Sen. Warren goads Fed, SEC, DOJ to explain no-fault bank deals

Sen. Elizabeth Warren (D-Mass.) had harsh criticism for U.S. regulators at a Senate Banking Committee hearing Thursday.
(Cliff Owen / Associated Press)

Sen. Elizabeth Warren, having chastised bank regulators for failing to put Wall Street giants on trial, is demanding to see any analyses that the U.S. Department of Justice, the Federal Reserve and the Securities and Exchange Commission have conducted on the pros and cons of settlements that require no admissions of guilt.

Warren wrote Fed Chairman Ben Bernanke, Atty. Gen. Eric H. Holder Jr. and SEC Chairman Mary Jo White requesting any research done on the topic -- a follow-up to her Feb. 14 grilling of other regulators at a congressional hearing, which has been viewed more than 1.2 million times on YouTube.

Warren argued that banks and bankers should not be able to assume they can buy their way out of trouble by writing big checks while walling themselves off from legal liability.


“If a regulator reveals itself to be unwilling to take large financial institutions all the way to trial -- either because it is too timid or because it lacks resources -- the regulator has a lot less leverage in settlement negotiations,” she wrote, “and will be forced to settle on terms that are much more favorable to the wrongdoer.”

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After the financial crisis devastated the economy, critics complained that the government failed to try to put top Wall Street figures in jail. Concerns over out-of-court deals have continued as a result of fresh scandals, including HSBC’s $1.9-billion settlement of rampant money laundering violations -- a deal that enabled the British bank to continue operating in the United States.

The DOJ didn’t immediately reply to a request for comment on Warren’s latest challenge. The Federal Reserve declined to comment in advance of its response to Warren, as did the SEC.

In testimony to Congress last week, White, the SEC’s newly appointed head, said she is reviewing the settlement policy with the SEC’s enforcement division.

But she added that at an agency like the SEC, which has only civil authority and can’t put wrongdoers in jail, there is a significant role for settling cases without admissions or denials of wrongdoing. That outcome saves resources, avoids the risks of litigation and gets money to investors quicker, she said.

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Former SEC Chairman Elisse Walter was among seven regulators who appeared at the Feb. 14 hearing on the implementation of the Dodd-Frank financial reforms and received Warren’s invitation: “Tell me a little bit about the last few times you’ve taken the biggest financial institutions on Wall Street to trial.”

When no one answered, Warren asked, “Anybody?”

Thomas Curry, head of the Treasury Department’s Office of the Comptroller of the Currency, which regulates national banks, responded that the agency did not have to bring banks to trial because it could use consent orders to achieve its goal.

Warren asked Curry, for the record, whether the OCC has done research or analysis on the trade-offs of settlement without admission of guilt.Last week, Curry responded that the OCC has conducted no such research and analysis, Warren said Tuesday.


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