WASHINGTON (Reuters) – The White House is considering Federal Reserve Governor Sarah Raskin and former Michigan Gov. Jennifer Granholm to head a new agency charged with protecting consumers of financial products, a source aware of the process said on Tuesday.
The consumer protection body will have broad powers to rein in abuses in the financial industry and was created in response to the aggressive and sometimes predatory lending practices that contributed to one of the worst financial crises in U.S. history in 2007-2009.
The Obama administration had considered the creation of the bureau one of the most important parts of the financial regulatory overhaul signed into law last summer.
However its creation has been tarnished by a months-old logjam over who should head the agency. Law professor Elizabeth Warren, an outspoken consumer advocate and harsh critic of industry practices who had championed the bureau’s establishment, had been a leading candidate to run it but was seen as too confrontational to industry to overcome objections from Senate Republicans.
The agency head will need to win Senate confirmation, and even though Democrats hold a majority in the chamber, objection by even a single senator can create procedural hurdles hard to surmount.
SEEN AS READILY CONFIRMABLE
Raskin, who was recently named by President Barack Obama to a seat on the Fed’s board, is viewed as readily able to win the needed confirmation to the office.
A former state banking regulator and former staffer on the Senate Banking Committee, Raskin is also seen by the White House as a candidate who would be acceptable to the financial services industry, the source added.
Granholm, who was the first female governor of Michigan, had been mentioned last year as a potential candidate for a seat on the Supreme Court.
She served for eight years as governor of a state that has been hit hard by the financial meltdown, the housing market collapse and the decline of the U.S. auto industry.
Granholm previously served as Michigan state attorney general and now advises the Pew Charitable Trusts on clean energy policies.
The source did not say whether other candidates besides Raskin and Granholm were under consideration.
Obama is under pressure from both ends of the political spectrum to name a head to the Consumer Financial Protection Bureau, which is set to open in July. While tougher financial oversight was signed into law with great fanfare, it has encountered steady opposition from industry, who say it will raise costs for consumers and create obstacles to legitimate lending to individuals and businesses.
OPPOSITION TO REFORMS
Newly empowered Republican lawmakers who won a majority in the House of Representatives and added seats in the Senate in November have made slowing down or preventing the reforms a top legislative priority.
The agency would be tasked with preventing exploitation of consumers by financial service firms, such as through shoddy mortgage practices and excessive credit card fees. It also would play a role regulating the so-called shadow financial industry, including pay day lenders.
Warren, a Harvard professor who had pushed to establish the agency while heading a panel that investigated government bank bailouts during the crisis, had been seen as a likely candidate last year. However, she would face a difficult, if not insurmountable, uphill struggle on confirmation because many Republicans see her as too antagonistic toward industry.
Warren, who has been serving as an adviser to Obama and the U.S. Treasury, has been helping to set up the agency for its formal launch. She has made efforts to foster a good working relationship with the industry.
(With additional reporting by JoAnne Allen)
(Writing by Tim Ahmann; Editing by Carol Bishopric and Clarence Fernandez)
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