Obama begins political counteroffensive this week (AP)

Play Video Barack Obama Video:Texas Governor Perry jolts White House race AFP By STEVEN R. HURST, Associated Press Steven R. Hurst, Associated Press – Sun Aug 14, 10:59 pm ET

WASHINGTON – President Barack Obama launches a political counteroffensive this week, weighed down by a stunted economy, wilting support among some of his most ardent backers, and a daily bashing from the slew of Republicans campaigning for his job.

"We've still got a long way to go to get to where we need to be. We didn't get into this mess overnight, and it's going to take time to get out of it," the president told the country over the weekend, all but pleading for people to stick with him.

A deeply unsettled political landscape, with voters in a fiercely anti-incumbent mood, is framing the 2012 presidential race 15 months before Americans decide whether to give Obama a second term or hand power to the Republicans. Trying to ride out what seems to be an unrelenting storm of economic anxiety, people in the United States increasingly are voicing disgust with most all of the men and women, Obama included, they sent to Washington to govern them.

With his approval numbers sliding, the Democratic president will try to ease their worries and sustain his resurrected fighting spirit when he sets off Monday on a bus tour of Minnesota, Iowa and Illinois. The trip is timed to dilute the GOP buzz emanating from the Midwest after Republicans gathered in Iowa over the weekend for a first test of the party's White House candidates. The state holds the nation's first nominating test in the long road toward choosing Obama's opponent.

"You have just sent a message that Barack Obama will be a one-term president," Minnesota Rep. Michele Bachmann told elated supporters minutes after winning Saturday's Iowa straw poll, essentially a fundraising event that also tests a candidate's organizational and financial strength. She spent heavily and traveled throughout the state where she was born, casting herself as the evangelical Christian voice of the deeply conservative small-government, low-tax tea party wing of the GOP.

Bachmann pulled in 4,823 votes, or 29 percent of those cast, edging out Texas Rep. Ron Paul, who drew 4,671 votes, or 28 percent. But while Democrats probably rejoiced that Bachmann's ultraconservative voice gained strength among Republican contenders, the contest to challenge Obama in November 2012 grew even more jumbled. While the voting was under way in Ames, Iowa, Republicans also had to keep an eye on South Carolina, where Texas Gov. Rick Perry made a cleverly timed entrance into the race.

Like Bachmann and all the other candidates, Perry ravaged Obama. He said the president was presiding over an "economic disaster," in a declaration that stole some of Bachmann's political thunder and undercut the front-runner status of former Massachusetts Gov. Mitt Romney, who didn't compete in the Iowa test vote. Perry clearly cast a broad shadow across the Republican contest.

Obama, expecting the political shelling he would take, fired pre-emptively in his weekly radio and Internet address to the nation on Saturday. He told listeners that it was the Republicans running for president and serving in Congress who were at work crushing voters' hopes and dreams.

The question for Obama and his backers remains: Will he sustain the counterattack? Of late, he's been seen by even his most staunch supporters as too ready to retreat from critical ground when confronted by intransigent Republicans.

Polls show voters hold both parties to blame for the stunted economic recovery, an unseemly political fight over raising the limit on U.S. borrowing, an anemic deal to cut the government deficit, the subsequent and unprecedented downgrade of the country's credit rating, wild stock market gyrations and an unemployment rate stuck above 9 percent.

In the face of that reality, Obama is tacking to put some wind in his re-election sails, apparently convinced that he can gather speed by turning up the attack on Congress.

"You've got a right to be frustrated," the president said in his weekly address. "I am. Because you deserve better. I don't think it's too much for you to expect that the people you send to this town start delivering."

He chastised Republicans for brinksmanship, saying "some in Congress would rather see their opponents lose than see America win."

That's an assessment that has some validity, particularly among the new class of House Republicans who have used their outsized legislative power to stymie Obama at every turn since their election last November.

Working in Obama's favor is a Republican Party still struggling to find a presidential candidate who lights a fire with voters. Questions remain about the appeal of Bachmann and Paul beyond, respectively, the more conservative and libertarian wings of the party.

Former Minnesota Gov. Tim Pawlenty, looking for a strong showing in Iowa to boost his struggling candidacy, ended a distant third with 2,293 votes, or 14 percent. On Sunday, he quit the race.

