Sen. Elizabeth Warren Calls for Hearings against the NY Federal Reserve
Sen. Elizabeth Warren has just been handed a giant political opportunity.
After spending several years championing the cause of the consumer and railing against the power of big banks, the Massachusetts Democrat may be perfectly positioned to react to the revelation of secretly taped conversations within the Federal Reserve that have exposed the cozy relationship that exists between the regulators in Washington and the regulated on Wall Street.
The tapes, which were made in 2012, involve examiners for the New York Federal Reserve who are heard being protective and deferential to Goldman Sachs when discussing some financial transactions that the firm had undertaken. Their actions were said to be “legal but shady.”
One of the Federal Reserve officials on the tape explains that they should not be too tough with the banks to make sure the lines of communication remain open in the future: “We don’t want to discourage Goldman from disclosing these types of things in the future and therefore maybe you know some comment that says don’t mistake our inquisitiveness, and our desire to understand more about the marketplace in general, as a criticism of you as a firm necessarily.”
The tapes have shocked many listeners because they reveal how weak the rules are and, even worse, how the regulators don’t have much interest in being tough with the banks. Years after the horrendous financial collapse of 2008 that led to international economic havoc, Washington is not doing very much to improve the situation. There have been many critics of the Dodd-Frank legislation who have warned that the law fell short, but to actually hear these conversations has a more powerful impact.
As Warren said on an interview with NPR’s Morning Edition, when people listen to the tapes “for a moment, [they] get to be the fly on the wall that watches all of it, and there it is to be exposed to everyone: the cozy relationship, the fact that the Fed is more concerned about its relationship with a ‘too-big-to-fail’ bank than it is with protecting the American public.”
Anger toward the banking system is one of the few issues that provides a common thread between the disparate parts of our political world.
Warren, who was instrumental to the creation of the Consumer Financial Protection Bureau, reacted to the substance of the tape by arguing that “the point of these tapes is that the regulators are backing off long before anyone’s in court making a legal argument about whether or not they came right up to the line or they crossed over the line.” She has called for oversight hearings as soon as possible.
The weakness of our regulatory system for finance is an issue that deserves attention, and it is a policy problem that attracts the interest of liberals, conservatives and moderates, all of whom have been stung by the economic toll of the financial meltdown.
Anger toward the banking system is one of the few issues that provides a common thread between the disparate parts of our political world. Tea party Republicans hate the intimate connections between banking and politicians as much as do left-wing Democrats.
If Warren handles oversight hearings on this problem in the right way, they could attract huge interest and really define who she is as a national politician, right as the 2016 presidential race heats up. In this case, politics and policy can work hand in hand.