Elizabeth Warren presents a conundrum for Wall Street. She is a forceful, well-prepared critic of the financial industry. She is running for the U.S. Senate from Massachusetts, and will be a formidable opponent to Republican incumbent Scott Brown in November. (The Democratic primary is in September, and Warren is likely to be the nominee. Some Democratic rivals have pulled out of the race.)

Warren, a Harvard law professor, author and former federal official involved in overseeing TARP and setting up the Consumer Financial Protection Bureau, presents her campaign as a crusade against Big Finance. “I really do think this is a question of whose side you’re on — Sen. Brown has been identified by Forbes magazine as one of Wall Street’s favorite senators,” she said late last year. (A 2010 Forbes article put Brown as No. 10 on a list of top 10 recipients of financial industry donations.)

New York Times columnist Paul Krugman welcomed Warren’s Senate run last summer with a blog post titled “Finally, Someone to Run Against Wall Street.” Unsurprisingly, Wall Street has been less enthused. Brown’s campaign has substantial backing from investment firms and executives. Warren, meanwhile, has built an impressive base of smaller donors, though her contributors include financial titan George Soros and his family.

A widespread opinion, among her supporters and opponents alike, is that Warren will be an important player if she makes it to the Senate. Some Warren enthusiasts, in fact, are already looking beyond Capitol Hill to a hoped-for presidential run by her as early as 2016.

Intellectual Foundations

As an academic, Warren placed much focus on bankruptcy and consumer credit. She has said her views were transformed by research she did after Congress passed a law in 1978 that made it easier for individuals and companies to declare bankruptcy. Looking into why people became bankrupt, she recalled in 2007, “I set out to prove they were a bunch of cheaters,” but instead found a prevalence of people who had been overwhelmed by illnesses, layoffs and other factors outside their control.

Starting as an advisor to the National Bankruptcy Review Commission in the mid-1990s, Warren became involved in a protracted conflict over revamping federal bankruptcy laws. She opposed a law passed in 2005 that increased hurdles for consumers to get bankruptcy protection; credit card companies and other lenders supported the bill, which was championed by then-Sen. Joe Biden of Delaware.

Drawing on such experiences, Warren became an outspoken advocate of the view that America’s middle class faced deteriorating economic conditions, and that government should respond with stepped-up activism and tougher regulations on financial institutions. She took to comparing mortgages and credit cards with toasters, in that the latter are better regulated to not burn consumers.

Her writings, heavy with academic tomes, came to include popular advice on personal finance, such as a 2006 book co-authored with Amelia Warren Tyagi, her management-consultant daughter, titled All Your Worth: The Ultimate Life Money Plan. Warren became increasingly well-known, showing up on TV programs such as Dr. Phil and The Daily Show.

In November 2008, she was appointed by Senate Majority Leader Harry Reid to chair the five-member Congressional Oversight Panel supervising implementation of TARP. The panel released monthly reports on matters ranging from foreclosures to stress tests to the automotive industry.

Warren was crucial in getting the idea of a consumer protection agency high onto the financial reform agenda, and in 2010 she stepped down from the congressional panel to join the Obama administration, with the title of Special Assistant to the President, to work on organizing the Consumer Financial Protection Bureau, which had been authorized in the Dodd-Frank legislation.

It was widely expected Warren would be appointed as the bureau’s first head. That prospect, however, generated strong Republican opposition in Congress. Some Democrats were wary of it too, including Treasury Secretary Timothy Geithner, who’d had some clashes with Warren during her stint as TARP overseer, and Sen. Chris Dodd of Connecticut, who said her appointment might spark a backlash against the bureau. In July 2011, Pres. Obama announced Richard Cordray as his nominee. Warren left the administration and in September announced she was running for the Senate.

In October, as Occupy Wall Street demonstrators gained visibility, Warren told an interviewer that “I support what they do” and “I created much of the intellectual foundation for what they do.” Subsequently, though, she put some distance between herself and the movement, describing it as “organic” in its formation and declining to sign a petition backing Occupy Harvard.

Crossroads GPS, a conservative advocacy group founded with help from Republican strategist Karl Rove, ran an ad in November attacking Warren for supporting “extreme left protests” marked by violence and drugs and demanding radical wealth redistribution. “Intellectual foundation for what?” the narrator demanded.

In early December, Crossroads GPS took a different tack with an ad suggesting she was too close not to Occupy Wall Street but to Wall Street itself. This time, the narrator said that Warren had overseen “bailouts that helped pay big bonuses to bank executives while middle-class Americans lost out” and that she had gone on a “charm offensive” toward some of those bailed-out banks.

Overall, these ads were probably not very effective, both because they offered a discordant message and because denouncing Warren as an ally of Wall Street strained credulity. One poll in early December showed Warren leading Brown by 49-42 percent, whereas a poll in late September showed Brown leading 41-38 percent. However, in the December poll, 27 percent said they had an unfavorable opinion of Warren, compared to 18 percent in September, so the ad linking her to Occupy Wall Street may not have been a waste of money by her opponents.

 What to Expect

How will all this pan out? Let us attempt, or hazard, some informed speculations.

Will Warren win? More likely than not; the race is volatile and could go either way, but Warren should be considered the favorite. Massachusetts is a predominantly Democratic state, and her campaign can be expected to generate a degree of supporter enthusiasm that Brown would be hard-pressed to match. Brown’s chances depend on a high turnout by independents.

What impact would a Sen. Warren have? She surely would have some effect in pressing financial regulators to implement the rules of Dodd-Frank and other existing laws more aggressively. However, her ability to do this, or moreover to create any major new legislative initiative on finance, would be limited by a close balance of power between Democrats and Republicans in the Senate.

The Senate’s current partisan breakdown is 51 Democrats and 47 Republicans. The 2012 elections put into contention 21 Democratic seats and just 10 Republican ones, and the 2014 elections involve another 20 Democratic seats and just 13 Republican ones. A Sen. Warren probably would be part of either a slim majority or a minority during her first term.

There is also a noteworthy potential for tension between a Sen. Warren and other Democratic legislators, particularly ones with heavy backing from the financial industry. In castigating Scott as a recipient of Wall Street cash, candidate Warren did not mention that topping the Forbes list she cited were New York’s Democratic senators Charles Schumer and Kirsten Gillibrand.

Will Warren get elected president in 2016? This is improbable, as it would require not only beating a Republican, possibly an incumbent, but also first gaining the Democratic nomination against a field that may include far more experienced rivals such as Hillary Clinton and Joe Biden. It would require a Sen. Warren to win over swing voters while keeping her base enthused, and to thrive on public dislike for Big Finance while keeping sufficient Wall Street support for the Democratic Party. Could she do all that? Not likely, though a few more financial crises and scandals would help.

Kenneth Silber is senior editor of Research magazine.