Former Alaska Gov. Sarah Palin, the GOP's 2008 vice presidential nominee, wasn't on the ballot and isn't a candidate yet. But she showed up at the Iowa State Fair a day before the vote, drawing huge crowds and saying she hadn't ruled out running.

Like Bachmann and Perry, Palin is a tea party favorite, but her coyness about joining the race could hurt her chances should she finally declare.

While Obama's bus tour is meant, in part, to blunt the Iowa Republican festivities, it will have to compete for attention as the country digests Perry's rhetorical assault on Obama's presidency.

Perry, a former Democrat and the nation's longest-serving governor, told his appreciative audience that Obama's government had "an insatiable desire to spend our children's inheritance." He accused Obama of presiding over an "economic disaster" that has been "downgrading our hope for a better future."

"I'll work every day to try to make Washington, D.C., as inconsequential in your lives as I can," Perry said, clearly bowing to his tea party backing. Specifics for turning his promises into realities were absent.

By entering the race on the same day as the Iowa voting, Perry angered some Republicans but saved some campaign cash and energy.

If nothing else, voters won't be able to ignore the fact that Perry's speaking style and swagger are eerily reminiscent of another Texas governor who made the transition to the national stage: President George W. Bush.

With his solid credentials on social as well as economic issues, Perry is an immediate threat to Bachmann, Romney and every other GOP candidate.

Romney did not participate in the Iowa poll, which he won four years ago before dropping out of the race when he failed to catch fire against eventual nominee John McCain. Romney did join all the announced candidates Thursday at an Iowa debate.

But it was his pre-debate visit to the Iowa State Fair that produced a political gift to the Democrats.

Responding to a heckler who challenged him on tax policies that benefit big business, he blurted out that "corporations are people, my friend." The Democratic National Committee quickly used video of that remark in pre-straw poll television ads in Des Moines, the state capital. It was the kind of business-friendly Republican applause line that could haunt him with undecided voters and disaffected Democrats.

Obama and the other GOP hopefuls now face daily scrutiny as well as they try to avoid for the same kind of misstep. That's a nearly impossible task in the long, arduous and expensive path toward the White House.

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Ex-Minn. Gov. Tim Pawlenty ends White House bid (AP)

Play Video Barack Obama Video:Texas Governor Perry jolts White House race AFP By BRIAN BAKST, Associated Press Brian Bakst, Associated Press – Sun Aug 14, 2:31 pm ET

ST. PAUL, Minn. – Former Minnesota Gov. Tim Pawlenty dropped out of the race for the GOP presidential nomination on Sunday, hours after finishing a disappointing third in the Iowa straw poll.

"I wish it would have been different. But obviously the pathway forward for me doesn't really exist so we are going to end the campaign," Pawlenty said on ABC's "This Week" from Iowa shortly after disclosing his plans in a private conference call with supporters.

The low-key Midwesterner and two-term governor had struggled to gain traction in a state he had said he must win and never caught fire nationally with a Republican electorate seemingly craving a charismatic, nonestablishment, rabble-rouser to go up against President Barack Obama.

Pawlenty tried to turn up the heat on Obama and his GOP rivals. But it often came across unnatural and he never was able stoked the passions of voters.

"What I brought forward, I thought, was a rational, established, credible, strong record of results, based on experience governing — a two-term governor of a blue state. But I think the audience, so to speak, was looking for something different," he said.

In recent weeks, he withered under the rise of tea party favorite Michele Bachmann, whose rallying cry is a sure-fire applause line about making Obama a one-term president, and libertarian-leaning Ron Paul, as well as the promise of Texas Gov. Rick Perry, the sharp-tongued Texan who entered the race Saturday.

"I thought I would have made a great president," Pawlenty said. "I do believe we're going to have a very good candidate who is going to beat Barack Obama."

He didn't immediately endorse a candidate.

Bachmann was quick to praise him, perhaps mindful of the need to broaden her appeal and reach his backers, who span the ideological spectrum.

"I wish him well," Bachmann said. "He brought a really important voice into the race and I am grateful that he was in. He was really a very good competitor."

The two-term ex-governor of a Democratic-leaning state was on Arizona Sen. John McCain's short list for the vice presidential spot in 2008. He had spent roughly two years laying the groundwork for his 2012 campaign and had hoped to become the alternative to the national front-runner, former Massachusetts Gov. Mitt Romney.

