Democratic Sen. Elizabeth Warren of Massachusetts called out the nation’s top bank regulators on Wednesday for failing to properly monitor Wall Street offenders, and ignoring the responsibilities Congress assigned them following the 2008 financial meltdown.
Warren made her argument at a conference hosted by the Levy Economics Institute where she called for major changes to the structure of the banking system.
Warren wants to remodel the “weak enforcement culture” at the Federal Reserve, the Securities and Exchange Commission, and the Department of Justice.
"The Department of Justice doesn’t take big financial institutions to trial ever -- even when financial institutions engage in blatantly criminal activity," Warren said.
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Warren accused the Department of Justice of turning deferred prosecution agreements that are designed for low-level offenders into “get-out-of-jail-free cards for the biggest corporations in the world."
"The SEC is even worse," Warren said. She stated that the agency has regularly given significant regulatory perks to companies that have been charged with civil securities fraud. Warren also noted that the SEC is not tackling CEO pay regulations as required by the 2010 Dodd-Frank financial reform law and that it protects the secrecy of corporate political contributions.
"The SEC needs to get its act together," Warren said. "In all sorts of ways and on all sorts of issues."
Warren noted that the Dodd-Frank law has made the banking system safer, but there are still structural problems.
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"Let's get real," Warren said in her speech. "Dodd-Frank did not end too-big-to-fail."
Warren plans to introduce a bill, with other lawmakers, that would separate commercial banking and investment banking, reports U.S. News & World Report.
“If banks want to access government-provided deposit insurance, they should be limited to boring banking,” Warren said. “If banks want to engage in high-risk trading, they can go for it, but they don’t get access to insured deposits and put the taxpayer on the hook for some of that risk.”
Warren told the Huffington Post following her speech that she wants to change the debate in Washington over how regulation should be used properly.
"The opponents of financial reform have cast the debate as rules vs. markets, that somehow anyone who believes in rules is anti-market," Warren said. "Rules are not the enemy of markets. They protect markets from blowing up. The real fight isn't between markets and rules. And it never has been. It's between competitive capitalism and crony capitalism."
According to Warren, both the Federal Reserve Bank and the Federal Deposit Insurance Corporation show that 11 of the largest banks in the country are in such a risky state that if one faltered it would require a bail out from the federal government. This could endanger the entire financial system.
“That is not a statistic that should make you sleep well at night,” Warren said.
Warren does not just want to dismantle the largest banks. She also wants to eliminate tax perks that they receive for encouraging taking on excessive debt.
Warren thinks that Congress should instead impose a new financial transactions tax to curb risky high-frequency trading.
"The fight over financial reform can't be over to back up a little or to back up a lot," Warren said. "It has to be about finishing the job."
In Warren’s speech she did not cite any officials by name, but given the regulatory failures she highlighted they do reflect poorly on a number of notable policymakers, including U.S. Attorney Loretta Lynch, who was recently nominated to be the next attorney general; Fed General Counsel Scott Alvarez; and SEC Chair Mary Jo White.
Following her speech, Warren said she is not trying to single out any particular staffers.
"The point is structural. The Fed needs to make enforcement a first priority, period," Warren said.
Warren did praise one institution for their work: The Consumer Financial Protection Bureau. It has returned over $5 billion to wronged consumers since its operations began in 2011. Warren helped set up the CFPB after it was started following Dodd-Frank.