Transcript: Senator Elizabeth Warren on “Face the Nation”, March 19, 2023

The following is a transcript of an interview with Senator Elizabeth Warren, Democrat of Massachusetts, which aired on “Face the Nation” on Sunday, March 19, 2023.

MARGARET BRENNAN

SEN. ELIZABETH WARREN

SEN. WARREN

MARGARET BRENNAN Now we want to move on to our other big story, the banking crisis. We’re going to Boston, and Democratic Senator Elizabeth Warren. Good morning to you, senator.

SEN. ELIZABETH WARREN: Hello.

MARGARET BRENNAN: We saw this multi-billion dollar attempt by the biggest banks to shore up one of the regional banks, First Republic. And even that hasn’t stopped the anxiety in the banking industry right now. Do you think that to stop the bleeding, one of those big too-big-to-fail banks has to be able to buy out that little bank?

SEN. WARREN: So I think right now what we’re trying to do is find the different ways to consolidate these banks. But the best way to understand this is to go back to what caused the crisis in the first place. Remember in 2016 the CEOs of these banks, these multi-billion dollar banks, came to Washington, they are pushing for lighter regulation. Donald Trump ran for president saying he would ease regulation on these banks. He is then elected, he appoints regulators who lighten the regulations on these banks. Donald Trump then went to Congress, and he said, pass laws to make it easier for them to ease even more regulation on these banks. And then Jerome Powell, literally took a flamethrower for these settlements–

MARGARET BRENNAN: Yeah–

SEN. WARREN: To make them less and less effective. The reason I mention all of this is because–

MARGARET BRENNAN: Well, I’m talking about the crisis we’re in right now, though. I understand where you’re coming from, but can we start with the haemorrhage that we’re seeing right now in the banking sector, as you just said, to shore up the banks. To consolidate them, should a merger be authorized? And is there another white knight who could come to save one of these regional banks, like First Republic?

SEN. WARREN: 1:53 Listen, right now, the one saving 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’s not a bankrupt bank.

SEN. WARREN: I understand that. I understand that. But it’s 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 support them. The fact is that right now the Treasury Department, the Fed, all the government regulators, the FDIC, are trying to go full throttle, trying to figure out what they can do to support these banks. And the point I was trying to make is that the reason they’re doing this is because this whole slice of banks has been underregulated for five years now.

MARGARET BRENNAN: Yeah–

SEN. WARREN: And people are very concerned about when you lift the hood, what’s under the hood, since the regulators clearly haven’t been on top of their game.

MARGARET BRENNAN: Okay, so…

SEN. WARREN: That’s why I’m asking for changes to the Fed in its regulatory approach right now, and changes to Congress so that we rescind the authorization to ease those regulations.

MARGARET BRENNAN: Well, I know there’s a dispute over the settlement. You talk about a 2018 adjustment to Dodd Frank, and I know Barney Frank, one of the authors of that original settlement, a dispute with you about what really happened here. But I want to talk about the present…

SEN. WARREN: Well, I wouldn’t call that an adjustment.

MARGARET BRENNAN: Well, senator, though, I want to ask you what Congress can do now, because it would be up to Congress to raise the FDIC insurance levels for those deposits over $250,000.

SEN. WARREN: Yes. LAW.

MARGARET BRENNAN: In this environment that we find ourselves in … do you think there’s a will in Congress to do that?

SEN. WARREN: I think lifting the FDIC insurance cap is a good move. Now the question is, where is the right number to lift it? But let’s recognize that we have to, because these banks are under-regulated, and if we lift the cap, we demand – or rely even more – on regulators to do their job.

MARGARET BRENNAN: Where would you raise that cap?

SEN. WARREN: The government supports them.

MARGARET BRENNAN: And for how long?

SEN. WARREN: That’s something we need to work on. Is it 2 million dollars? Is it $5 million? Is it 10 million? Small businesses need to be able to rely on their money to do payroll, to pay utility bills. Non-profit organizations must be able to do this. These are not people who can investigate the safety and soundness of their individual banks. This is the job that regulators are supposed to do.

MARGARET BRENNAN: Well, I want to get to that particular point in a moment. But back to that, are you currently talking in the White House about a proposal to lift the FDIC assurance levels? Are they asking you to do this? And is it possible to pass?

