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Warren Sees Yellen Boosting Fed’s Oversight of Banks

Photographer: Andrew Harrer/Bloomberg

U.S. Senator Elizabeth Warren speaks before a Bloomberg Television interview in Washington. Close

U.S. Senator Elizabeth Warren speaks before a Bloomberg Television interview in Washington.

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Photographer: Andrew Harrer/Bloomberg

U.S. Senator Elizabeth Warren speaks before a Bloomberg Television interview in Washington.

U.S. Senator Elizabeth Warren said she anticipates Janet Yellen will be a more aggressive financial regulator than Ben S. Bernanke when she succeeds him as chairman of the Federal Reserve Board.

“Yellen is making commitments in the direction of saying she understands the problem, she sees the problem, she knows what the tools are. I’m hopeful that means she’s going to act,” Warren, a Massachusetts Democrat, said of the Fed’s regulatory duties in an interview on Bloomberg Television’s “Political Capital with Al Hunt,” airing this weekend.

The Senate voted 56-26 on Jan. 6 to confirm Yellen, the Fed’s vice chairman. She will become the 15th Fed chairman and the first woman to head the central bank in its 100-year history.

Warren said she is “optimistic” about Yellen’s approach to financial regulation, particularly with big banks. She said she would give a “mixed grade” to Bernanke’s chairmanship.

“It’s very uneven,” Warren said. “There have been places where Bernanke has done a good job. Regulation has obviously not been a place where he has concentrated and done what the Fed needed to do to help bring under control the too-big-to-fail banks.”

Yellen, 67, will take over as the Fed trims monthly bond purchases in a first step toward lessening the unprecedented economic stimulus commenced under Bernanke’s leadership. His second four-year term expires on Jan. 31. Warren, 64, was among Democratic lawmakers who urged President Barack Obama to choose Yellen as Bernanke’s successor, rather than former Treasury Secretary Lawrence Summers.

Criticizing Dimon

In the “Political Capital” interview, Warren also raised questions about a prospective replacement for her as the Fed’s vice chairman and criticized JPMorgan Chase (JPM) & Co. Chief Executive Officer Jamie Dimon.

Former Bank of Israel Governor Stanley Fischer will be Obama’s nominee for vice chairmanship, according to a White House statement today in which Lael Brainard and Jerome Powell were also named as nominees for seats on the Fed’s Board of Governors.

Warren said she isn’t sure Fischer is “going to work in the right direction,” without elaborating on her concerns.

Asked about Dimon, Warren said she is “waiting on him to demonstrate that understanding” of learning from past missteps.

“What JPMorgan Chase and the other large financial institutions have done is they have continued to get bigger and bigger and load up more and more on risk,” Warren said.

Madoff Issue

JPMorgan agreed on Jan. 7 to pay $2.6 billion to resolve criminal and civil allegations that it failed to stop Bernard Madoff’s Ponzi scheme, bringing its legal settlements from the past two years to more than $29 billion and further eroding its once-record earnings.

JPMorgan has announced settlements of government and private disputes in the past two years equal to about three-fourths of the $39 billion of profit analysts estimate the bank will have earned in that time after it reports fourth-quarter results next week.

Long an outspoken critic of Wall Street, Warren was the architect for the Obama’s administration of the Consumer Financial Protection Bureau, created by the 2010 Dodd-Frank Act. After she failed to secure the agency’s top job, Warren -- in her first bid for elective office -- won her Senate seat by defeating Republican incumbent Scott Brown in the 2012 election.

A former Harvard University law professor specializing in bankruptcy issues, Warren rose to prominence for her criticism of Wall Street during the 2008 financial crisis. As a member of the Senate Banking Committee, she has pressed regulators to push for prosecutions of alleged wrongdoing by banks, rather than settle cases.

Disclosure Bill

Along with Oklahoma Republican Senator Tom Coburn, Warren introduced a bill on Jan. 8 that would require U.S. government agencies to provide “accessible and detailed” disclosures of such settlements.

“When Federal Reserve and others, banking regulators, anywhere else in the government, makes a settlement with a corporate wrongdoer, if they think that’s such a great deal for the U.S. taxpayer, then we think they ought to be forced to make those settlements public,” she said in the “Political Capital” interview.

“We have to keep reminding people that, back in 2008, when the big crash came, that our leaders stood up and said, remember, they stood up and said, ‘We have got to bail these banks out because there’s too much concentration in the banking industry, they’re too big, we cannot let them fail.’” She said. “And where are we today? They are bigger than they were then.”

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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