Sen. Elizabeth Warren issued a harsh indictment of Wall Street Wednesday following the announcement that regulators rejected five banks’ “living wills,” complete with a special call-out of JPMorgan Chase CEO Jamie Dimon.
The Massachusetts Democrat called it a “very big deal” and “scary” that the agencies declared that the banks’ plans for going bankrupt without government help are not credible.
Warren, more than any other member of Congress, has pushed regulators such as Federal Reserve Chairwoman Janet Yellen to state definitively that living wills were not credible. The living wills are documents the banks are required to draw up annually to spell out how they would go through bankruptcy without needing government help.
In jointly declaring the banks’ living wills not credible, the Fed and Federal Deposit Insurance Corporation gave the banks until Oct. 1 to address the concerns they raised with the plans. Beyond that point, the banks would face regulatory consequences, starting with stricter scrutiny and possibly ending, in the unlikely case of two years of noncompliance, with forced sales.
Warren has called for the break-up of big banks and argued Wednesday that the results showed the need to keep pressure on them.
The big banks, Warren argued, were responsible for the 2008 financial crisis and have not adequately been held to account for doing so.
No Wall Street executives went to jail for fraud perpetrated by banks, she claimed, and “some of them, like Jamie Dimon at JPMorgan Chase — whose bank was tagged as a continuing threat to the economy today — are still running the same banks.”
The liberal senator also laid out the case that the rejection of the living wills “dramatically demonstrates the danger of taking our focus off the big banks as we think about how to prevent the next major crisis.”
In doing so, she weighed in on a running debate between the Democratic presidential candidates, Bernie Sanders and Hillary Clinton, without mentioning either. While Sanders has called for breaking up the big banks, Clinton has proposed a new focus on regulating elements of the “shadow banking” system, such as hedge funds and mutual funds.
Warren denounced “revisionist history,” downplaying the role of Wall Street banks in financing subprime lenders and packaging the home loans they underwrote into securities.