But this summer he unexpectedly found himself in a grudge match with Bachmann, the Minnesota congresswoman who shot to the top of polls in Iowa after getting into the race. Pawlenty struggled to raise money and connect with voters. He poured most of his cash and time into Iowa in the run up to Saturday's straw poll, a test of organizational strength and popularity in the state whose caucuses lead off the GOP nomination fight.

Pawlenty had acknowledged that he needed a strong finish in the straw poll to show momentum and quiet concerns that his campaign was faltering. He put it all on the line, spending the bulk of his campaign account on TV ads ahead of the contest and on a statewide tour of Iowa.

But Bachmann won with 4,823 votes, while Texas Rep. Paul got 4,671. Pawlenty received 2,293.

Pawlenty said his message "didn't get the kind of traction or lift that we needed and hoped for coming into the and out of the Ames straw poll. We needed to get some lift to continue on and to have a pathway forward. That didn't happen."

Even after the poll, Pawlenty suggested to supporters late Saturday night that he wasn't dropping out. He called the test vote here "an important first step on the road to the Republican nomination and, ultimately, the White House.

"This is a long process to restore America — we are just beginning, and I'm eager for the campaign."

Still, he said in a statement after the results were announced: "We have a lot more work to do."

Hours later, he reversed course in the face of a daunting challenge: convincing donors who were slow to give in the months leading up to the straw poll that he was still a viable candidate. Had he stayed in the race, he would have been competing for money in an expanded field as Perry, a prolific fundraiser with deep ties to the party's biggest donors, entered the race.

Said Pawlenty: "We weren't going to have the fuel to keep the car going down the road."

In Iowa, Pawlenty's exit means there's now an available contingent of top GOP staff and consultants, including former state party chairman, former advisers to President George W. Bush and senior advisers to Mike Huckabee's winning 2008 caucus campaign, including Sarah Huckabee, the former Arkansas governor's daughter. Top legislators who had signed on to Pawlenty's camp also now are free to rally behind other candidates.

It's not yet clear the size of the electorate Pawlenty frees up. GOP activists commonly praised his skill and background, but many were holding out until they met other candidates. This was an especially common reaction among a class of pro-business Republicans in Iowa.

On paper, Pawlenty, 50, seemed to have all the right ingredients as a candidate.

His blue-collar upbringing offered him a natural rapport with middle-class America. He governed as a fiscal hard-liner in a left-leaning state, winning his second term in a year when Republicans elsewhere got drubbed. He made inroads with the right crowds and assembled an all-star cast of advisers with loads of presidential campaign experience.

Pawlenty ran a traditional operation. In the lead-up to his campaign, he spread checks around to local politicians in key states through a political action committee while putting a heavy focus on small-scale events in places such as Iowa and New Hampshire.

But Pawlenty struggled to connect. He came off as bland and rehearsed next to more dynamic contenders. He languished in the polls. Perry's candidacy shoved Pawlenty further to the side.

His inability to stoke the passions of voters the way other candidates and even noncandidates have was evident.

"He said the right things, that we're going to limit the size of government and hold down spending," Sam Buck, a retired veteran from Winterset, said last week after hearing Pawlenty speak. "I like him ... but let's see what Perry of Texas does."

Pawlenty had been building momentum after a May campaign launch in which he framed himself as the one in the race willing to deliver the hard truths and confront public policy sacred cows. The climb screeched to a halt in a New Hampshire debate in early June, when he shied away from the chance to back up prior tough talk about Romney when they were face to face. It reinforced worries among some Republicans that he wouldn't be willing to take the fight to Obama as the nominee.

In that same debate, Bachmann declared herself a candidate and immediately cast a long shadow Pawlenty had trouble escaping.

Pawlenty tried for weeks to reel in Bachmann, questioning her accomplishments in office and framing her as a perpetual naysayer. In Thursday's debate, Pawlenty went even harder at her and said all of the major policies she proudly fought came to pass anyway.

"If that's your view of effective leadership with results, please stop because you're killing us," Pawlenty said to her.

That caused some Republicans to question whether he came on too strong.

___

Associated Press writers Thomas Beaumont in Des Moines, Iowa, and Philip Elliott in Ames, Iowa, contributed to this report.

