Warren Says Congress Should Act Now on Too Big to Fail Measure

U.S. Senator Elizabeth Warren said banks remain too big to fail even amid the progress that has been made on financial regulation since the 2008 credit crisis.

“If Dodd-Frank gives the regulators the tools to end too big to fail, great -- end too big to fail,” Warren, a Massachusetts Democrat, said of the Wall Street rules overhaul in a Washington speech today. “If the regulators won’t end too big to fail, then Congress must act to protect our economy and prevent future crises.”

Warren, who set up the Consumer Financial Protection Bureau before being elected to Congress in 2012, used her speech at an event marking the fifth anniversary of crisis to promote her proposal to re-create the Glass-Steagall Act, the 1930s law that separated commercial and investment banking.

The senator’s call to end too big to fail aligns her with Federal Reserve Governor Daniel Tarullo and Federal Deposit Insurance Corp. Vice Chairman Thomas Hoenig. While regulators and lawmakers acknowledge the problem still exists, consensus hasn’t formed around a single approach.

Her bill, also sponsored by Senators John McCain, an Arizona Republican, Maria Cantwell, a Washington Democrat, and Angus King, a Maine independent, would separate traditional banks that offer checking and savings accounts insured by the FDIC from “riskier financial institutions.” The latter category includes companies involved in investment banking, insurance, swaps dealing, hedge funds and private equity.

Previous Senate attempts to revive Glass-Steagall, which was repealed in 1999, or otherwise limit the size of banks have failed to gain enough support to become law.

Warren rejected calls to wait for regulators to finish implementing Dodd-Frank before moving her bill.

“I don’t understand the logic,” she said. “Since when does Congress set deadlines, watch regulators miss most of them, and then take that failure as a reason not to act? I thought that if the regulators failed, it was time for Congress to step in. That’s what oversight means.”

To contact the reporter on this story: Cheyenne Hopkins in Washington at chopkins19@bloomberg.net

To contact the editor responsible for this story: Maura Reynolds at mreynolds34@bloomberg.net

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