Although President Obama made the creation of a Consumer Financial Protection Bureau a hallmark of the financial reform law enacted July 21, his delay in nominating the agency's first director could hamper its ability to get off the ground.

With so much riding on the appointment, several observers had expected Obama to make his choice clear within days of the law's enactment. Instead, the absence of a pick has given rise to a grassroots campaign to appoint Elizabeth Warren to the job, which could create a political issue for the administration whether it ultimately chooses her or not.

The Treasury Department, in the meantime, is tasked with getting the agency up and running, and observers said it is critical that a director be nominated and confirmed relatively soon.

"There's a lot of operational work that can be done without a director being done, but some of the most profoundly difficult things comes down to having a leader," said Raj Date, the chairman and executive director of the Cambridge Winter Center for Financial Institutions Policy. "Leadership matters. If you are trying to have an agency that attracts the best and brightest for the sector, then you have to have a leader."

Creating the consumer bureau was the first in a long list of tasks the agency must accomplish in its first year. Among other things, it must merge mortgage disclosure laws and outline a vision of its own authority.

Industry observers said that the Treasury can start much of the work, but that a new director will have to make hard choices.

The idea of letting the Treasury run the bureau has "a short life," said Jerry Buckley, a partner at BuckleySandler LLP. "As time goes by, there will be more and more pressure to appoint a leader who will take responsibility for getting the Bureau launched on the right foot. The president has said the CFPB is essential, he's campaigned for it, and he's rejoiced in its creation. A months-long delay in appointing a leader could start to raise questions about how important a priority this really is for the administration."

Several observers noted that Treasury is scheduled to a host a meeting in September with consumer groups, industry representatives and others about the consumer bureau's agenda. While it would be all but impossible for a new director to be confirmed by that point, many said a nominee could at least attend to help drive the process forward. "I think the director will be pretty important, because they are given a lot of responsibilities. So I would think that would be one of the first steps," said Stephanie Robinson, a lawyer at K&L Gates. "I would assume they have plenty of knowledgeable people to get the process, but if they don't have a director in [by the September meeting], I would think they would need to get one in soon."

Despite the growing unease, the administration does not appear to be in a rush. White House spokesman Robert Gibbs told reporters last week that a nomination was "weeks" away. A spokeswoman for the White House did not comment for this article.

Exactly why Obama is waiting is something of a mystery, and may hurt him politically. The consumer agency was always a top priority for the administration and guaranteed to be part of the final regulatory reform bill. By the time the president signed it, the administration had had months to consider candidates.

A shortlist of possible nominees has been circulating for months. It includes Warren, a Harvard professor who came up with the idea of a consumer financial protection agency, and Michael Barr, a consumer advocate who is currently Treasury assistant secretary for financial institutions.

Some said the delay is not just holding up the future of the consumer bureau. Because Barr is also a candidate for the next comptroller of the currency — a seat that has been vacant since John Dugan finished his five-year term this month — several observers said that decision will come after a CFPB move.

"They are waiting to see who gets this first before the" Office of Comptroller of the Currency, said Paul Miller, managing director of FBR Capital Markets Corp.

Consumer groups like Barr, but they have devoted most of their energy and attention to Warren.

Several top lawmakers, including House Financial Services Committee Chairman Barney Frank, have openly pushed the administration to choose Warren for the job, and her potential nomination has been embraced by the liberal blogosphere.

Although the administration may have hoped the campaign would die down, it has shown no signs of abating. Last week Warren was the subject of a widely distributed video featuring the comedian Ryan Anthony Lumas wearing a cowboy hat and rapping the song "Got a New Sheriff."

Maureen Thompson, a steering committee member for Americans for Financial Reform, said her group's campaign for Warren will only grow.

"The groundswell of support for Elizabeth Warren was big a month ago and it will be even bigger a month from now," Thompson said. "The more time that supporters of Warren get to make their case, the clearer it becomes that there is no other presumptive front-runner emerging. Another effect of more time being allowed for the process is that the weak case made against Warren by some in the bank lobby is seen to be full of more and more holes."

In many ways, the campaign has also put the administration in a box. If it selects Warren it will look like it is yielding to pressure from the left and opening itself up to a confirmation fight in the Senate. If it does not choose her, it will anger the administration's base shortly before the November midterm elections.

