(Updates with announcement, White House comments)

By Caren Bohan and Dave Clarke

WASHINGTON (Reuters) - From an exclusive perchclose to the seat of power, Wall Street nemesis ElizabethWarren will have plenty of autonomy as well as President BarackObama's ear.

The Harvard law professor, whose grandmother drove a wagonin the Oklahoma land rush, is a folk hero for consumer groupsand the bane of Wall Street. She will build from scratch a newgovernment agency to crack down on abusive practices infinancial products like mortgages and credit cards.

Warren has known Obama since his student days at Harvardand will be designated "assistant to the president" -- acoveted title most often reserved for the closest White Houseaides.

Named on Friday as a special adviser leading the creationof the Consumer Financial Protection Bureau, she will jugglereporting to two of the most powerful figures in Washington --Obama and Treasury Secretary Timothy Geithner.

Warren's relationship with Geithner has occasionally been abit rocky, although both now say they get along just fine. Thefolksy, plainspoken Midwesterner and the smart, New York-bornfinancial guru clashed when Warren ran the U.S. governmentwatchdog agency overseeing the $700 billion financial bailoutprogram.

Both Warren and Geithner appeared with Obama at the RoseGarden announcement of her new job, but neither spoke.

The advisory role allows Obama to avoid a nasty battle forWarren's Senate confirmation that would have been triggered bya formal nomination as director of the consumer agency butwould put her at the helm of an independent agency.

"This is a capitulation of sorts," said Terry O'Neill,president of the National Organization for Women. But she saidshe believed Warren would ultimately wield influence in the"old boys' club" that is the administration's economic team.

SPLITTING THE BABY

Warren will work from two offices -- one at Treasury andanother in a building a few blocks from the White House wherethe consumer agency will initially be housed. Most assistantsto the president have space in the West Wing and power is oftenmeasured by their physical proximity to the Oval Office.

The White House feared Warren would have been sidelinedduring a lengthy nomination fight in which she would have beenexpected to keep a low profile and would have been much moreconstrained in the duties she could take up.

Wall Street fears Warren would use her role to push forpolicies that would hurt profits on products like credit cardsand stifle their competitiveness.

Obama's Solomon-like decision to split the baby raisedquestions about whether it was a half measure that would limitWarren's power as she works to get the bureau up and running.

"If Warren is given real power, this is great news," saidBecky Bond of the liberal group CREDO. "If she is not given thepower to make change and hold Wall Street and abusive banksaccountable, this maneuver is nothing more thaninside-the-Beltway cleverness."

Business groups and some senators considered the bypass ofthe confirmation process as signaling a lack of transparencythat would undermine the new consumer agency.

It was Warren who first proposed the consumer agency andhelped the administration push for its inclusion in thesweeping financial reform bill that passed in July.

Warren, 61, has spent decades championing the rights ofmiddle-class families and detailed their struggles in abest-selling book called "The Two-Income Trap."

The janitor's daughter from Oklahoma, whose father was avictim of a crooked business partner, has been called by Obamaa "dear friend," and her views on issues like predatory lendinghave long gelled with his.

REAL AUTHORITY?

Few who know Warren doubt she would have insisted on aposition with real authority.

"My working assumption is that Elizabeth Warren, havingknown her for many, many years, would not accept a positionwhere she does not have the authority she needs to make thingshappen," said Maureen Thompson of the consumer group Americansfor Financial Reform.

"She is not a shrinking violet," Thompson said.

Warren's job has been compared to previous advisory roles,such as the "pay czar" job held by Kenneth Feinberg to examineexecutive compensation at bailed-out banks and Steve Rattner'sappointment as "car czar" leading the auto industry rescue.

A provision in the financial reform law that directs theTreasury Department to get the consumer agency up and runningallowed Obama to name Warren to the advisory role.

Warren will be "instrumental" in picking the consumeragency's director, White House spokesman Robert Gibbs said, buthe would not say if she would be considered as a candidate.

Obama's decision sparked a debate among banking lawyersover potential legal constraints on Warren's authority.

Some said the law limits Treasury's role to overseeing theintegration of employees from various federal agencies into thenew shop and would not include the ability to write newregulations. Others say that is too limited an interpretation.

Former Bush administration official Tony Fratto said itwould have been virtually impossible to confirm Warren ahead ofthe November congressional elections and even harder to do soafterward, with Republicans likely to make gains in theSenate.

But White House officials rejected any notion that Obamablinked from a fight.

"A confirmation battle could be 7, 8, 10, 12 months long,"one senior official said. "In that period of time, she wouldn'tonly have no power to do anything, she wouldn't have any rolein the decision-making in standing up the agency. She wouldn'tbe able to speak publicly about the agency."

"This is a far better option because she will play acentral role in getting the agency going at a pivotal time,"the official said. (Reporting by Caren Bohan and Dave Clarke; Editing by LeslieAdler and Tim Dobbyn)