By Simon Johnson

It’s one thing to block Elizabeth Warren from heading the new Consumer Financial Protection Bureau.

It’s quite another thing to deny in public, for the record, that any such blocking is going on (e.g., see this report; Michael Barr apparently said something quite similar today).

There is a strong groundswell of opinion on this issue from the left – see the BoldProgressives petition. But the center also feels strongly that, given everything Treasury has said and done over the past few months, it would be a complete travesty not to put the strongest possible regulator in change of protecting consumers. (See Ted Kaufman on the NYT’s DealBook, giving appropriate credit to the SEC, and apply the same points to broader customer issues going forward.)

This can now go only one of two ways.

Elizabeth Warren gets the job. Bridges are mended and the White House regains some political capital. Secretary Geithner is weakened slightly but he’ll recover. Someone else gets the job, despite Treasury’s claims that Elizabeth Warren was not blocked. The deception in this scenario would be nauseating – and completely blatant. “Everyone was considered on their merits” and “the best candidate won” will convince who exactly?

Despite the growing public reaction, outcome #2 is the most likely and the White House needs to understand this, plain and clear – there will be complete and utter revulsion at its handling of financial regulatory reform both on this specific issue and much more broadly. The administration’s position in this area is already weak, its achievements remain minimal, its speaking points are lame, and the patience of even well-inclined people is wearing thin.

Failing to appoint Elizabeth Warren would be the straw that breaks the camel’s back. It will go down in the history books as a turning point – downwards – for this administration.