Frank said:

I need people to understand she’s not a zealous advocate but a very smart operator. Sometimes people think those are separate. That if you care a lot about an issue, you’re not going to be effective in putting it forward. I never had a better partner on a tough fight than I had in Elizabeth Warren. Her knowledge is great. Her compassion is great. She stands out as the person who ought to be running that agency.

He also noted:

I sympathize with President Obama. He’s been criticized by some of my liberal friends. We didn’t get a public option and other things we wanted. That wasn’t his fault. The economic recovery bill, the stimulus, it wasn’t as big as it should have been. That wasn’t his fault. He couldn’t get the votes. With regard to appointing Elizabeth Warren, that’s his decision. No one can stop him from making it. I hope he will appoint her.

And Treasury Secretary Timothy Geithner, without outright supporting Warren, had warm words for her this week as well:

She represents to a large part of the country — not just people caught up in the damage of the crisis, but people who view this system as being fundamentally broken — she represents, again, one of the most compelling advocates for reform.

The discussion kicked off after the final passage of the Dodd-Frank financial regulatory reform bill, which will become law when President Obama signs it tomorrow. And it heated up when a Huffington Post story, citing unnamed sources and pushed back on by the White House, said that Treasury Secretary Timothy Geithner opposes the much-lauded Warren — a Harvard Law professor, expert on consumer finance and the current head of the Congressional Oversight Panel over the Troubled Asset Relief Program. (The idea for the CFPB is hers, to boot.)

Since then, the White House and legislators have rushed to offer praise, if not outright support, for her. Rep. Carolyn Maloney (D-N.Y.) circulated a letter asking legislators to get behind her. Dozens did so. And the White House signaled its possible support too. “While there are a number of strong choices under consideration for this position, Elizabeth Warren is a champion for consumers and middle-class families, and we are confident she is confirmable,” Jen Psaki, a White House spokesperson, said.

At The Washington Post, Brady Dennis confirms that Warren is a short-list candidate, along with Assistant Treasury Secretary Michael Barr and Eugene Kimmelman, a deputy attorney general and former consumer advocate. (The White House will name the head of the CFPB, and Congress has to confirm him or her.) And WaPo’s Neil Irwin details the concern that she does not have the executive experience necessary to run a bureaucracy.

Still, her advocates are coalescing on the left. Yesterday, Americans for Financial Reform endorsed her. Today, the SEIU and the AFL-CIO, the powerful labor unions, also threw their weight behind her. Of course, the question will be whether she can draw a Republican or two to vote for confirmation in the Senate. Thus far, none have come out publicly in support.

Democratic leaders in Congress say their top pick for the post is Elizabeth Warren, the high-profile Harvard law professor and an outspoken critic of what she sees as a too-cozy relationship between government and bankers. Other potential candidates include Michael Barr, a Treasury assistant secretary and University of Michigan law professor with a longstanding interest in consumer finance; Democratic state attorneys general Martha Coakley of Massachusetts, Lisa Madigan of Illinois and Lori Swanson of Minnesota; Susan Wachter of the University of Pennsylvania’s Wharton School, who served in the Clinton Department of Housing and Urban Development; and Nicolas Retsinas of Harvard’s Joint Center for Housing studies, a former bank regulator and a low-income housing specialist.

Warren seems the most obvious choice — and is certainly the name I have heard the most — though some have pointed out that the White House might consider her too tough for the position. (Why would being doggedly pro-consumer be problematic? That, I do not know.) I have also heard Eric Stein’s name pop up, though that might be due to right-wing advocacy group Americans for Prosperity’s preemptive campaign against him.

The change might undercut the regulation of financial products created by firms like AIG, no less potentially dangerous than ones created by a Wall Street bank or a hedge fund, and has consumer advocates spooked. And it is one of dozens of kinks to be worked out and issues to be considered today, tomorrow and Thursday, as the conference process races to the finish.

Sen. Chris Dodd (D-Conn.) and Rep. Barney Frank (D-Mass.), the head of the committee, promised it will be over this week — despite the significant amount of work still left. Today, the conferees debate the new Consumer Financial Protection Agency, the auto dealer exemption and debit card fees. Later this week: the Volcker Rule, derivatives and dozens of other small changes. Addressing the convened conferees when they convened this afternoon, Frank said, “If we are not able to finish up by Thursday, then this bill will not be able to pass until the middle of July.” Obama plans to have the finalized version ready for a meeting of the G-20 in Toronto this weekend.

