Below is a transcript of an interview with Sen. Elizabeth Warren, D-Massachusetts, that aired on Face the Nation on Sunday, March 19, 2023.
Margaret Brennan
o. Elizabeth Warren
o. to caution
Margaret Brennan We now want to turn to our other big story, the banking crisis. We go to Boston and Democratic Senator Elizabeth Warren. Good morning to you, Senator.
o. Elizabeth Warren: Good morning.
Margaret Brennan: We saw this multi-billion dollar attempt by the largest banks to support one of the regional banks, the First Republic. Even that hasn’t stopped anxiety in the banking sector for the time being. Do you think that in order to stop the bleeding, one of those big banks, too big to fail, should be able to buy that smaller bank?
o. Warren: I think right now, what we’re trying to do is figure out the different ways to support these banks. But the best way to understand this is to go back to why the crisis started. Remember, in 2016, the CEOs of these banks, of these multi-billion dollar banks, came to Washington, pushing for lighter regulation. Donald Trump ran for president saying he would ease regulations on these banks. Then he was elected, appointing regulators who relaxed regulations on these banks. Then Donald Trump went to Congress, and said he was passing laws that would make it easier for them to ease regulations on these banks even further. And then Jerome Powell, literally, took a flamethrower to these regulations-
Margaret Brennan: Yeah–
o. Warning: to make it less effective and less effective. The reason I mentioned all this is because-
Margaret Brennan: Well, I’m talking about the crisis we’re in right now, though. I appreciate where you’re going there, but can we start hemorrhaging that we’re seeing in the banking sector right now, as I just said, to support the banks. To support them, do you need to allow the merger? And is there any white knight who could come to the rescue of one of these regional banks, like the First Republic?
o. WARREN: 1:53 Look, okay, now, the person bailing out 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. It is not a failing bank.
o. WARREN: I understand that. I understand that. But the fact that the federal government has gone to other banks, and said, “We need extraordinary intervention here,” that these other banks have stepped in and tried to shore them up. The point is, right now the Treasury, the Federal Reserve, all the government regulators, the FDIC, are trying to fire on all cylinders, to try and figure out what they can do to support these banks. And the point I was trying to make, is why they’re doing this is because this whole segment of banking has been badly regulated for five years now.
Margaret Brennan: Yeah–
o. WARREN: And people are very concerned when you lift the lid, what’s under the lid, since obviously the regulators weren’t on top of their job.
Margaret Brennan: Well, then-
o. WARREN: That’s why I’m now calling for changes in the Fed in its regulatory approach, and changes in Congress so that we revoke the mandate to ease those regulations.
Margaret Brennan: Well, I know there’s some disagreement about the bylaws. You’re talking about an amendment in 2018 to Dodd Frank, and I know Barney Frank, one of the authors of those original bylaws, has a dispute with you regarding what really happened here. But I want to talk about now —
o. WARREN: Well, I wouldn’t call it a tweak.
Margaret Brennan: Well, Senator, I would like to ask you what Congress can do now, because it’s up to Congress to raise the FDIC insurance levels for those deposits over $250,000.
o. WARREN: Yes. right.
Margaret Brennan: We’re in this environment… Do you think there’s a will in Congress to do that?
o. WARREN: I think raising the FDIC insurance cap is a good move. Now the question is, where is the correct number when it is raised? But you have to realize that we have to do that, because these banks are not regulated, and if we raise the cap, we require — or rely more on the regulators to do their jobs.
Margaret Brennan: Where do you lift that cap?
o. Warren: The government supports them.
Margaret Brennan: And for how long?
o. WARREN: That’s a question we’ve been working through. Is it 2 million dollars? Is it $5 million? Is it 10 million? Small businesses should be able to count on getting their money to make payroll, and pay utility bills. Nonprofit organizations should be able to do this. These are not people who can check the integrity and safety of their individual banks. This is the job that regulators are supposed to do.
Margaret Brennan: Well, I want to get to that very point in a moment. But back to this, are you talking to the White House currently about a proposal to raise FDIC insurance levels? Do they ask you to do that? Is this possible to pass?
o. WARREN: I don’t want to talk about private conversations, but I will say it’s one of the options that should be on the table right now.
