Is too big to fail too big to jail?
That’s the uncomfortable question consumer champion and neophyte U.S. Senator Elizabeth Warren (D-Mass) asked a panel of the nation’s top bank regulators last week during her first hearing as a member of the Senate Banking committee.
“When did you last take...a large financial institution, a Wall Street bank, to trial?”
The nation’s top financial watchdogs couldn’t recall.
Not Elisse B. Walter, new chairman of the Securities and Exchange Commission. Not Thomas Curry, the Comptroller of the Currency. And not top officials of the Federal Deposit Insurance Commission, the Federal Reserve or the Department of the Treasury.
With just five minutes of barbed questions Warren demonstrated why she’s such an important addition to the Senate, and why financial industry players, and their friends in the Senate, didn’t want her anywhere near Washington, either as director of the new Consumer Financial Protection Bureau or as a senator.
“Now I know there have been some landmark settlements,” she said. “But we face some very special issues with big financial institutions. 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. So the question I really want to ask about is how tough you are.”
When the economy was melting down in 2008 the government’s job one was to head-off the total collapse of the nation’s financial system.
But Warren put her finger on the thing that most vexes a lot of ordinary Americans who lost jobs, homes, retirement security and faith in the American dream when the bubble — inflated by the risky financial instruments the industry concocted to line their pockets — burst.
Why hasn’t anyone responsible gone to jail?
“I’m really concerned that too big too fail has become too big for trial,” Warren said.
Now that she’s put top regulators on the hot-seat they should take a hard look at how their agencies operate and honestly answer for themselves if they’re tough enough.