Possible Hillary Clinton rival Warren touts bank reform

Nov. 13, 2013 at 2:20 AM
share with facebook
share with twitter
| License Photo

WASHINGTON, Nov. 13 (UPI) -- "Too big to fail" U.S. banks have grown since the financial crisis and could spawn a new crisis, a senator seen as a presidential rival to Hillary Clinton said.

"Today the four biggest banks are 30 percent larger than they were five years ago. And the five largest banks now hold more than half of the total banking assets in the country," Sen. Elizabeth Warren, D-Mass., said in a keynote address at a Washington conference on the future of financial reform.

"Who would have thought five years ago, after we witnessed firsthand the dangers of an overly concentrated financial system, that the 'too big to fail' problem would only have gotten worse?" Warren told the conference sponsored by the Americans for Financial Reform coalition and the progressive Roosevelt Institute think tank.

Warren said current rules let giant Wall Street institutions have an $83 billion annual subsidy because the banks are so large and so interconnected that they know they can safely rely on government bailouts in another crisis because their failure would be disastrous to the economy.

As a result they feel free to take much higher-risk, higher-return gambles than their rivals, she said.

"We have got to get back to running this country for American families, not for its largest financial institutions," said Warren, a former Harvard professor specializing in bankruptcy law who helped President Obama set up the newly formed Consumer Financial Protection Bureau in 2010.

The first-term senator -- the subject of widespread 2016 presidential speculation after The New Republic magazine reported Sunday a growing number of progressives were privately urging her to run -- said the banking "Goliaths" needed to be reined in with a 21st century version of the Glass-Steagall Act, passed in 1933.

Warren, who the magazine said could be Clinton's "nightmare," denies White House ambitions.

"I am confident David can beat Goliath on 'too big to fail,'" she told the conference. "We just have to pick up the slingshot again."

Like the original law, the new act, written with Sen. John McCain, R-Ariz., would separate commercial banking from investment banking, Warren said.

The original Depression-era legislation was repealed in 1999 with huge bipartisan majorities. The repeal let commercial banks, investment banks, securities firms and insurance companies consolidate.

The new law would make banking "boring," Warren said, by reducing banks' scope of activities, providing discipline and stability to the financial system, Warren said.

"Now sure, the lobbyists for Wall Street say the sky will fall if they can't use deposits in checking accounts to fund their high-risk activities," she said. "But they said that in the 1930s too."

"What we need is a system that puts an end to the boom-and-bust cycle, a system that recognizes we don't grow this country from the financial sector, we grow this country from the middle class," Warren said.

Trending Stories