Margaret Brennan: You talked about revising the regulations for some of these small banks, those mid-sized banks. Your bill would also put a stress test on institutions with more than $50 billion in assets. For them to run stress tests, as required by the big banks, that’s a lot of money. In fact, says the Wall Street Journal, a program like this could cost a bank $150 to $250 million apiece. Wouldn’t that force the smaller banks out of business?
o. warning:
you know –
Margaret Brennan: Or in the arms of a big bank?
o. to caution
I want you to think about what that means. When you describe these banks as smaller, keep in mind that we’re talking about an SVB, a $200 billion bank. We’re talking about the threshold here of $50 billion. And I want to put it this way. If they can’t afford to look at them and ask questions like, “Have you offset the risk that interest rates may not always remain at historical lows? Do you have enough capital to keep this bank solvent?” Questions like that, then this bank has serious problems. And this– this is our difficulty. They inject risk into the system. Remember, when Gary Baker came to Congress and said, “You need to loosen up the regulations on banks like banks, because we’re not taking any risk.” What we have clearly discovered is that they are dangerous. This means that they need to be carefully supervised.
Margaret Brennan
Concept.
Senator warned:
Jerome Powell needs to make a 180-degree turn and put these banks under closer scrutiny.
Margaret Brennan:
OK.
Senator warned:
And Congress needs to tighten regulations.
Margaret Brennan:
Concept. Let’s talk about that.
Senator warned:
We also need to detain these bank executives –
Margaret Brennan:
good. Let’s talk about that with the Fed, and what the regulators are supposed to do with that oversight. There were already, you know, general requirements and disclosures here and there were flashing red lights in December. SVB has notified the Securities and Exchange Commission, however, that it does not have interest rate hedges on its bond portfolio. In March, the San Francisco Federal Reserve Bank, which was publicly available, noted that banks in that area experienced the largest pace of drawdowns and drawdowns in the country, possibly due to increased exposure to accounts over $250,000. So this was already in the public space.
o. WARREN: Yes.
Margaret Brennan: Why didn’t the major regulator in the Silicon Valley area take the San Francisco Fed Act here? Does she trust her boss, Mary Daly?
Senator warned:
No I do not. The Fed should have acted, but the Reserve Bank of San Francisco and the Federal Reserve Bank. Remember, the Fed and Jerome Powell are ultimately responsible for the oversight and supervision of these banks. They have made it clear that they believe it is their job to ease regulations on these banks. We’ve seen the consequences now.
Margaret Brennan: But those were regulations — they were publicly announced. I mean, those were missing references to what’s out there. So do you think – what are the consequences for regulators in San Francisco and Washington?
o. WARREN: Well look, that’s the point I’ve been trying to make this whole time. Jerome Powell has said that all he wants is less regulation on the banks. I opposed him as chair of the Fed for precisely this reason. I said he is a dangerous man in this position.
Margaret Brennan — she opposed him when President Biden reappointed him as well, she opposed him consistently, and I understand that —
o. WARREN: I opposed him both times.
Margaret Brennan: I get that–
o. WARREN: That’s absolutely true. And that’s exactly why. Because what he’s done all along is looser regulations on the banks. And so, what we have to do —
Margaret Brennan
With that said, do you worry, at the moment, as we have this crisis of confidence that you’re cultivating even more distrust of the federal government now?
o. to caution
Well, what I’m doing is being honest about what went wrong, and I don’t think you’re building any trust at all, if you don’t start with why it’s broken, and who’s–oops, that’s to blame for that. We need accountability for our regulators who have clearly fallen on the job, and that starts with Jerome Powell. We need to hold the CEOs of these large financial institutions accountable. Look, there must be claws for Gary Becker and the others who blew these banks. So you get the big paychecks back.
Margaret Brennan:
Will this bill pass?
Senator warned:
Definitely should. On both sides, there must be support for this. And we must also ever borrow them in banking again. We do that with stockbrokers. We must do the same with the bankers.
Margaret Brennan:
Elizabeth Warren. Senator, thank you very much for your time.
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