Massachusetts Democrat Elizabeth Warren isn’t wasting any time setting the tone for her term in the Senate. During the Banking Committee’s first hearing of the 113th Congress, she drew applause from the gallery as she grilled regulators about their tendency to settle with Wall Street banks that break the law. Warren, the former Harvard professor who also helped stand up the Consumer Financial Protection Bureau, called for the breakup of the big banks during her campaign for the Senate. She made it clear she would like to see law-breaking megabanks hauled into court.
“I know there have been some landmark settlements, but we face some very special issues with big financial institutions,” Warren said during the Feb. 14 hearing on Dodd-Frank implementation. “If they can break the law and drag in billions in profits and then turn around and settle, paying out of those profits, they don’t have much incentive to follow the law.”
Warren indicated government agencies may lose leverage in their settlements because of their unwillingness to go to trial.
“So the question I really want to ask is about how tough you are,” she said. “Tell me a little bit about the last few times you’ve taken the biggest financial institutions on Wall Street all the way to a trial.”
Elisse Walter, chairman of the Securities and Exchange Commission (SEC), said her agency uses penalties to achieve its enforcement goals.
“When we look at these issues — and we truly believe that 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,” Walter said.
“That’s what everybody does,” Warren returned. “The question I’m asking is can you identify when you last took the Wall Street banks to trial.
Walter said the SEC litigates cases but would have to get back to Warren with specifics.
Comptroller of the Currency Thomas Curry said his office executed a number of consent orders but does not have to take supervised banks and thrifts to trial as a practical matter.
“I appreciate that you say you don’t have to bring them to trial,” Warren persisted. “My question is when did you bring them to trial?
None of the agency leaders seemed to be able to recall such a time.
“I’m really concerned that too-big-to-fail has become too-big-for-trial,” Warren said in response as the gallery again erupted with applause. “That just seems wrong to me.”