Elizabeth Warren smacks Wall Street faces

Elizabeth Warren

© Tim Pierce

She is called “Wall Street’s nightmare”. Last week again, Sen. Elizabeth Warren (Mass.) urged the Obama administration to conduct financial and economic reform to prevent the country from another crisis. The first female senator from Massachusetts doesn’t fight for herself, but for the American middle-class she comes from. Her only device: transparency.

When Elizabeth Warren asks a question, she won’t take no for an answer. And she won’t take flannelling either. Those who tried only reaped shame. Media still remember the epic moment during the first Banking, Housing and Urban affairs Committee hearing when Warren asked the bank regulators: “When was the last time you took a Wall Street bank to trial?” None of them was capable of uttering something clear. But Warren kept asking, repeatedly, and thus, shaming them. And then concluded with: “I am really concerned that ‘too big to fail’ has become ‘too big for trial’”.

Too big to be reliable

That was in February 2013. Since she was elected as the Massachusetts Senator in November 2012, Elizabeth Warren hasn’t actually stopped questioning American financial and economic structures. Indeed, she knows her subject since she is a former Harvard Law school professor specializing in… bankruptcy. She also served as chair of the Congressional Oversight Panel (COP), belonging to the Troubled Asset Relief Program (TARP) created in 2008 during the Bush administration, and participated in the conception and the establishment of the Consumer Financial Protection Bureau in 2011 signed by Barack Obama. Now, she is concerned about a new crisis that may come very soon because of bank deregulation. A crisis that would come from the “too big to fail” banks.

For several months now, this has been her favorite subject. Last Tuesday, on the 12th of November, she was the keynote speaker for the latest report published by the Roosevelt Institute and titled An Unfinished Mission, Making Wall Street Work for Us. This report, prepared both by the Roosevelt Institute and Americans for Financial Reform, “explore[s] the policy questions that remain, both within and beyond the scope of the Dodd-Frank reforms”[1]. During her speech, she explained that the biggest banks were now 30% larger than they had been in 2007-2008, when the subprime crisis happened. And this crisis was precisely made worse by the overly concentrated financial system. Now, the five largest banks of the country hold more than half of the total banking assets. They are considered “too big to fail”. Not from Elizabeth Warren’s point of view. To her, this is a very risky situation that may collapse at any time, and she is willing to fight this concentration.

The 21st century Glass Steagall

But Elizabeth Warren is not only a woman of words; she is also a woman of acts. She and three other senators (John Mc Cain, R; Maria Cantwell, D; and Angus King, I.) have tabled a bill they want to be added to Dodd-Frank. Called the “21st century Glass-Steagall act of 2013”, it refers directly to Franklin Roosevelt’s 1933 law that brought fifty years of financial stability to the United States. The main idea of this act lies in the separation between commercial and investment banking. It would thus regulate the “too big to fail” issue by reducing the biggest banks.

Glass Steagall would also prevent banks from gambling with consumers’ deposit money. As a consequence, Warren is confronted with all the people that make money with banking. In July, CNBC personalities tried to discredit her plans, arguing that regulations could not prevent the country from bank crashes. The extract was shown on The Young Turks TV show. Host Cenk Uygur pointed out that CNBC represents the banker so the channel has to defend banks’ interests. All of  CNBC anchors tried to make her say that no regulation could help the future of banks, arguing that at the end of the 1980s, banks had crashed, despite the Glass-Steagall law. Elizabeth Warren approved. And then, kicked their butt with a brief history lesson. The only argument they had left then was “the bill won’t ever pass”. But as she said, if you don’t fight for it, the chances are zero. This recalls the story of the Consumer Financial Protection Bureau: the opponents said the Senate would not accept such a thing and… it did pass.

Despite all the pressure Warren may be under, she won’t let anything go. Thus she urged the Obama administration during the Roosevelt Institute speech to set a timeline for bank reform in order to get the country out of this hazardous situation. Until that, she’ll keep fighting, even if it includes some smacking.

[1] The Dodd Frank Wall Street Reform and Consumer Protection Act, commonly referred to as Dodd-Frank, was signed in July 2010 and brought significant changes to financial regulation in the United States. But critics argue that these changes are not event to prevent the country from another crisis.

Marine Chaudron

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