Elizabeth III

The chutzpah here is something to behold. The pride of Harvard Law School, Ms. Warren is a hero to the political left for proposing a new bureaucracy to micromanage the services that banks can offer consumers. But she is also so politically controversial that no less a liberal lion than Connecticut Senator Chris Dodd has warned the White House that she probably isn’t confirmable. A President with more political and Constitutional scruple would have nominated someone else. Mr. Obama’s choice is to appoint her anyway and dare the Senate to do something about it.

The plan is for Ms. Warren to run the new bureau from an office at the Treasury Department. Instead of calling her the “Director” of the bureau—the statutory title for the organization’s boss—Mr. Obama has appointed her an “assistant” to him and a “special advisor” to Treasury Secretary Timothy Geithner.

Congressional Oversight Panel Chair Elizabeth Warren

Mr. Geithner’s supervision will be pro forma, however, because Ms. Warren rolled over him during the financial reform debate and has her own pipeline to the Oval Office. The President emphasized that Ms. Warren will enjoy “direct access” to him and said she would oversee all aspects of the creation of the new agency, including staffing and policy planning. For all intents and purposes, Ms. Warren will be Treasury Secretary for all consumer lending.

We would have thought a Harvard law professor would object to the extra-legality of this arrangement, but then this is also the crew that gave us ObamaCare via budget reconciliation and put Donald Berwick in charge of Medicare without a Senate debate. Remind us again why the tea party critique of Obama governance is crazy.

The new bureau was already destined to be a bureaucratic rogue. When Members of Congress objected to it being “independent” in the way Ms. Warren hoped, Mr. Dodd and the Administration cooked up a plan to make it part of the Federal Reserve without actually answering to anyone there. The bureau has independent rule-making authority and can grant itself an annual budget up to $646 million. It will draw this money from the operations of the Fed, so the bureau needn’t deal with the messy intrusions of Congressional appropriators and will therefore receive limited Congressional oversight.

Ms. Warren’s bureau will dictate how credit is allocated throughout the American economy—by banks and financial firms, and also by many small businesses that extend credit to consumers. The bureau’s mandate under the new Dodd-Frank law is to ensure that “consumers are protected from unfair, deceptive, or abusive acts and practices and from discrimination.” If those terms sound vague and overbroad now, wait until Ms. Warren’s hand-picked staff begins interpreting existing laws on fair lending and writes new rules.

In a blog posting Friday on the White House website, Ms. Warren made her intentions clear enough: “President Obama understands the importance of leveling the playing field again for families and creating protections that work not just for the wealthy or connected, but for every American.” Given the economic growth and jobless figures, maybe we should start calling this the “leveling” Administration.

Though her mandate goes beyond banks, the banking system is likely to suffer the most damage. Ms. Warren was a vociferous opponent of allowing regulators charged with maintaining the safety and soundness of banks to control this new bureau. No matter how destructive its new rules may be, they can only be rescinded by a two-thirds vote of the Administration’s new Financial Stability Oversight Council.

And the bureau will now be staffed and shaped by an “assistant” with no obligation to appear before the Senate. The possibility that an appointed official could hold significant authority is why the framers wrote the Senate into the process of approving the President’s senior hires. Article II, Section 2 of the Constitution says the President “shall nominate, and by and with the Advice and Consent of the Senate, shall appoint . . . Officers of the United States.”

Article II, Section 2 also says “Congress may by Law vest the Appointment of such inferior Officers, as they think proper, in the President alone,” but Congress explicitly did not view the head of the financial consumer bureau as an inferior officer. On July 21, Mr. Obama signed a bill passed by both Houses stating that the “Director shall be appointed by the President, by and with the advice and consent of the Senate.”

We have here another end-run around Constitutional niceties so Team Obama can invest huge authority in an unelected official who is unable to withstand a public vetting. So a bureau inside an agency (the Fed) that it doesn’t report to, with a budget not subject to Congressional control, now gets a leader not subject to Senate confirmation. If Dick Cheney had tried this, he’d have been accused of staging a coup.