By Caren Bohan and Dave Clarke

WASHINGTON (Reuters) - President Barack Obama ispoised to make an announcement soon on the leadership of thenew U.S. consumer financial agency and is leaning stronglytoward Harvard law professor Elizabeth Warren for the role.

He has a choice of naming her on either a temporary or apermanent basis.

Here are Obama's options and how they they could play out:


Warren, whom Obama referred to last Friday as a "dearfriend" and who first conceived of the idea of the consumeragency, is all but certain to be chosen by Obama.

The landmark financial reform law that created the ConsumerFinancial Protection Bureau gives his administration the optionof setting up the agency within Treasury on an interim basisunder the leadership of an interim director.

This would allow Obama to avoid a heated battle in theSenate to confirm Warren, who is fiercely opposed by WallStreet and many Republicans. Her critics contend she would takea heavy-handed approach toward regulating banks and otherfinancial firms that could hurt their competitiveness.

An advantage to this option is that it would enable theadministration to get the consumer agency up and running morequickly. Obama sees the agency's creation as a signatureaccomplishment and the administration is concerned that a delayof several months in getting confirmation for its new directorcould be a setback to the effort.

"The big issue seems to be the politicization of the newagency and the process, and, in an odd way, putting up aninterim director somewhat diffuses that," said Kevin Petrasic,a lawyer at Paul, Hastings, Janofsky & Walker LLP, who followsbanking issues.

If Warren is the pick, an interim appointment allows for atrial run to see how politicized her tenure might be. "It'sprobably the least objectionable of not very many goodalternatives for the administration at this point," Petrasicsaid.


If Obama decides to formally nominate Warren as the newdirector of the consumer bureau, she could serve for a term ofup to five years, if she receives Senate confirmation.

Although the fight to confirm Warren would be contentious,there are some advantages to the White House in embracing sucha debate.

Obama's Democrats are at risk of crushing losses toRepublicans in the November congressional elections. Warren isa hero to the liberal base of the Democratic party because ofher willingness to take on Wall Street.

A nomination fight could energize liberal activists andconsumer groups, helping to spur Democratic turnout for theNov. 2 election.

The White House also sees the issue as one that wouldresonate with middle class voters.

If Republicans were to try to block Warren, Obama and theDemocrats would paint them as siding with the financialindustry over ordinary consumers at risk of financial hardshipcaused by hidden credit card fees and products such aspredatory loans.

However, if Republicans end up making big gains in theSenate in November, it could prove even harder to confirmWarren and the White House would run the risk of leaving theconsumer agency rudderless for several months.


If Obama wanted to avoid a lengthy Senate fight, anotheroption he could use is a "recess appointment" -- naming Warrenon a temporary basis at a time when the Senate is not in formalsession.

This is seen as the least likely option, at least for now.If Obama were to use the recess appointment any time soon,Warren would only be able to serve for about a year under thelaw.

The Senate is currently in session for a few weeks so thisoption would not be available until October.

Another disadvantage is that a recess appointment couldantagonize moderate Democrats and Republicans, costing theWhite House political capital. Those lawmakers might see suchan appointment as going around the legislative body.

One of the reasons a recess appointment seems so unlikely,is that if it was Obama's preferred course, he could have endedthe whole drama weeks ago by making a recess appointment whilethe Senate was on its summer break instead of waiting untilthis week when lawmakers have just returned. (Writing by Caren Bohan; Editing by Tim Dobbyn)