Personal Finance

Poof! Elizabeth Warren to Leave Consumer Protection Agency on Aug. 1

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And just like that, she’s gone. Elizabeth Warren, the consumer advocate who spent the last year creating the government’s newest consumer protection agency, announced Tuesday that she will leave the bureau on Aug. 1.

Warren, a former Harvard law professor, is credited with having created the Consumer Financial Protection Bureau, and led the fight in Congress to get it written into the Dodd-Frank financial reform act, which became law last summer. President Obama tapped her to be his special advisor in charge of “standing up” the agency, and she was widely considered to be the frontrunner for the nomination to become the bureau’s first permanent director.

[Related article: Moody's: Consumer's Bureau is "Medicine" for Banks' Ills]

But Warren also is a controversial figure, a foe of many banking industry leaders thanks to her harsh criticisms of bank behavior during and after the housing boom. With support from the industry, Republicans in Congress pushed hard to limit the bureau’s power, including changing its leadership structure from a solitary director to a five-member board.

Republicans maintained that their position was not about Warren herself, a line that sometimes was difficult to maintain.

“It has nothing to do with Elizabeth Warren, it really has nothing to do with her,” Rep. Spencer Bachus, chair of the House Financial Services Committee, told a group of bankers in May.

After a pause, Bachus said, “I will not take a lie detector test,” eliciting a laugh from the bankers in the audience.

Last week, President Obama introduced Richard Cordray as his nominee to lead the new bureau. Cordray, a former attorney general of Ohio who gained national recognition for his investigations into bank wrongdoing during the housing boom, already worked for the bureau as director of its enforcement team.

But Republicans in the Senate have indicated they won’t confirm Cordray or anyone else to lead the bureau until the administration agrees to limit the new agency’s power. So as Cordray’s nomination sits in limbo, the Treasury department announced that Raj Date, the bureau’s current research director, will take over Warren’s role as interim leader.

Warren, meanwhile, will return to teaching law at Harvard. Many Democratic Party leaders have urged her to challenge Massachusetts Republican Scott Brown for his Senate seat. Kevin Franck, a spokesman for the state’s Democratic Party, told the Huffington Post that its members would be “thrilled” if Warren chooses to run in 2012.

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Image: Leader Nancy Pelosi Photostream, via Flickr.com

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