Sen. Kay Hagan (D-N.C.)

By all accounts, Sen. Kay Hagan’s (D-N.C.) amendment to Sen. Chris Dodd’s (D-Conn.) financial regulatory reform bill was an excellent one. The first-term senator had a long-standing reputation in her home state for fighting payday lending, the $42 billion a year industry that offers easy-to-get short-term loans in exchange for hefty fees and annualized percentage rates of interest in the triple digits, as high as 650 percent in some states.

[Economy1]Hagan’s amendment — the Payday Lending Limitation Act of 2010, cosponsored by Sens. Dick Durbin (D-Ill.) and Charles Schumer (D-N.Y.) — capped the number of times a customer could get a payday loan to six per year. It also required payday lenders to offer borrowers extended repayment plans, letting them pay back their loans in smaller installments over longer periods of time. Payday loans are advertised as emergency stop-gap measures to help customers with sudden expenses. But the average payday loan rolls over between eight and 12 times. And more than 60 percent of payday loans go to borrowers that use them 12 times or more per year.

To illustrate how bad payday loans sometimes got, Hagan told the story of one of her constituents, Sandra Harris from Wilmington. “She had a job at Head Start and always paid her bills on time,” Hagan said on the Senate floor. “When her husband lost his job, Sandra got a $200 payday loan to pay the couple’s car insurance. When she went to repay the loan, she was told she could renew. Sandra ultimately found herself indebted to six different payday lenders, and paid some $8,000 in fees.”

Hagan’s amendment, without banning the financial service, would have stopped the industry’s worst practices — but also its most lucrative practices. Payday lenders make 90 percent of their business from repeat users. If payday loans were capped at six per customer per year, payday lenders could see their business fall by a third or half. Thus, the industry lobbied hard against Hagan’s proposal, as it had done against financial reform in both houses all year — spending $6.1 million on lobbying in 2009, more than double what it did in 2008.

The lobbying effort employed everyone from the grassroots — individual customers — to the highest-powered lawyers. David Lazarus of the Los Angeles Times reported that as Hagan’s amendment came up for a vote in Congress last week, one payday lender instructed his employees, “After a customer repays their loan, the customer then asks for a new loan. TELL YOUR CUSTOMER THAT YOU CAN’T LOAN TO THEM BECAUSE THE GOVERNMENT HAS PUT US OUT OF BUSINESS. That will get their attention. Then ask them to write letters or call their senator/congressman.” A flurry of letters written at check cashers or payday loan shops showed up in Congress.

On May 20, Hagan’s amendment came up in the Senate. Durbin stood up in support, calling payday lenders the “bottom feeders” of the financial industry. Then, as Dodd moved to proceed, Sen. Richard Shelby (R-Ala.) — who in 2009 received more campaign donations from payday lenders than any other Senator — blocked unanimous consent to vote on the popular provision. (Shelby’s office did not respond to repeated requests for comment.) It died on the floor.

Hagan’s was the last of many such payday-lender-specific provisions to come up in the regulatory reform process. And it was the last to fail. There are no interest-rate or rollover caps in the Senate bill. And there are none in the House either.

Durbin argued for capping the maximum annualized percentage rate of interest a payday lender could charge at 36 percent, for instance, a measure supported by the Center for Responsible Lending and other consumer groups. It never made it into the bill, nor did Rep. Jackie Speier’s (D-Calif.) version in the House. Rep. Luis Gutierrez (D-Ill.) — who has in the past advocated effectively banning payday lending — sponsored the Payday Loan Act of 2009, a series of reforms attached to the House bill. Consumer reform groups blasted the measures, which capped annualized percentage rates of interest at 391 percent. But even those very modest reforms did not make it in. And the most notable payday lender victory might have come from the work of Sen. Bob Corker (R-Tenn.), who reportedly lobbied for and won a loosening of the Consumer Financial Protection agency’s oversight over small payday lenders.

One might think this would have consumer advocates incensed about the House and Senate bills’ ability to stop the worst practices in the payday lending industry. But, in fact, they argue that payday lenders spent millions to win numerous battles before ultimately losing the war.

