Transcript: Sen. Elizabeth Warren on
The following is a transcript of an interview with Senator Elizabeth Warren, Democrat of Massachusetts, which aired on “Face the Nation” on Sunday, March 19, 2023.
Margaret Brennan
Sen. Elizabeth Warren
Sen. Warren
Margaret Brennan We now want to move on to our second big story, the banking crisis. We go to Boston, and Democratic Senator Elizabeth Warren. Good morning to you, Senator.
Sen. Elizabeth Warren: Good morning.
MARGARET BRENNAN: We saw this multibillion-dollar effort by the largest banks to push First Republic, one of the regional banks. And even this has not ended the anxiety in the banking sector. Do you think one of the big, too-big-to-fail banks needs to be able to buy the smaller bank, to stop the bleeding?
Sen. WARREN: So I think right now, what we’re trying to do is find different ways to move these banks forward. But the best way to understand this is to go back to what caused the crisis. Remember that in 2016, the CEOs of these banks, of these multi-billion dollar sized banks, came to Washington, lobbying for lighter regulation. Donald Trump ran for president saying he would ease regulations on these banks. After he was elected, he appointed regulators who eased regulations on these banks. Donald Trump then went to Congress, and he said, pass laws to make it easier for him to further loosen the regulations on these banks. And then Jerome Powell took a flamethrower on those terms just literally.
Margaret Brennan: Yes—
Sen. Warren: To make them less effective. The reason for mentioning all this is that-
MARGARET BRENNAN: Well, I’m talking about the crisis that we’re in right now. I appreciate where you’re going there, but can we just start the bleeding that we’re seeing right now in the banking sector, as you just said, to shore up the banks? . To push them, do you need to allow integration? And is there another white knight who might come to the rescue of one of these regional banks, like First Republic?
Sen. WARREN: 1:53 Look, well, right now, what’s saving all these banks is the federal government. and the First Republic-
Margaret Brennan: The First Republic is still alive. It is an actively traded company. This is not a failed bank.
Sen. Warren: I understand that. I understand that. But it’s the fact that the federal government went to the other banks, and said, “We need an extraordinary intervention here,” that these other banks stepped in and tried to push it. The point is that right now the Treasury Department, the Fed, all the government regulators, the FDIC, are firing on all cylinders to try to figure out what they can do to prop up these banks. are And the point I was trying to make, is that they are doing this because this whole tranche of banks has been under-regulated for five years.
Margaret Brennan: Yes—
Sen. WARREN: And people are very concerned about what’s under the hood when you lift the hood, because the regulators clearly haven’t been on top of their job.
MARGARET BRENNAN: Well, so—
Sen. WARREN: That’s why I’m calling right now for changes at the Fed in its regulatory approach and for changes in Congress so that we withdraw authorization to ease these regulations.
MARGARET BRENNAN: Well, I know there is some controversy over regulation. You’re talking about an adaptation to Dodd-Frank in 2018, and I know Barney Frank, one of the authors of those original regulations, has a conflict with you about what happened here. But right now I want to talk about-
Sen. Warren: Well, I wouldn’t call it an adaptation.
MARGARET BRENNAN: Well, senator, though, I want to ask you what Congress can do now, because it’s up to Congress to raise the level of FDIC insurance for these deposits above $250,000.
Sen. Warren: Yes. Okay fine.
MARGARET BRENNAN: In this environment we’re… do you think there’s an appetite in Congress to do that?
Sen. Warren: I think lifting the FDIC insurance cap is a good move. Now the question is where is the right number to pick it up? But recognize that we have to, because these banks are underregulated, and if we lift the cap, we need – or rely more on – regulators to do our jobs.
Margaret Brennan: How far would you lift that hat?
Sen. WARREN: The government is backing them.
Margaret Brennan: And how long?
Sen. Warren: That’s a question we have to work on. Is it 2 million dollars? Is it 5 million dollars? Is it 10 million? Small businesses need to be able to access their money to make payroll, pay utility bills. Nonprofits need to be able to do this. These are not people who can investigate the safety and soundness of their individual banks. That’s what regulators have to do.
MARGARET BRENNAN: Well, I want to get to that particular point in a moment. But back to that, are you currently talking to the White House about the proposal to raise the level of FDIC insurance? Are they asking you to do this? And is it possible to pass?
