Senator Elizabeth Warren Enters, Guns Blazing

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Senator Elizabeth Warren and Big Banks

Source: AP

Not one to mince her words, Senator Elizabeth Warren made her arrival known last week at a Senate Banking Committee hearing. Oh, and she wasn’t wasting any time; frankly, many said it was refreshing to hear the question posed by her to the federal regulators, “When was the last time you took a big Wall Street bank all the way to trial?” This is going to get good.

Wall Street Reform

The Banking Committee Hearing, held on February 14, and titled “Wall Street Reform: Oversight of Financial Stability and Consumer and Investor Protections”, had in attendance Honorable Martin Gruenberg, Chairman, Federal Deposit Insurance Corporation, Honorable Mary Miller, Under Secretary for Domestic Finance, U.S. Department of the Treasury, Honorable Richard Cordray, Director, Consumer Financial Protection Bureau and Honorable Gary Gensler, Chairman, U.S. Commodity Futures Trading Commission, among others.

Remember, these are the people whose decisions play a significant role in how much money we pay for credit, whether or not a bank or credit card network can push new rules or terms on consumers and even how student loans are dispersed – there’s clearly a lot at stake.

Waiting for Answers

As she waited for the answer, the SEC chair, Elisse B. Walter, explained that while they have the power to force any financial institution into a trial, it’s not a preferred solution. Of course, anyone who pays attention to current events knows that much. She continued,

As you know, among our remedies are penalties but the penalties we can get are limited.

She went on to explain that they like to be sure they have a “very vigorous enforcement program”. Sen. Warren said she’s aware of that and you could hear a pin drop as she waited to hear a real answer to her question. Walter continued, clearly hoping this was the answer Warren was looking for, “(when) we truly believe we have a very vigorous enforcement program, we look at the distinction between what we could get if we go to trial and what we could get if we don’t.”

It was then that the Comptroller of the Currency, Thomas Curry, offered his own answer,

We have not had to do it as a practical matter to achieve our supervisory goals.

The Comptroller of the Currency regulates national banks. He continued with what seemed like a patronizing effort, stating that

We do not have to bring people to trial.

He then sought to “there, there” her with his assurances that when necessary, his agency secures consent orders or other settlements. Not one to be dismissed, Warren fired back,

I appreciate that you say you don’t have to bring them to trial. My question is, when did you bring them to trial?

she responded. Defeated, Curry simply said,

We have not had to do it as a practical matter to achieve our supervisory goals.

Same Stories

Again, those are the standard “plug them in” answers we’ve heard for years. Neither had said anything a taxpayer, journalist or anyone else asking the hard questions hasn’t heard before.

Warren was able to say what most everyone else is thinking; her worries are that banks are getting off the hook, so to speak, by simply paying fines from the profits they earned breaking regulatory rules. In other words, they’re being rewarded for their bad – and in many cases – illegal behaviors.

And things got really interesting and if you heard distant cheers from the north, south, east and west, it was likely due to one statement she made:

I want to note that there are district attorneys and U.S. attorneys who are out there everyday squeezing ordinary citizens on sometimes very thin grounds and taking them to trial to “make an example,” as they put it. I am really concerned that too-big-to-fail has become too-big-for-trial.

Bonding the Efforts

While Warren isn’t saying anything that hasn’t been mumbled before, she is, at this point, serving as the cement for efforts of others who share her sentiments. There have already been two settlements tossed in cases that include CitiGroup and Bank of America – both due to SEC charges. In fact, U.S. District Judge Jed. S. Rakoff made it clear that settling these cases without a trial is not only in the best interest of the public, but it’s a kick in the teeth to that same public and that he intends to ensure the SEC meets its role,

The SEC has a duty, inherent in its statutory mission, to see that the truth emerges.

He made it clear a trial will be held.

All the Acronyms

So are the bank regulators worried? Sure – and they should be. In that same initial meeting, Warren took on all of the financial acronyms: FDIC, SEC, OCC, CFPB, CFTC, the Federal Reserve and the Federal Treasury Department – all of which were represented by their own leaders.

Not even close to being finished, she turned back to Walter and repeated her question, “Can you identify the last time you took Wall Street banks to trial?” Walter simply said, “I will have to get back to you with that specific information”.

Then, Warren did something that was a bit surprising. She made a comparison to district attorneys who are in the trenches “squeezing ordinary citizens” on very thin grounds and taking them to court. She said her worries were that “too big to fail” has now become “too big for trial”.

Laying Blame

While many are saying both Wall Street lobbyists and Senate Republicans are to blame, others are suggesting outgoing Treasury Secretary Tim Geithner play a role in the entire too big to fail debacle; either way, it was an embarrassing moment for anyone caught unprepared. Remember, too, Warren was a strong contender for the head honcho role at the Consumer Financial Protection Bureau until efforts to block her nomination were successful. Clearly, this is a woman with a fearless mindset – and it’s going to serve her well as she moves forward in this contentious “good old boy” system of American banking.

No word yet on whether or not anyone spent the weekend looking for answers to her question. The former Harvard law professor put her cards on the table, though. It’s clear she has no interest in mollycoddling nor babysitting a group of folks who, so far, has chosen the path of least resistance.

What did you think of Warren’s first day? Could it be this is the fearless mindset Wall Street has been missing? And do you think big bankers should be concerned?

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About Author

Casey is a seasoned writer in personal finance. He has written a number of articles that have been published in magazines and blogs around the country. His advice has helped millions make better choices about how they save their money.


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