Why? Payday lenders in both bills still come entirely under the rule-making authority and oversight of the new Consumer Financial Protection Agency, which consumer advocates are confident will consider tamping down on annualized percentage rates of interest and establishing rollover limits. There has been considerable confusion over the Senate’s payday lending language and possible loopholes. It ensures the Consumer Financial Protection Agency has oversight and rule-making authority over all payday lenders, with the CFPA enforcing rules against bigger lenders and the Federal Trade Commission enforcing rules against smaller lenders, Kirstin Brost of the Senate Banking Committee said. And the House language, simply having the CFPA have total authority over all payday businesses, as supported by the White House and Treasury, is likely to win out.

“In the end, it doesn’t matter much that Congress didn’t specifically regulate payday lenders,” Ed Mierzwinski, the consumer program director at the U.S. Public Interest Research Group explains. “For the payday lenders to call the defeat of the Hagan a win for them is a Pyrrhic victory — because both both the House and Senate bills include a strong new consumer financial protection agency and it will regulate them.”

And Kathleen Day, the spokesperson for the Center for Responsible Lending, which worked with Senators on crafting payday lending restrictions and has fought a longtime and vocal fight against the businesses, concurs. “The [CFPA] will be able to enact strong consumer protections that would apply to payday lenders. As long as those protections are in there, that’s the name of the game,” she says. “There’s going to be people that say they want to be specific, they want to have specific provisions in this law about payday lending. But the great thing about having this agency is that it will have broad overview to write fair laws and to make sure laws are fair.

“Of course, we’d love to have a 36 percent [annualized percentage rate of interest] cap. But that’s unlikely. And sometimes regulations can be too specific. We are confident [the CFPA] will be able to react to the market in a flexible, consumer-focused way.”

Indeed, behind the scenes, payday lenders — much like auto dealers who make car loans — fought hardest for an exemption from CFPA authority. That battle, they spent millions to lose. And it means that consumers might win down the road.

At 5:30 p.m. today, the Senate is voting on whether to recommend its representatives on the conference committee push for provisions in two amendments that did not receive votes. (The “will of the Senate” measures are not binding.) They are Sen. Sam Brownback’s (R-Kans.) amendment exempting auto lenders from Consumer Financial Protection Agency rules (identified by consumer advocates as a highly problematic measure) and Sen. Kay Bailey Hutchison’s (R-Texas) amendment weakening restrictions on proprietary trading.

Sen. Chris Dodd (D-Conn.) (EPA/ZUMApress.com)

Last week, the Senate passed a sweeping overhaul of the regulation of banks and financial institutions. The bill, authored by Sen. Chris Dodd (D-Conn.), does not just focus on Wall Street firms, changing leverage limits and capital requirements. It focuses on Main Street banks and lenders as well. The bill empowers a new oversight council to create and enforce rules specifically on behalf of regular consumers: the Consumer Financial Protection Agency, housed in the Federal Reserve in the Senate bill and an independent federal agency in the House bill, which now need to be merged.

[Economy1]By and large, consumer watchdogs — some of the bill’s fiercest critics and biggest supporters — were happy with the final Dodd legislation. “We are pleased the Senate has passed this momentous bill that will rein in big banks’ reckless behavior and bring transparency to our financial system and protect consumers,” Heather Booth, the consumer advocate and director of the Americans for Financial Reform, said in a statement. “[This bill] ensures the financial system operates to support needs of working families, promotes business growth and economic mobility rather than the interests of the speculators who view the economy as a huge casino.”

But as the Dodd bill heads to conference committee — where members of Congress will reconcile the Senate financial regulatory reform proposal with the House’s bill, passed last year — consumer advocates have identified loopholes and weak points where a merged bill could be watered down, leaving American workers and families overpaying for financial services or otherwise vulnerable. Consumer advocates primarily cite the purview of the CFPA — the companies it will be able to regulate, and the extent to which it will be able to enforce rules — as the primary yardstick of real reform.

Travis Plunkett, the legislative director of the Consumer Federation of America, points to investor protections as the “big hole” remaining in the bill. “The House legislation is stronger on making sure that financial professionals are responsible for the advice they give,” he says. But the CFA is also focusing on ensuring a strong, independent CFPA comes from the conference committee process. He named a loophole in the Senate bill regarding the CFPA’s ability to monitor small non-bank lenders, like payday lenders, as problematic. “We’d like to see the House language triumph there,” he said, noting that the difference would amount to millions for low-income Americans.