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Debt crisis: Deal sought to head off stock plunge (AP)

Play Video Tax Season Video:$4.3 million of Virginia's $311 million surplus going to tornado relief 13 News, WVEC Hampton Roads By DAVID ESPO, AP Special Correspondent David Espo, Ap Special Correspondent – 2 hrs 15 mins ago

WASHINGTON – Precariously short of time, congressional leaders struggled in urgent, weekend-long talks to avert an unprecedented government default, desperate to show enough progress to head off a plunge in stock prices when Asian markets open ahead of the U.S. workweek.

With the White House consigned to the periphery of negotiations, Republicans sought as much as $4 trillion in deficit cuts over a decade as a condition for raising the nation's debt limit.

But after hours of staff negotiations followed by a meeting of Congress' top four leaders, Senate Majority Leader Harry Reid accused GOP leaders of intransigence, adding he would not accept anything less than a deal that raised the debt limit through 2012.

"Their unwillingness to compromise is pushing us to the brink of a default on the full faith and credit of the United States. We have run out of time for politics. Now is the time for cooperation," he said in a sharply worded statement.

A spokesman for House Speaker John Boehner, Michael Steel, responded mildly. "Like the President and the entire bipartisan, bicameral Congressional leadership, we continue to believe that defaulting on the full faith and credit of the United States is not an option," he said in a written statement.

Obama met earlier in the day with the Republican and Democratic leaders — but only briefly_ the day after Boehner abruptly broke off his own once-promising compromise talks with the White House.

In talks through the afternoon in the Capitol, congressional aides were looking at an immediate debt limit increase of about $1 trillion, officials said, with slightly higher spending cuts to be locked into place simultaneously.

Another $1.4 trillion in additional borrowing authority would be needed to satisfy Obama's demand that any deal extend into 2013. "A two-step process is inevitable," Steel said, although and based on Reid's accusation, it was clear the two sides had not yet been able to bridge their differences.

On one point, there was no disagreement — time is running out.

Congressional aides labored to produce a tentative agreement by Monday, congressional officials said. Even that would allow scarcely enough time for the House and Senate to clear legislation in time for Obama's signature by the Aug. 2 deadline, a week from Tuesday.

More urgently, Boehner told rank-and-file Republicans in a conference call he hoped to be able to announce a "viable framework for progress" by 4 p.m. EDT on Sunday, before the stock markets open in Japan and elsewhere in Asia, according to two participants.

Lawmakers fear a big drop in investor confidence in stocks and bonds could start in Asia and sweep toward Europe and the Americas, causing U.S. stock values to plunge on Monday.

Barring action by Aug. 2, the Treasury will run out of the money needed to pay all its bills, triggering a possible default that could seriously damage the domestic economy and send damaging waves across the globe. Obama has warned repeatedly of the possibility of a spike in interest rates that could affect Americans' mortgages, credit cards and other forms of personal debt.

"The bipartisan leadership in Congress is committed to working on new legislation that will prevent default while substantially reducing Washington spending," McConnell said in a written statement not long after he, Boehner and Democratic leaders met with Obama at the White House.

Obama appeared grim-faced as he convened the meeting around the big table in the White House Cabinet Room. He was flanked by Boehner, R-Ohio, and Reid, D-Nev. Vice President Joe Biden, McConnell and Pelosi also attended.

The only aides attending the White House meeting were budget director Jack Lew and Treasury Secretary Tim Geithner, who emphasized the concern about Asia.

Afterward, White House press secretary Jay Carney issued a stern statement: "Congress should refrain from playing reckless political games with our economy. Instead, it should be responsible and do its job, avoiding default and cutting the deficit."

Under normal procedures, Boehner would need to have legislation on the House floor by Wednesday to allow enough time for a measure to reach Obama's desk in time to meet the debt-limit deadline.

Negotiators were working against two avowedly non-negotiable demands — Obama's insistence on a plan that assures no rerun of the current crisis until 2013 at the earliest, and Boehner's requirement that spending cuts over 10 years must exceed the size of any increase in borrowing authority — without any rise in taxes.

To comply with both edicts, under most estimates, legislation would have to cut more than $2.4 trillion across the next decade, since that is the amount of additional borrowing authority the Treasury is expected to require to pay the nation's bills.

Also complicating the talks were divisions within each party.

Liberal Democrats are generally opposed to cuts in Medicare and Social Security, while Obama hopes to use the negotiations to appeal to voters who want big cuts in federal deficits.