Some said the fact that Warren has not yet been nominated is a sign the administration will not pick her.

"It seems to me the longer it sits there, the less likely she is to get it," said Oliver Ireland, a partner at Morrison & Foerster LLP. "If they were going to nominate Elizabeth Warren, they could have done that any time along the way. They could have announced it when they signed the bill. It's not like they didn't know about her."

Some observers said the campaign itself, unprecedented for a banking regulatory position, weakens Warren's chances.

"Pushing her out there in my opinion increases your opposition rather than increases the intensity of her support," said Mark Calabria, a former Republican Senate aide and now director of financial regulations studies at the Cato Institute.

Others argue the opposite, saying the campaign may help Warren gain support and get lawmakers used to the idea.

"The longer it takes, it may be affording an opportunity for those who are hawkish of her to get to know her better," said David Berenbaum, chief program officer for the National Community Reinvestment Coalition.

But time is running out if the administration wants a new director, particularly a controversial choice like Warren, confirmed this year. With midterm elections within two months of the Senate's return next month, the Banking Committee would have to move quickly to hold a confirmation hearing and a vote before turning the issue over to the full chamber.

Some said it was already too late.

"It's nearly impossible to have her confirmed between now and Election Day," said Richard Hunt, president of the Consumer Bankers Association. "I don't care who the nominee is; we are expecting a thorough process. This is akin to a Supreme Court nominee for financial services."

Yet if the administration waits until after the elections, Democrats will likely face a narrower majority in the Senate.

"The bill passed over a month ago you would have thought they would have put someone up by now," said Gregory Lyons, a partner at Debevoise & Plimpton LLP. "If [Obama] does in fact want Warren to be the nominee, he's going to have to do it soon, because if the Republicans take a strong hold over Congress, it will be more difficult."

Even with Democrats holding 59 seats in the Senate, it is unclear whether Warren or another liberal choice is confirmable. Many moderate Democrats are said to have reservations with Warren and may balk if she is the nominee.

"If it was just a Democrat-Republican battle, they would fight that, because even if they lose it would make Republicans look bad. But there are Democrats fighting this, too," Miller said.

Senate Banking Committee Chairman Chris Dodd has warned he does not think Warren is confirmable, but he has also urged the administration to make a choice.

"If the administration goes through an eight-month debate over who is going to run this, you are going to do damage before you start," Dodd said in a recent interview. "You need to have a good-quality individual, and if [Warren] can be confirmed, then step up and do it. I just think it's a problem, but I could be wrong."

Some industry representatives said that as a result, they do not expect a nominee to be named until after the elections. But several observers said such a move would further harm the agency, potentially setting back confirmation of a new director until sometime next year.

"If they wait until after the mid term election and you don't see the selection coming forward, that is a signal to the markets and consumer groups and all the interested groups that's where the administration seems to not know what it wants to do," said Kevin Jacques, Boynton D. Murch Chair in Finance at Baldwin-Wallace College.

Obama has said he plans for Warren to have some kind of role in the agency's formation. Some have speculated she might be chosen for a White House position, one that does not require confirmation, that has some oversight of consumer protection activities. Gibbs acknowledged last week that Warren had visited the White House to talk with senior adviser David Axelrod, but did not give many specifics.

"Obviously she was here," Gibbs said at a briefing. "The consumer office is an aspect of the financial reform, Wall Street reform bill the president signed recently. It in many ways was an idea conceptualized by Elizabeth Warren several years ago. Obviously we have said that she is among those being looked at for a role in that new bureau. … She was here to talk about the office."

While the banking industry continues to oppose the idea of the consumer agency, and a selection of Warren in particular, some observers said banks were hurting their own case.

"I am struck that the industry's lobbyists have been feverish in their enthusiasm to bad-mouth Prof. Warren, but they've been seemingly unable to point to any issue in the last decade when the bank lobby has been right in retrospect, and Prof. Warren has been wrong," Date said. "And they've been weirdly shy about advancing any particular alternative candidates. Taken together, I think this is why the lobbyists' complaints on this subject seem shrill and childish."

This story has been reprinted with permission from American Banker.

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