agricole Securities (USA), wrote in a May 7 note to investors that Warren, in a conference call with investors, had made "the best argument that we have heard yet" for a consumer agency.

Still, many of her Republican opponents remain steadfast. "I would not support her for that job," says Senator Richard Shelby of Alabama. "She would have no real check on her, only her imagination."

The Bottom Line: Elizabeth Warren's industry outreach could smooth the way for Obama to name her as head of a new consumer financial protection bureau.

Before it's here, it's on the Bloomberg Terminal.