* Senator Warren asks if regulators are tough on banks
* Warren says concerned big banks seen as too-big-for-trial
* Financial regulators update senators on Dodd-Frank efforts
By Sarah N. Lynch and Douwe Miedema
WASHINGTON, Feb 14 A U.S. senator critical of
Wall Street took regulators to task on Thursday for failing to
take banks to court over misconduct, coming out swinging in her
first public appearance as a member of the Senate Banking
Elizabeth Warren, a Massachusetts Democrat, said U.S.
financial regulators appear to have focused too much on ironing
out settlements with large financial firms, as opposed to taking
them to trial for alleged misconduct.
Her comments quickly became the highlight of a hearing with
the heads of seven regulatory agencies responsible for cracking
down on financial abuses and preventing another blowup like the
2007-2009 financial crisis.
"The question I really want to ask is about how tough you
really are," Warren said, drawing applause from spectators in
the packed room during an otherwise low-key hearing.
"I'm really concerned that too-big-to-fail has become
too-big-for-trial," she said.
U.S. authorities in recent years have entered into a number
of major settlements with top banks over financial misconduct.
Warren directed her criticism at the Securities and Exchange
Commission, which is appealing a court ruling that rejected a
proposed $285 million settlement with Citigroup. In
rejecting the accord, the judge challenged the SEC's practice of
letting companies settle without admitting or denying the
Previously, the same judge had turned down a $33 million SEC
settlement with Bank of America Corp, later approving a
$150 million accord.
SEC Chairman Elisse Walter told Warren the agency has asked
for additional authority to go after firms for misconduct.
"I think Senator Warren was suggesting that we should take
big Wall Street banks to trial even when we are getting all the
relief we can get at trial through a settlement," Walter told
reporters after the hearing. "I understand that point of view,
but I don't agree with it."
COP ON THE BEAT
Warren, who was elected in November, already had a
reputation as a tough adversary of big banks.
She led a congressionally appointed panel that was charged
with keeping an eye on the government's bailout of the financial
system and championed the creation of the Consumer Financial
Protection Bureau, which was created by the 2010 Dodd-Frank
oversight law and which she set up.
She has kept a low profile since taking office last month,
but on Thursday showed that her appetite for policing Wall
Street was undiminished.
Lawmakers also expressed concern about a settlement between
more than a dozen banks and the Office of the Comptroller of the
Currency and the Federal Reserve in which the banks agreed to
pay some $9.3 billion to end case-by-case reviews of past home
New Jersey Democrat Bob Menendez asked whether it was fair
to end the reviews if certain borrowers still wanted them.
"Despite keeping their legal rights to sue the banks, most
borrowers don't have the financial means to litigate their cases
if they feel the compensation was inadequate," he said.
Thomas Curry, who heads the OCC, said the settlement "isn't
perfect" but that it was necessary to end a long, flawed review
process that had grown expensive.
The hearing was intended to check in on regulators' progress
writing dozens of new rules required by Dodd-Frank, including a
ban on proprietary trading known as the Volcker rule and new
regulations for the over-the-counter swaps market.
Committee Chairman Tim Johnson, a Democrat from South
Dakota, cited a new Government Accountability Office report that
said the crisis may have cost the U.S. economy more than $10
trillion and asked regulators to move forward with efforts to
make the financial system more durable.
Lawmakers pressed the regulators on how various rules, such
as a series of new mortgage regulations, would work together and
whether the agencies are considering the impact of new rules on
Sen. Mike Crapo of Idaho, the committee's top Republican,
said regulators need to give more information on how new rules
for the over-the-counter swaps market would apply overseas.
"There is a bipartisan concern that some of the Dodd-Frank
rules go too far and need to be fixed," he said.