Policy: Economy

Elizabeth Warren: Too-big-to-fail worse now than before crisis

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Banking and Finance Committee,Treasury,PennAve,Joseph Lawler,Economy,Jack Lew,Elizabeth Warren

Sen. Elizabeth Warren, D-Mass., warned that the problem of too-big-to-fail banks has gotten worse in the years after the financial crisis and criticized Obama administration officials for not acting sooner to address the problem.

Addressing a meeting of financial reform advocates Tuesday afternoon on Capitol Hill, Warren asked, "Who would have thought that, five years after the crisis … that the too-big-to-fail problem would only have gotten worse?"

Noting that the five largest Wall Street banks control more than half the assets of the entire banking industry, Warren criticized regulators for failing to implement the Dodd-Frank financial reform law in a timely fashion. According to the law firm Davis Polk, 60 percent of the deadlines for Dodd-Frank rule-writing have been missed.

That delay is the product of lobbyists for big banks working to delay and water down regulations, Warren said. "How much longer should Congress wait for regulators to fix this problem?" she asked.

Warren commended Treasury Secretary Jack Lew for setting a deadline of the end of the year for ensuring that no banks remained too big to fail -- that is, to go bankrupt without endangering the broader financial system. Lew said then, "If we get to the end of this year and we cannot, with an honest, straight face, say that we have ended too-big-to-fail, we are going to have to look at other options."

But administration officials other than Lew received criticism, if only indirectly. "I’d like to see the other administration officials and regulators follow suit," Warren said, warning that big banks "have fought to delay and hamstring financial reform and they will continue to fight for every inch the rest of the way" in lobbying regulatory agencies.

Warren suggested that Congress should not wait for the rest of the Dodd-Frank rulemaking to be carried out, but instead seek legislative solutions to the problem. She talked up a bill she introduced in July with Sen. John McCain, R-Ariz., and other senators that would have created a "21st-century Glass-Steagall" to prevent commercial banks from engaging in speculative investment activities.

She was careful to say that she is an advocate of Dodd-Frank, saying that if she had been in office in 2010 when the bill was being deliberated, she would have "voted for it twice." But the law is incomplete, she says.

"David beat Goliath with the passage of Dodd-Frank," Warren said. "I am confident that David can beat Goliath on too-big-to-fail. We just need to pick up the slingshot again.”

Warren, 64, rose to fame among liberals by criticizing the 2008-2009 bailouts as the chairman of the Congressional Oversight Panel that monitored the implementation of TARP. A former Harvard law professor, Warren has quickly emerged as a populist favorite among Democrats. Earlier in the week, she was featured in the new republic as a potential alternative to Hillary Clinton for the 2016 Democratic nomination.

Tuesday's event was hosted by Americans for Financial Reform and the Roosevelt Institute, two progressive organizations promoting a new report on regulating Wall Street.

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