I LOVED the way Warren ripped these people to shreds. Wall Street will NOT be pleased. Also, I wrote an article about this http://www.addictinginfo.org/2013/02/15/warren-senate-banking-committee-hearing/ & also transcribed the whole thing. Here's the transcript for anyone who wants it. I don't transcribe things that often, but this was SO worth it!
-- Cheers! Elisabeth
TRANSCRIPTION OF ELIZABETH WARREN'S FIRST SENATE BANKING COMMITTEE HEARING, FEBRUARY 14th, 2013
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.
[APPLAUSE BUT NO RESPONSE]
WARREN: … Anybody?
TOM CURRY: Um …
WARREN: Tom Curry?
CURRY: … to offer … um … my perspective …
WARREN: Sure.
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 … aaaaa … 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 theat 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.
[APPLAUSE]
WARREN: If I can, I’ll go quickly. Chairman Johnson, I have one more question I’d like to ask, and that’s a question about why the large banks are trading at below book value. We all understand that book value knows just what the assets are listed for, what the liabilities are, and that most big corporations trade well above book value. But many of the Wall Street banks right now are trading below book value, and I can only think of two reasons why that would be so. One would be because nobody believes that the banks’ books are honest. Or the second would be that nobody believes that the banks are really manageable. That is, they are too complex either for their own institutions to manage them, or for their regulators to manage them.
And so, the question I have is, what reassurance can you give that these large Wall Street banks that are trading for below book value, in fact, are adequately transparent and adequately managed? Governor Tarullo?
TARULLO: So there’s certainly another reason I might add to your list, Senator Warren, which is … uh … investors’ skepticism as to whether a firm is gonna make a return on equity. That is, an excess of what the investor regards as the value of the individual parts. And so I think what you would hear analysts say is that in the wake of the crisis, there have been … uh … issues on just that point. Um … surrounding first, what the regulatory environments are going to be … uh … how much capital’s gonna be required, what activities are gonna be restricted, and … Two, for some time they’re’ve been questions about … uh .. the franchise value of some of these institutions and … the crisis showed that some of the so-called synergies were not very synergistic at all, in fact there really wasn’t … uh … the potential, at least on a sustainable basis, to make a lot of money.
And part of it is probably just the environment of economic uncertainty. I think that in some cases we’ve seen some … uh … effort to get rid of large amounts of assets at some of the large institutions. It is indirectly in response to just that point. I think it concluded that they are not in a position to have a viable, manageable, profitable franchise if they’ve got all of the entities that they had before, so a couple of them — as I say — have actually reduced, or are in the process of reducing, their balance sheets.
The other thing I would note is you’re absolutely right about the difference there. The difference is actually that the economy has been improving and that some of the … um … uh … firms have built up their capital. You’ve seen that difference actually narrowing in a number of cases as they seem to have a better position in the view of the market from which to proceed in a more feasible fashion.
WARREN: I appreciate this, and apologize for going over. Thank you.
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- Because if you can't trust a banker, who can you trust? 