Tea party-backed Republicans, dozens of whom are in the House, adamantly oppose any higher taxes, while Obama has made more revenue the price of admission to the talks.

It was unclear how much Reid, House Democratic leader Nancy Pelosi, Boehner and McConnell would rely on the results of earlier talks, those that Biden held with lawmakers for several weeks in the Capitol and negotiations Obama had with leaders in a group and with Boehner.

Judging from accounts provided by officials in both parties, Obama had previously agreed to significant changes in benefit programs, including raising the raise of eligibility for Medicare from 65 to 67 for future recipients, and also slowing the projected rise in Social Security cost of living benefits. His concessions triggered a revolt earlier in the week by Senate Democrats, who feared he was giving away too much without getting enough additional government revenue in return.

For his part, Boehner had been ready to agree to an overhaul of the tax code that would result in a net increase of revenue to the government of $800 billion over a decade.

There also had been a general agreement to cut $1 trillion or more from hundreds of government programs ranging from the Park Service to foreign aid and agriculture, and to chalk up another $1 trillion in savings by assuming the end of the wars in Iraq and Afghanistan.

There was another possible element of a deal on the shelf — legislation that McConnell and Reid have developed that would let Obama raise the debt limit by $2.4 trillion in three installments over the next year or so without prior approval by Congress. Instead, he would be required to recommend spending cuts assured of coming to a vote in Congress.

Additionally, that proposal envisions establishment of a special congressional committee to recommend cuts in benefit programs such as Medicare and Social Security and possibly draft a tax reform bill as well.

___

Associated Press writers Charles Babington and Larry Margasak contributed to this report.

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Fresh White House talks for debt negotiators (AP)

Play Video Barack Obama Video:Does Big Business Fear President Obama? FOX News By ANDREW TAYLOR, Associated Press Andrew Taylor, Associated Press – 6 mins ago

WASHINGTON – President Barack Obama summoned top Democratic lawmakers to the White House Wednesday to resume negotiations on averting a potentially crippling government default, as attention focused on a new bipartisan budget plan emerging in the Senate. Republicans expected to come, too, separately.

The White House also indicated Obama would be willing to sign a short-term debt limit increase — something he's opposed — if it's merely a stop-gap measure to allow time for a broader plan to be put into place. It's unlikely a broad deficit-cutting measure could be finished by the Aug. 2 deadline to increase the government's borrowing limit.

The meeting with House and Senate Democratic leaders, planned for mid-afternoon Wednesday, marked a partial resumption of talks that ended last week after five days of Obama huddling with lawmakers from both parties, with little progress to show. Republican officials said they expected a meeting between GOP leaders and the president later in the day.

The announcement Tuesday of a possible agreement by the Senate "Gang of Six" on a budget plan was seized by Obama as a possible breakthrough. Now the job for the president, if he is to build momentum behind the plan, includes overcoming GOP opposition to tax hikes involved and selling members of his own party on the cuts to entitlement programs that the plan embraces.

"We are in the 11th hour," said White House press secretary Jay Carney, repeating what Obama had said Tuesday. "We need to meet, talk, consult and narrow down in fairly short order what train we're riding into the station."

Carney also indicated that the president would be willing to support a short-term extension as a stop-gap measure. Carney said Obama would not support a short-term extension "absent an agreement on a larger deal."

"If both sides agree on something significant we will support the measures necessary to finalize the details," Carney said.

The plan by the Gang of Six senators, three from each party, is probably far too complicated and contentious to be approved before the Aug. 2 deadline to avoid a default that Treasury Secretary Timothy Geithner and other experts warn would drive up interest rates and threaten to take the country back into a recession. But the plan's authors clearly hope it could serve as a template for a "grand bargain" later in the year that could erase perhaps $4 trillion from the deficit over the coming decade.

It includes tax hikes that are opposed by Republicans and cuts to Medicare and other entitlements that many Democrats are against.

"This is a unique opportunity and we ought to seize it," Carney said, even while saying the White House still wanted to keep working on a less ambitious "Plan B" measure to increase the debt limit even if no big plan can be reached.

That was a sign administration officials were acutely aware of the obstacles that remain to a major deal, perhaps particularly from House conservatives who adamantly oppose any new taxes. Carney said Obama spoke by phone Tuesday evening to the top four Democratic and Republican congressional leaders.

