I felt like standing up and cheering last week. On Valentine’s Day, I savored how new U.S. Senator Elizabeth Warren (D-Mass) took down our nation’s weak-kneed financial regulators for their shameful timidity.
Finally — someone with sufficient juice, gravitas, and know-how was challenging those lame, flimsy rationales for why regulators had failed to aggressively prosecute the country’s biggest financial institutions for their part in causing the greatest financial catastrophe since The Great Depression.
Already knowing the answer before she asked the question, Warren — herself a lawyer, artfully asked three other lawyers, Elisse B. Walter, SEC Acting Chair, Daniel Tarullo, U.S. Federal Reserve, and Thomas J. Curry, U.S. Comptroller of the Currency, “When did you last take… a large financial institution, a Wall Street bank, to trial?”
Here’s most of the transcript:
WARREN: I appreciate your all being here.
I want to ask a question about supervising big banks when they break the law. Including the mortgage foreclosures, but others as well. We all understand why settlements are important, that trials are expensive, that we can’t dedicate huge resources to them. But we also understand that if a party is unwilling to go to trial — either because they’re too timid or they lack resources — that the consequence is that they have a lot less leverage in all the settlements that occur.
Now, I know there have been some landmark settlements, 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. It’s also the case that each time there’s a settlement, and not a trial, it means that we didn’t have those days and days of testimony about what these financial institutions have been up to.
So, the question I really want to ask is about how tough you are and how much leverage you really have in these settlements. And what I’d like to know is … tell me a little bit about the last few times you’ve taken the biggest financial institutions on Wall Street all the way to a trial.
WARREN: … Anybody?
TOM CURRY: Um …
WARREN: Tom Curry?
CURRY: … to offer … um … my perspective …
CURRY: As bank supervisor … uh … we primarily view the tools that we have as … uh … mechanisms for correcting deficiencies? So, uh, the primary motive for our forceful actions is really to identify the problem, and then to demand solutions on an ongoing basis.
WARREN: And then you set a price for that — sorry to interrupt, but I just want to move this along — it’s effectively a settlement. What I’m asking is when did you last take — and I know you haven’t been there forever, so I’m really asking about the SEC — a large financial institution, a Wall Street bank, to trial?
CURRY: Uh … the institutions I supervise — national banks and federal thrifts — we’ve actually had a fair number of … uh … consent orders … uh … we do not have to bring people to … uh … aaaa … trial …
WARREN: I appreciate that you don’t have to bring them to trial. My question is, when did you bring them to trial.
CURRY: We have not had to do it as a practical matter to meet our supervisory goals.
WARREN: Ms. Walter?
WALTER: Thank you Senator. As you know, among our remedies are penalties, but the penalties we can get are limited. We actually have asked for additional authority — my predecessor — did to raise penalties. And we truly believe that we had a very vigorous enforcement program. We’d look at the distinction between what we can get if we go to trial and what we’d get if we don’t.
WARREN: I appreciate that, that’s what everybody does. So, the question I’m really asking is, can you identify when you last took the Wall Street banks to trial?
WALTER: I will have to get back to you with the specific information, but we do litigate. And we do have settlements that are — that are — either rejected by the Commission, or not put forward.
WARREN: Okay, we’ve got multiple people here. Anyone else want to tell me about the last time they took a Wall Street bank to trial? I just want a note on this: There are district attorneys and U.S. attorneys out there every day squeezing ordinary citizens — sometimes on very thin grounds — and taking them to trial in order to make an example, as they put it. I’m really concerned that ‘too big to fail’ has become ‘too big for trial.’ It just seems wrong to me.
In a 2009 article, Rolling Stone’s Matt Taibbi famously called Goldman Sachs, “a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money.”
Almost 3 years ago, acerbic wit, consummate gadfly and cheeky financial advice columnist Malcolm Berko — who wields a keyboard like a rapier — of big banks, aptly wrote, “a well-oiled, politically connected money machine and, like Goldman Sachs, can do almost anything it wants to.”
So far, the financial giants have been getting away with it. They’re “The Untouchables” — “too big to jail.” No Wall Street executive has gone to jail.
And so-called civil settlements with government overseers have been laughable — with all the sting of a wasp in lucite.