The Center for Responsible Lending, a nonpartisan research group, cites whether auto lenders are under the CFPA’s oversight as an issue to watch. The Center estimates that consumers spend $20 billion more a year on their car loans because they borrow through dealerships — whose contracts can be usurious and difficult to understand — rather than banks or credit unions. Kathleen Day, a spokesperson for the organization, notes that the House bill exempts auto lenders from CFPA regulation and that car companies are lobbying hard to keep it that way in the final legislation.

Sen. Sam Brownback (R-Kans.) attempted to push the same exemption into the Senate bill, but the Senate ultimately did not vote on his amendment. Today, the Senate plans to take a nonbinding “sense of Congress” vote on the measure. “It isn’t binding, but these things are taken into account in conference committee,” Day says. “Currently, the Senate bill is better than the House bill on that, so we don’t want to see a shift there.” Plus, it is a point of hard lobbying. Last year, Ford Motor Company alone made more than $1 billion through its financing arm.

Day also says the CRL hopes Congress removes a Senate provision allowing small non-bank companies to preview and comment on CFPA rules “before they see the light of day.” “That’s behind the scenes, and would lead to the kind of cozy relationships between regulated companies and regulators that led to this crisis in the first place.”

Consumer watchdogs also cite preemption — the ability of the federal government to quash strong local rules — as a major issue to watch as the bills are merged. “It [is] really in the weeds,” Day says, “and a hard one to tamper with, but important.”

Mike Konczal, a fellow at the Roosevelt Institute and specialist in banking regulation, explains that reformers want states to retain the ability to create and enforce strong consumer-protection standards within their borders — and had to fight for the provision in both the House and Senate. “The New Democrats [in the House] could have probably killed the CFPA or at least turned it into a toothless panel,” he says. “But they let it go and then pushed hard [for] pre-emption, which would allow the Office of the Comptroller of Currency” — a primary government banking regulator — “to break state consumer protection laws.”

Therefore, preserving the ability to police consumer protection at the local level remains a priority for advocacy groups in Washington.

Audit the Fed. The House charges the Government Accountability Office with auditing the Fed, including its emergency lending programs, past and future. The Senate bill covers emergency lending programs only between Dec. 1, 2007, and the date the bill is signed into law.

Derivatives. Both the House and Senate bills require derivatives trades to go through clearinghouses. But the House bill provides for more exemptions and has bigger hypothetical loopholes, and the Senate bill requires banks to spin off and separately capitalize their swaps trading desks.

Leverage requirements. The Senate bill charges regulators with determining banks’ leverage requirements. The House bill has a firm 15 to 1 cap.

Proprietary trading. The House bill does not ban proprietary trading. The Senate bill charges regulators with studying proprietary trading in order to eventually restrict it by putting in place some form of the Volcker Rule.

The Consumer Financial Protection Agency. The Senate houses it in the Federal Reserve; the House version of the bill keeps it independent. Rep. Barney Frank (D-Mass.), the head of the House Financial Services Committee, has promised to fight for an independent CFPA.

Autodealers. The Senate bill allows the CFPA to regulate a broader group of lenders, including, crucially, autodealers who make car loans. The House bill has a smaller purview for the new agency.

Resolution authority. The House bill has an $150 billion resolution authority pool, funded by big banks. In the event that the government chose to wind down a firm, it would tap the fund to pay for relevant costs. The Senate version instructs authorities to take a loan from Treasury to pay for winding the bank down and then says the government is the first entity paid back when the bank is dissolved.

Executive compensation. Both the Senate and House bills require financial firms to have independent panels set executive compensation. But the Senate bill forces executives to return their bonuses if the company misstated or mislead on its financial health.

It seems that Democrats do not yet have the crossover support.

Sen. Mitch McConnell (Ky.), the minority leader, told FOX News Sunday, “It’s my expectation that we will not go forward with this partisan bill tomorrow,” and that “it’s not ready yet.” On NBC’s Meet the Press, Sen. Richard Shelby (R-Ala.) and Sen. Dodd said much the same. “I think that nothing happens between now and tomorrow,” Shelby said. “The Democrats will not get cloture.”

But Republican opposition to the bill seemed to be softening, with issues for debate winnowing down to: the $50 billion “resolution authority” fund, which some Republicans wrongly insist would mean taxpayer funded bailouts for big firms; the role of the Consumer Financial Protection Agency; and a provision backed by Republicans to guarantee no taxpayer funds will be used for bailouts.