Sen. Warren: I don’t want to talk about private conversations, but I would say that’s one of the options that’s on the table right now.
MARGARET BRENNAN: You talked about reviewing the regulation of some of these smaller banks, these mid-sized banks. The bill you’re proposing would also put pressure on institutions with more than $50 billion in assets. It’s a lot of money for them to do stress tests, like the big banks have to do. In fact, such a program could cost a bank between $150 and $250 million, according to the Wall Street Journal. Won’t this force small banks out of business?
Sen. Warren:
you know –
Margaret Brennan: Or in an arm of a big bank?
Sen. Warren
I want you to think about what that means. When you describe them as small banks, keep in mind, we’re talking about SVB, a $200 billion bank. We’re talking about the $50 billion dollar range here. And I want to put it this way. If they can’t afford to have someone look at them and ask, “Have you covered the risk that interest rates won’t always be at historic lows? Do you have the ability to keep this bank solvent?” Is there enough capital for that?” And fundamental such questions, then this bank is facing serious problems. And that’s—that’s the difficulty that we’ve got. They pose a threat to the system. Remember, when Gary Baker came in, came to Congress and said, “You need to ease the regulations on banks like mine, because we’re not a threat.” What we have clearly discovered is that they pose a threat. And that means they need to be carefully monitored.
Margaret Brennan
Understood
Senator Warren:
Jerome Powell needs to turn 180 degrees and put these banks under more careful scrutiny.
Margaret Brennan:
Okay fine.
Senator Warren:
And Congress needs to tighten regulations.
Margaret Brennan:
Got it. Let’s talk about it.
Senator Warren:
We also need to catch these bank executives –
Margaret Brennan:
good Let’s talk about that with the Fed, and–and what the regulators are doing with that oversight. You know there were already requirements and public disclosures and the red lights were flashing in December. SVB reported to the SEC, there were no interest rate hedges on its bond portfolio. In March, the San Francisco Fed, making it publicly available, noted that banks in that district had the highest rate of declines and withdrawals in the country, likely due to high exposure to accounts over $250,000. So it was already there in the public space.
Sen. Warren: Yes.
Margaret Brennan: Why didn’t the chief regulator of the Silicon Valley region create the San Francisco Federal Reserve Act here? Do you trust its president, Mary Daly?
Senator Warren:
no! not me. The Fed should have acted, but the San Francisco Fed and the Federal Reserve Bank. Remember that the Federal Reserve Bank and Jerome Powell are ultimately responsible for monitoring and supervising these banks. And he has made it clear that he believes his job is to ease regulations on these banks. Now we have seen the results.
MARGARET BRENNAN: But these were regulations that were being reported publicly. I mean, it was missing the signals of things that were there. Do you wonder what the outcome is for regulators in San Francisco and Washington?
Sen. WARREN: So, look, this is the point I’ve been trying to make all along. Jerome Powell has said he only wants to ease regulations on banks. I opposed him as chairman of the Federal Reserve Bank for exactly that reason. I said he was a dangerous man to be in that position.
MARGARET BRENNAN You opposed him when President Biden reappointed him, you consistently opposed him, I understand that—
Sen. Warren: I opposed it both times.
MARGARET BRENNAN: I understand that—
Sen. Warren: That’s right. And for exactly that reason. Because what he has done is loosened regulation on banks. And so, what we need to do-
Margaret Brennan
Are you concerned, at this moment, where we have this crisis of confidence, that you are currently sowing the seeds of further distrust in the federal government?
Sen. Warren
Well, what I’m doing is being honest about what went wrong. I don’t think you’ve built any trust, if you don’t start with why it’s broken, and who it is — sorry, responsible for the accountability we need for our regulators. There are those who clearly fell to the task, and it begins with Jerome Powell. And we need accountability for the executives of these big financial institutions. Look, Gary Baker and the others who blew up these banks should be clawing. So you withdraw the big salaries-
Margaret Brennan:
Will that bill pass?
Senator Warren:
It must be. It should be supported by both parties. And we should borrow them from being in banking again. We do this with stockbrokers. We should do the same with bankers.
Margaret Brennan:
Elizabeth Warren. Senator, thank you very much for your time.