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Elizabeth Warren's Dual Approach

When she took office last January, many wondered if Sen. Elizabeth Warren would follow in the path of well-known senators before her—like Hillary Clinton, who developed a reputation for putting her head down and focusing on constituent issues—or whether she would blaze her own trail on the back of her enormous populist support.

So far, she seems to be doing both.

Supporters note the attention she has given even to unglamorous issues such as insurance licensing, and praise her ability to reach across the aisle as Clintonesque. But she hasn't abandoned her fiery rhetoric on the populist issues that she rode into office, prompting one industry official to liken her style more to that of Sen. Ted Cruz, R-Texas, than to the former first lady and secretary of state.

"What I care about is trying to be effective," says Warren, who indicates that she appreciates her national fame insofar as her office can channel that energy to get more done.

A Massachusetts Democrat, Warren had the highest attendance rate last year of any member of the Senate Banking Committee, showing up for a variety of sessions uncelebrated causes in addition to the big, barn-burner-style hearings.

"Passing big legislation is powerfully important—that's Dodd-Frank," she says. "But that doesn't happen every day. In between those times, there's a lot of work that can be done, and that's what I've focused on."

What has emerged is a hybrid approach to her Senate role, says Brandon Barford of ACG Analytics, an investment research firm that focuses on the implications of government policy.

"Her work on Massachusetts issues, I think, has been very much in the Hillary Clinton model, and I think on nonfinancial services issues that impact the average Massachusetts resident, she has gone out of the way to establish good relationships with Republicans and to work with them," Barford says.

"But she's just as much of a crusader on financial issues as expected."

A former law professor who founded the Consumer Financial Protection Bureau, Warren came out swinging last February at the first banking panel hearing of the year, grilling top regulators on why they haven't pursued bank prosecutions more aggressively. She was far less aggressive when the committee's attention turned to the future of housing finance, quietly delving into the nuances of mortgage market reform and piecing together her position on the issue.

Warren praises Sens. Bob Corker, R-Tenn., and Mark Warner, D-Va., for having "ignited a conversation" with their bill to reform Fannie Mae and Freddie Mac. But she still has questions about how exactly a new system should be designed. She wants to ensure that a handful of megabanks don't come to dominate the secondary market, and stresses the importance of making loans available to low-income and rural families and providing additional affordable housing options to the needy. "How a market that is privately driven is sure to give us 100 percent coverage in the guaranteed market is a real challenge," she says.

But she's also concerned with how an explicit government guarantee for the market would be triggered in times of crisis, an issue she recently raised at a Senate Banking Committee hearing. The Corker-Warner plan would require the private market to put up capital for the first 10 percent of losses, but leaves open the possibility of a structured transaction or bond guarantor model for determining when government steps in.

"Those are two very different guarantees—they obviously trigger at a different point, which means they would be priced differently and would have very different implications in the marketplace," Warren says. "And I don't think that's been spun out yet."

Another big concern of Warren's is the regulatory burden facing community banks and credit unions. She supports the idea of a two-tiered regulatory system, and has called on regulators to exempt smaller institutions from Basel III capital requirements.

Warren has taken a far less charitable stand on big banks, introducing a bill that would revive the main tenets of the Depression-era Glass-Steagall Act separating commercial and investment banking. But some observers note that the bill, like an earlier proposal Warren introduced that would temporarily set student loans rates equal to the rate at which banks borrow from the Federal Reserve, is more about messaging than anything else.

"I look at both the student loans bill and the 21st Century Glass-Steagall Act as echoes of her professorial past," says Isaac Boltansky, a policy analyst at Compass Point Research & Trading. "They are meant more to facilitate conversation than they are to serve as a framework for actual legislation."

If facilitating conversation is the goal, it's difficult to argue against Warren's success. Nearly half a million people have signed the MoveOn.org petition Warren started for her student loans bill.

The Senator also seems to be having an impact on debates within the regulatory community. For example, shortly after Warren began criticizing regulators publicly for settling with financial institutions over violations without requiring the firms to acknowledge wrongdoing, Securities and Exchange Commission Chairman Mary Jo White said the agency would begin requiring banks to admit guilt in some cases—an historic shift.

"I spend time with the regulators—I call them, I talk to them, try to go out to lunch when I can, because I want them to do their jobs," Warren says. "I want to be best friends when they're doing their jobs, but I think it's really important that we exercise our oversight."

Warren's popularity and influence has fueled speculation—and concern on Wall Street—that she aspires to even higher office, and could possibly challenge Clinton for the Democratic nomination to the White House in 2016. But Warren publicly denies having presidential ambitions, and a Democratic Hill aide confirms that Warren was among the female senators to sign a letter urging Clinton, who has not yet declared her intention, to run in the next election.