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Warren Plows Forward with Financial-Sector Regulatory Aims

Regulators about to roll out new rules, but some lawmakers want a boot on the neck of Wall Street even more.

by
Rodrigo Sermeño

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July 18, 2013 - 12:00 am
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WASHINGTON – Three years after the nation’s most comprehensive financial regulation overhaul, regulators have announced that they are near the end of completing a series of new rules, but some lawmakers think this is not enough to stop excessive risk-taking on Wall Street.

Officials from the Federal Deposit Insurance Corporation (FDIC), Treasury Department, and the Federal Reserve were called before the Senate Banking Committee to update the status of the 2010 regulatory overhaul.

Agency officials testified they were ready to wrap up the bulk of the rules under the Dodd-Frank Act by the end of the year. The legislation requires agencies to design hundreds of new rules forbidding risky lending and investment practices that caused the 2008 economic crisis.

By the end of the year, regulators should complete implementation of a risk-based capital surcharge for systemically important banks, a liquidity rule and the Volcker rule to ban proprietary trading by banks, Fed Governor Daniel Tarullo said.

The Fed, FDIC and the Office of the Comptroller of the Currency completed work this week on bank capital rules and proposed a tougher leverage requirement for eight of the largest lenders – those with more than $700 billion of assets – to hold equity capital to 6 percent of total assets.

Requiring banks to set aside money could ensure that they remain solvent in times of financial distress and eliminates the tough choice of funding a bailout or risking the collapse of a major bank.

At the same hearing, Sen. Elizabeth Warren (D-Mass.) admonished financial regulators for not taking firms to trial and instead seeking settlements with many of the violators. Warren criticized financial regulators for allowing firms to get accustomed to paying penalties for violations without admitting guilt. The Massachusetts Democrat argued that without the threat of trial, violators have more leverage to negotiate lower fines.

“How much you can settle with them for, that is, how much they will really pay as a result of having broken the law, depends in part on how they evaluate your willingness to push them to trial,” Warren said.

Warren also urged officials to reveal more information about the nature of violations and the corresponding $9.3 billion settlements. She said the Fed had been unwilling to turn over information about the abuses committed by individual banks.

“If you had real confidence in your settlements and that if people could see the details of those settlements, what the banks did wrong and how you determined how much money would go to individual people, then the public could evaluate for itself whether or not you’re really out there fighting on their behalf. And so far, you have not been willing to do that,” Warren said.

Tarullo admitted the Fed could do a better job communicating with the public about its enforcement actions against big banks. Warren asked the Fed governor whether the central bank planned to follow the Securities and Exchange Commission’s (SEC) lead in requiring admission of guilt.

SEC Chairman Mary Jo White announced a few weeks ago that her agency would begin pressing for an admission of wrongdoing from defendants when settling civil charges.

“The question I’m asking about is really how much leverage you have. And what SEC Chairman White has said is that she’s going to step it up. She’s going to be tougher, and she thinks that’s going to give her better leverage,” Warren said.

Tarullo described the “supervisory mechanisms” in place as an effective tool to prevent violations and penalize violators in the financial sector.

“I appreciate that you have another tool that you sometimes use quietly and out of public sight,” Warren responded. “The question I am asking is whether or not you’re going to require something more public.”

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All Comments   (14)
All Comments   (14)
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There's a simple reason the government is settling these cases without admission of wrongdoing. The cases are BS. The government's lawyers know perfectly well that model they're working from is essentially risable. It essentially requires the banks to ensure that no one on the other side of any transaction ever makes a losing bet. The firms go along with it because fighting a legal war with the entities that regulate you is just too costly. Frankly, I wouldn't mind seeing the government try pushing for an admission of culpability and seeing them get their rear end handed to them in court.
39 weeks ago
39 weeks ago Link To Comment
Dodd-Frank was so bi-partisan it's named Dodd-Frank.

If you don't get the joke, take a minute and look it up. Then, give thanks to Thaddeus McCotter for that chuckle - it was his line.
39 weeks ago
39 weeks ago Link To Comment
Chris Dodd got the sweetheart personal home loan from Countrywide's now disgraced Angelo Mozilo and Bawney Fwanck spent years defending the solidity of capricious and over extended Fannie and Freddie.

Both, thankfully, have left their respective Congressional gigs, but that "thing" they fashioned (dodd-frank) they leave behind.
39 weeks ago
39 weeks ago Link To Comment
"...and Bawney Fwanck spent years defending the solidity of capricious and over extended Fannie and Freddie."

Why wouldn't he? His lover was their director of New Product Initiatives.
39 weeks ago
39 weeks ago Link To Comment
Banksters deserve boot on the neck, boot in the ass, and ten in the pen.

They want to avoid that reinstate Glass-Steagall. It's only when the taxpayer has to bail the bastids out that we start talking boots. Banksters have been robbing the entire economy blind for ten years, it has been the golden age of rent seeking in the history of banking.

You want Warren to go away, that's how you do it.
39 weeks ago
39 weeks ago Link To Comment
So do the people in Massachusetts hang their heads in shame for selecting the lying 1/32 (not) Cherokee woman to represent them in the United States Senate ?

The ideological acolyte of Barack's "you didn't build that" thesis ?

Oh wait, these are the voters that saddled us with The Swimmer Teddy, Barney Fwanck and John Kerry all those years.

Never mind.

39 weeks ago
39 weeks ago Link To Comment
"At the same hearing, Sen. Elizabeth Warren (D-Mass.) admonished financial regulators for not taking firms to trial and instead seeking settlements with many of the violators."

If that's her position, should we not be seeking criminal sanction against those in CONGRESS who encouraged much of the behavior that led to the financial collapse - people like Dodd, and Frank, and Obama for example? Should not that crew that expanded the Community Reinvestment Act be held similarly liable? It's true they didn't drive the securitization process, but the message to "lend more ... and don't worry, we're guaranteeing everything" was certainly a dangerous one.
39 weeks ago
39 weeks ago Link To Comment
Gee whiz, and all along i thought the Fannie Mae, Freedie Macs arifical pumping up of the real estate market had something to do with it. You mean roughly 4 to 6 trillion $ didn't? Da guvmint has clean hands, every one else doesn't it seems. So the people who have also given us four straight years of $trillion plus deficits & the staggering debt that goes with it, to no good effect, are going to straighten things out. And Elizabeth Warren is a key player ! Where's my bottle of booze when I really need it?
39 weeks ago
39 weeks ago Link To Comment
Let's see. We had a tax cheat that was former head of the very committee governing taxation, and another tax cheat as former Secretary of the Treasury.

Chief Runs with Marxists is as qualified to be regulating Wall Street as Fat Fanny Frank or Delinquent Dodd were qualified to legislate banking regulation.

So she's perfect for the Obama team.

That means the next bill up for Congressional approval is the Your Wampum Obama/Warren Wampum Financial Regulatory Controls...
39 weeks ago
39 weeks ago Link To Comment
No risk? No reward! We are no talking about risk here. It was congress that propelled into the collapse in 2008. Specifically Frank and Dodd. The these central planning morons are involved, e worse it will be for all Americans. The Marxist juggernaut continues with no X-man or superhero to stop it. This will not be good news for first time home buyers.
39 weeks ago
39 weeks ago Link To Comment
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