Statement from Senator Warren on Rejection of Banks' "Living Wills" by Fed and FDIC
Washington, DC - United States Senator Elizabeth Warren released the following statement today:
"Eight years ago, Too Big to Fail banks sparked a financial meltdown, then sucked up hundreds of billions of dollars in taxpayer bailouts. Today, after an extensive, multi-year review process, federal regulators concluded that five of the country's biggest banks are still - literally - Too Big to Fail. They officially determined that five US banks are large enough that any one of them could crash the economy again if they started to fail and were not bailed out.
"This announcement is a very big deal. It's scary. And it means that, unless these banks promptly address the concerns identified by the regulators, the government must push these banks to get smaller and less complex.
"The announcement also dramatically demonstrates the danger of taking our focus off the big banks as we think about how to prevent the next major crisis.
"There's been a lot of revisionist history floating around lately that the Too Big to Fail banks weren't really responsible for the financial crisis. That talk isn't new. Wall Street lobbyists have tried to deflect blame for years. But the claim is absolutely untrue.
"There would have been no crisis without these giant banks. They encouraged reckless mortgage lending both by gobbling up an endless stream of mortgages to securitize and by funding the slimy subprime lenders who peddled their miserable products to millions of American families. The giant banks spread that risk throughout the financial system by misleading investors about the quality of the mortgages in the securities they were offering. The Financial Crisis Inquiry Commission (FCIC) spent years looking into the causes of the crisis and concluded that 'collapsing mortgage-lending standards and the mortgage securitization pipeline lit and spread the flame of contagion and crisis.'
"Big bank executives got rich off that pipeline, but when it all predictably - yes, predictably - blew up, the government lavished their institutions with billions in taxpayer bailouts. None of those executives lost their jobs in exchange for the taxpayer rescue, and none of them went to jail for the rampant illegal activity that has been subsequently uncovered by the Department of Justice in bank settlement after bank settlement after bank settlement. Some of them, like Jamie Dimon at JPMorgan Chase - whose bank was tagged as a continuing threat to the economy today - are still running the same banks.
"Revisionist history is dangerous because it can blind us in the present - and bind us in the future. As the FCIC wrote, 'If we do not learn from history, we are unlikely to fully recover from it.' Today's announcement should remind us of the central role that the big banks played in the last crisis - and it is a giant, flashing sign warning us about the central role they will play in the next crisis unless both Congress and our regulators show some backbone, stand up to the revolving door culture that is pervasive in Washington, resist the millions spent on Wall Street lobbying and campaign contributions, and demand real changes at these banks. Today, our top regulators warned us about the danger of the biggest banks - and we would be foolish to ignore their warnings."
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