July 15, 2014

Sen. Warren Questions Fed Chair Yellen on Oversight of Big Banks, Efforts to End Too Big to Fail

Video of Sen. Warren's Q&A with Fed Chair Yellen is available here

WASHINGTON, DC -- At a Senate Banking Committee hearing today, U.S. Senator Elizabeth Warren questioned Federal Reserve Chair Janet Yellen about the Fed's oversight of big banks and its efforts to end "Too Big to Fail."  Under Dodd-Frank, big financial institutions are required to submit plans each year detailing how they could be liquidated without bringing down the nation's economy or needing a bailout. Senator Warren asked Chair Yellen about the Fed's responsibility to review these plans to determine if they are credible.

"When it failed, Lehman had $639 billion in assets. Today JPMorgan has nearly $2.5 trillion in assets. That's four times as big as Lehman was when it failed," said Senator Warren. "Lehman had 209 registered subsidiaries when it failed...JPMorgan today has 3,391 subsidiaries. That's more than 15 times the number of subsidiaries that Lehman had when it failed. Now, JPMorgan has filed resolution plans in each of the last three years, and the Fed hasn't rejected any of them as not credible. Given our recent experience with the bankruptcy of Lehman Brothers, can you honestly say that JPMorgan could be resolved in a rapid and orderly fashion as described in its plans with no threats to the economy and no need for a taxpayer bailout?"

Senator Warren noted that as part of their responsibility to review big financial institutions' liquidation plans, the Fed and Federal Deposit Insurance Corporation have the authority to require companies to simplify their structure or sell off some of their assets. She also asked about whether the Fed is doing enough to inform the public about the steps big banks are taking to guard against another financial crisis.

"I hope you would urge greater transparency by these large financial institutions that are required to submit these plans, and I hope the Fed will be making a call on whether or not the Fed, under its statutory responsibility, sees these plans as credible for resolving these financial institutions if they hit financial trouble," said Senator Warren.