SEN. WARREN: I don’t want to talk about private conversations, but I will say that’s one of the options that needs to be on the table right now.

MARGARET BRENNAN: You talked about reviewing the regulation of some of these small banks, these medium-sized banks. The bill you are introducing would also impose stress tests on institutions with more than $50 billion in assets. For them, doing stress tests, as the big banks are required to do, is a lot of money. In fact, according to the Wall Street Journal, such a program can cost a bank between $150 million and $250 million apiece. Wouldn’t that force the small banks to close their doors?

SEN. WARREN:

You know –

MARGARET BRENNAN: Or in the arms of one of the biggest banks?

SEN. WARREN

I want you to think about what that means. When you describe them as small banks, keep in mind that we are talking about SVB, a $200 billion bank. We’re talking about the $50 billion threshold here. And I mean it this way. If they can’t afford to have someone look at them and ask questions like, “Have you compensated for the risk that interest rates won’t always stay at historic lows? you have enough capital to maintain the solvency of this bank? questions like that, then this bank is in serious trouble. And that’s-that’s the difficulty we have. They inject risk into the system. Remember, when Gary Becker came, came to Congress and said, “You have to ease the regulations on banks like mine, because we pose no risk. What we have clearly discovered is that they pose a risk. And that means they need to be carefully monitored.

MARGARET BRENNAN

Understood.

SENATOR WARREN:

Jerome Powell needs to do a 180 degree flip-flop and bring these banks under closer scrutiny.

MARGARET BRENNAN:

All right.

SENATOR WARREN:

And Congress needs to tighten regulations.

MARGARET BRENNAN:

Understood. Let’s talk about that.

SENATOR WARREN:

We also need to hold these bank executives –

MARGARET BRENNAN:

GOOD. Let’s talk about this with the Fed and what regulators are supposed to do with this oversight. There were already, you know, requirements and public disclosures here and there were flashing red lights in December. SVB reported to the SEC that it had no interest rate hedges on its bond portfolio. In March, the San Francisco Fed, which is publicly available, noted that banks in this district had the highest rate of decline and withdrawal in the country, possibly due to higher exposure to accounts. greater than $250,000. So it was already there in the public space.

SEN. WARREN: Yeah.

MARGARET BRENNAN: Why didn’t the Silicon Valley region’s chief regulator put in place the San Francisco Federal Reserve Act? Do you trust its president Mary Daly?

SENATOR WARREN:

No I do not have. The Fed should have acted, but the San Francisco Fed and the Federal Reserve Bank. Remember that the Federal Reserve Bank and Jerome Powell are ultimately responsible for monitoring and supervising these banks. And they have made it clear that they believe their job is to ease regulation on these banks. We have now seen the consequences.

MARGARET BRENNAN: But these were regulations that were—that were made public. I mean, there were missing signals of what exists. Do you think then – what is the consequence for regulators in San Francisco and Washington?

SEN. WARREN: So listen, that’s the point I’ve been trying to make all along. Jerome Powell said all he wanted to do was ease regulation on banks. I opposed him as chairman of the Federal Reserve Bank precisely for this reason. I said he was a dangerous man to have in that position.

MARGARET BRENNAN You-have opposed him when President Biden also reappointed him, you-have constantly opposed him, I understand that–

SEN. WARREN: I opposed him both times.

MARGARET BRENNAN: I understand that…

SEN. WARREN: That’s right. And precisely for this reason. Because what he’s been doing all along is easing the regulations on the banks. And so, what we have to do–

MARGARET BRENNAN

Do you worry though, right now where we have this crisis of confidence that you’re sowing more distrust of the federal government right now?

SEN. WARREN

Well, what I do is be honest about what’s wrong. I don’t think you’re building any trust, if you don’t start with why it’s broken and who it is – excuse me, it’s responsible for this. We are accountable to our regulators who have clearly failed at the job, and that starts with Jerome Powell. And we need accountability from the leaders of these big financial institutions. Look, there should be clawbacks for Gary Becker and the others who are blowing up these banks. So you take back the big salaries –

MARGARET BRENNAN:

Will this bill pass?

SENATOR WARREN:

He definitely should. On both sides there should be support for this. And we should also borrow them to never be in banking again. We do this with stockbrokers. We should do the same with bankers.

MARGARET BRENNAN:

Elizabeth Warren. Thank you very much, senator, for your time.