Warren presses Wall Street regulators to take more bad actors to trial

Sen. Elizabeth Warren (D-Mass.) scolded financial regulators on Thursday, questioning why they had sought settlements with many of Wall Street’s bad actors instead of taking those firms to trial.

“There’s been some real questions about the settlements you’ve made,” Warren told a panel of top regulators during a hearing before the Senate Banking Committee.

{mosads}The Massachusetts Democrat implored officials from the Federal Reserve, the Treasury Department, the Federal Deposit Insurance Corporation (FDIC) and the Office of the Comptroller of the Currency (OCC) to reveal more information about the nature of violations and corresponding settlements. 

“Then the public could evaluate for themselves if you’re really out there fighting on their behalf,” she said. 

Warren’s remarks follow an announcement by Securities and Exchange Commission (SEC) Chairman Mary Jo White that her agency would begin pressing for an admission of guilt from defendants. 

In recent years many firms have grown accustomed to paying penalties for violations without admitting guilt. 

Warren criticized that arrangement, arguing that without the threat of trial, violators have more leverage to negotiate lower fines. She urged regulators to follow White’s lead. 

“She’s going to step it up, she’s going to be tougher,” said Warren, who has used her first year in Congress to be a tough critic of Wall Street regulators. 

Daniel Tarullo, who sits on the Federal Reserve’s Board of Governors, faced tough questions from Warren and said that the central bank is holding internal discussions about whether to begin taking defendants to court.

“There may be instances in which doing so would be warranted for a variety of reasons,” said Tarullo, who maintained that tough enforcement was a priority. 

He described the penalty practices in place as an effective tool to deter and punish violations in the financial sector. 

“I appreciate that you have another tool that you sometimes use quietly and out of public sight,” Warren responded. “The question I am asking is whether or not you’re going to require something more public.”

At the same hearing, agency officials testified that they are on schedule to implement a number of new regulations in accordance with the 2010 Dodd-Frank Wall Street reform law. 

The statute required agencies to draw up hundreds of new rules barring risky lending and investment practices that caused the 2008 economic crisis. 

“By the end of this year, we expect to approach the point of substantial completion of the implementation of the Dodd-Frank Act,” Treasury Undersecretary Mary Miller told lawmakers. 

The panel gave the agencies mostly high marks for their work to put the law’s provisions in place, with both Republicans and Democrats praising steps taken this week to toughen capital requirements for banks and designate a pair of major companies for additional regulation by the Fed. 

“It is time to finish implementing these reforms as quickly as possible, to put an end to ‘too big to fail,’ and to protect American taxpayers from ever again bailing out a failing financial company,” Sen. Tim Johnson (D-S.D.), the committee’s chairman said.