Senator Warren Inquires about Treasury Secretary's Unusual Calls with CEOs of the Nation's Six Major Banks
Letters Follow Treasury Inquiries About the Banks' Liquidity During a Period of Significant Uncertainty in the U.S. Stock Market
Washington, DC - United States Senator Elizabeth Warren (D-Mass.) sent separate letters to Treasury Secretary Steven Mnuchin and to the CEOs of the nation's six largest banks -- Morgan Stanley, Wells Fargo & Co., Goldman Sachs & Co., JP Morgan Chase, Citigroup Inc., and Bank of America. The letters follow an announcement on December 23rd by the Treasury Department that Mr. Mnuchin called the CEOs of the six banks about whether they had adequate liquidity during a sustained period of stock market losses.
Mr. Mnuchin's phone calls came after a week of significant uncertainty in financial markets: the S&P 500 had dropped 7.1 percent the previous week; the Nasdaq Composite Index had entered into a bear market; parts of the federal government were in the midst of shutting down; and President Trump was reportedly considering firing Federal Reserve Chairman Jerome Powell over the Fed's recent interest-rate hike and months of stock market losses.
"The public announcement of these calls was a rare step for a Treasury Secretary to take," Senator Warren wrote to Mr. Mnuchin. "Moreover, your calls sought to assuage a concern-the liquidity of banks-that neither banking regulators nor executives had publicly indicated was a problem."
The day after the calls were announced, the S&P 500 declined by 2.7 percent.
Given the role of liquidity problems in the 2008 financial crisis, the Senator has requested responses from Mr. Mnuchin to better understand the risks to the U.S. banking system that triggered his concerns. The Senator has asked for the following information by January 29, 2019:
- What did Mr. Mnuchin see in financial markets that caused him to be concerned about the liquidity of the six largest banks in the nation and prompted him to call a meeting of the President's Working Group on financial markets to "discuss coordination efforts to assure normal market operations"?
- A summary of the six calls to the CEOs, including copies of any documentation, notes, or other written analyses produced in conjunction with the call; and copies of all internal and external Treasury Department communications scheduling the call.
- A summary of the call with the President's Working Group, including copies of any documentation, notes, or other written analyses produced in conjunction with the call.
- Whether Treasury has information indicating that that the nation's financial institutions are facing liquidity risks, clearance or margin risks, or other risks to market operations that could negatively impact the U.S. economy.
In separate letters sent to the six CEOs, Senator Warren has requested additional information to better understand the nature of each call with Mr. Mnuchin. The Senator has asked for the following information by January 29, 2019:
- A detailed summary of the call with Mr. Mnuchin on December 23, including a list of call participants; copies of any documentation, notes, or other written analyses produced in conjunction with the call; copies of all internal and external bank communications scheduling the call; and a description of any actions taken by the bank in response to the call.
- What effect did the events of the week of December 17, 2018 have on the liquidity of the bank's assets?
- Whether the bank has information indicating whether the nation's financial institutions are facing liquidity risks, clearance or margin risks, or other risks to market operations that could negatively impact the U.S. economy.
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