Warren: It’s time to break up too-big-to-fail banks

by MPA16 Apr 2015
U.S. Senator Elizabeth Warren has called on lawmakers to break up too-big-to-fail by capping the size of the largest financial institutions and separating commercial and investment banking. She also proposed limiting emergency lending by the Federal Reserve to troubled institutions by the Federal Reserve.

Speaking at the Levy Institute’s 24th annual Hyman Minsky conference, Warren said the fact that the Federal Reserve and the Federal Deposit Insurance Corp. say 11 banks threaten the entire U.S. economy means they are too big.

"Too much reliance on a technocratic approach also directly plays into the hands of the big banks," Warren said, since government regulations against banks can get diluted in favor of the big financial institutions. "Big banks can always throw more lawyers at a problem than the government can."

In fact, last week Warren revealed that during a meeting with JPMorgan Chase’s CEO, Jamie Dimon told her to “Hit me with a fine. We can afford it.”

In her speech, she said regulators have fostered a “slap on the wrist” culture for big banks. "When small banks break the law, their regulators do not hesitate to shut down the banks, toss their executives in jail and put their employees out of work.”

Warren also said simply adding more regulations won’t solve the problem as it adds to the regulatory burden of smaller financial institutions, which could be an effective argument for breaking up big banks against Republicans, like Senate Majority Leader Mitch McConnell, who has said Dodd-Frank has hurt smaller banks, according to The National Journal.