Even among Democrats, Rep. Chris Van Hollen, senior Democrat on the House Budget Committee, said lawmakers had too few details about the Gang of Six plan. He said that until they have a chance to see the fine print, it will be difficult to get their caucus to focus on it.

The top Democrat in the House, Minority Leader Nancy Pelosi, reacted positively Wednesday to the new plan, saying it "has some good principles in it." At the same time, a top House GOP military hawk said it would cut defense too much.

House Armed Services Committee Chairman Howard "Buck" McKeon, R-Calif., blasted the Gang of Six plan in a missive to his panel members, saying it would cut the Pentagon way too deeply and would unfairly curb military health and retirement benefits.

"This proposal raises serious implications for defense and would not allow us to perform our constitutional responsibility to provide for the safety and security of our country," McKeon wrote in a memo to panel Republicans.

Speaking on the Senate floor Wednesday morning, Democratic leader Harry Reid said he was confident Obama and congressional negotiators could avoid a government default, but he also said the Senate still needed to hear from the House.

"We have a plan to go forward over here so I await word from the Speaker," said the Nevada lawmaker. Reid was referring to a plan he's working on with GOP leader Mitch McConnell of Kentucky to give Obama new powers to obtain an increase in the borrowing cap unless overridden by Congress — the Plan B that the White House also wants.

In the House, majority Republicans won a 234-190 vote Tuesday on a "cut, cap and balance" plan conditioning any increase in the government's borrowing authority on congressional passage of a balanced budget constitutional amendment and a fresh wave of spending cuts. That reflected the strength of tea party forces elected in last year's midterm election. GOP conservatives reveled in their victory, however temporary it may be, since the plan faces a White House veto threat and is a dead letter in the Senate anyway.

The Gang of Six plan, meanwhile, promises almost $4 trillion in deficit cuts, including an immediate 10-year, $500 billion down payment that would come as Congress sets caps on the agency budgets it passes each year. It also requires an additional $500 billion in cost curbs on federal health care programs, cuts to federal employee pensions, curbs in the growth of military health care and retirement costs, and modest cuts to farm subsidies.

The plan also involves a major influx of new tax revenues as Congress overhauls the loophole-choked U.S. tax code. It calls for getting rid of myriad tax loopholes, preferences and deductions and using the savings to sharply lower income tax rates. But $1 trillion to $2 trillion would be skimmed off the top and used to reduce the deficit, depending on who does the calculations.

"On the positive side, the tax rates identified in the Gang's plan — with a top rate of no more than 29 percent — and the president's endorsement of them are a positive development and an improvement over previous discussions," House Majority Leader Eric Cantor, R-Va., said. "That said, I am concerned with the Gang of Six's revenue target."

___(equals)

Associated Press writers David Espo, Erica Werner, Jim Kuhnhenn, Julie Pace, Ben Feller and Darlene Superville contributed to this report.

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Obama picks ex-Ohio AG to lead consumer agency (AP)

Play Video Barack Obama Video:AP Top Stories AP By JIM KUHNHENN, Associated Press Jim Kuhnhenn, Associated Press – Sun Jul 17, 8:52 pm ET

WASHINGTON – Reigniting a partisan fight over banking regulations, President Barack Obama intends to nominate former Ohio Attorney General Richard Cordray to lead a consumer protection bureau that was a central feature of a law overhauling the rules that govern the financial sector.

Obama plans to announce the nomination formally on Monday, the White House said Sunday. Republicans immediately threatened to block Cordray's Senate confirmation.

In choosing Cordray, Obama bypassed Elizabeth Warren, a favorite of consumer groups, who has been assembling the agency as a special adviser to the White House and to Treasury Secretary Timothy Geithner.

The Consumer Financial Protection Bureau will officially begin its oversight and regulatory work on July 21. Its role is to be a government watchdog over mortgages, credit cards and other forms of lending.

"Richard Cordray has spent his career advocating for middle-class families, from his tenure as Ohio's attorney general, to his most recent role as heading up the enforcement division at the CFPB and looking out for ordinary people in our financial system," Obama said in a statement.

Sen. Tim Johnson, D-S.D., chairman of the Senate Committee on Banking, Housing and Urban Affairs, promised Sunday, "I will move Mr. Cordray's nomination forward in the Banking Committee as quickly as possible."

Warren, who is considered the architect of the consumer bureau, faced stiff Republican opposition in the Senate and would have had a difficult time wining confirmation.

The financial industry lined up against Warren. Bankers said a Warren-run agency would restrict new products just when companies are seeking to replace profits squeezed by the new financial rules.

Sen. Richard Shelby of Alabama, the top Republican on the Banking committee, said Republicans would block Cordray as well unless Obama seeks changes in the agency.

"Until President Obama addresses our concerns by supporting a few reasonable structural changes, we will not confirm anyone to lead it," Shelby said. "No accountability, no confirmation."

Cordray's elevation from enforcement chief to director raises a separate concern for the industry: Some fear the agency will launch early enforcement actions designed to raise its public profile. Treasury officials said that's unlikely, because the agency's enforcement division still is making key decisions about policy and procedure.

Cordray, 52, is considered a Warren ally and has been working with her as director of enforcement for the agency.

"He will make a stellar director," Warren said of Cordray.

Republicans fought fiercely against the creation of the bureau last year and have been trying to place restrictions on the agency. In May, all Senate Republicans joined in a letter to Obama threatening to withhold their support for any nominee to the position if the White House didn't seek significant changes to the agency.

Among the changes would be to replace a single director with a board and to make the bureau's finances subject to congressional approval.

Though Democrats control the Senate, Republicans could block Cordray's appointment through a filibuster.

"I remain hopeful that those who want to cripple this consumer bureau will think again and remember that the financial crisis — and the recession and job losses that it sparked — began one lousy mortgage at a time," Warren said in a statement Sunday.

Rep. Barney Frank, D-Mass., who shepherded the financial regulation bill through the House last year as the chairman of the House Financial Services Committee, said he regretted that Warren had "fallen victim to such wholly unjustified political attacks."

But Frank praised Cordray and said, "There is no excuse for Senate Republicans to refuse to confirm Richard Cordray given his clear qualifications for this job."

The Progressive Change Campaign Committee, which had backed Warren, issued a statement supporting Cordray.

"With her track record of standing up to Wall Street and fighting for consumers, Elizabeth Warren was the best qualified to lead this bureau that she conceived — and we imagine Richard Cordray would agree," said the committee's co-founder, Stephanie Taylor. "That said, Rich Cordray has been a strong ally of Elizabeth Warren's and we hope he will continue her legacy of holding Wall Street accountable."

But consumer advocate and one-time presidential candidate Ralph Nader called bypassing Warren "an act of political cowardliness by President Obama."

"Elizabeth Warren apparently is just too good, too smart, too able to arouse the just concerns of millions of American families over the need to put the law-and-order wood to the corporate criminals, defrauders and reckless speculators," Nader said.

Treasury Secretary Timothy Geithner credited Warren for recruiting staff for the consumer bureau and for her efforts to simplify mortgage disclosure, improve credit card transparency and protect military families from lending abuses.

Johnson added, "The CFPB is off to a strong start promoting an equitable and transparent consumer financial market place, and that is due in large part to the leadership of Elizabeth Warren."

Warren wants to remain a public advocate on consumer issues including abuses by mortgage servicing companies that have foreclosed illegally on military families and others, according to people familiar with her thinking.

She has felt constrained from speaking out as a White House appointee and looks forward to the freedom she will enjoy when she returns to being a Harvard Law School professor, said those familiar with her plans. They spoke on condition of anonymity to describe private conversations.

In pushing for changes in financial regulations last year, Obama focused on the popular appeal of a consumer bureau, which he had proposed as an independent agency. It was during that debate that Obama referred to bankers as "fat cats," a characterization he has since abandoned.

The regulatory overhaul was a response to the financial crisis of 2008 that helped plunge the country into a recession.

In a compromise, the consumer agency was placed within the Federal Reserve, but will act autonomously from the central bank.

In his statement, Obama thanked Warren "for her many years of impassioned leadership, and her fierce defense of a simple idea: ordinary people deserve to be treated fairly and honestly in their financial dealings."

Obama also said, "This agency was Elizabeth's idea, and through sheer force of will, intelligence, and a bottomless well of energy, she has made, and will continue to make, a profound and positive difference for our country."

____

AP Business Writer Daniel Wagner contributed to this report.

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