WASHINGTON (Reuters) - A U.S. Federal Reserve official said on Thursday that the agency should consider releasing more information to the public when it takes enforcement actions against big banks for hurting consumers.
Fed Governor Daniel Tarullo’s comments at a hearing before the Senate Banking Committee came in response to criticism over a settlement related to mistakes big banks made while processing foreclosures in the years after the financial crisis.
U.S. Senator Elizabeth Warren, a Massachusetts Democrat, said the Fed had been unwilling to turn over information about the abuses committed by individual banks and about how the $9.3 billion settlement was reached.
Tarullo did not directly address that settlement but said the Fed should think about ways to better communicate with the public about its enforcement activities.
“I think there’s a pretty good case to be made for thinking about putting enforcement actions, orders that we will use, as you say, internally, out on the public record as well,” Tarullo said.
Warren, a staunch opponent of the biggest banks who set up the new Consumer Financial Protection Bureau before running for Congress, has gone after regulators for what she sees as their inability to effectively punish firms that harm consumers.
In the foreclosure settlement, regulators fined banks including JPMorgan Chase (JPM.N), Citigroup (C.N) and Bank of America (BAC.N) for problems such as foreclosing while they were still working with borrowers on loan modifications.
Most of the harmed borrowers received payments of less than $1,000. Regulators have said they cannot release many of the details Warren has requested about the banks’ mistakes or how the payouts were determined because they cannot give out supervisory information.
Critics say that makes it tough to tell if the settlement was fair.
“I just want to make the point that if you had real confidence in your settlements and that if people could see the details of those settlements...then the public could evaluate for itself whether or not you’re really out there fighting on their behalf,” Warren said.
Warren also has criticized financial regulators for settling with banks without forcing them to admit to misdeeds. U.S. Securities and Exchange Commission head Mary Jo White has since said her agency will push more firms to admit wrongdoing.
Tarullo said on Thursday that the SEC is in a “fundamentally different situation” than the Fed because the SEC is primarily an enforcement body. The SEC forcing firms to admit wrongdoing could help investors sue the firms as well, he said.
He said the Fed, on the other hand, is more responsible for protecting taxpayers and often can get banks to correct problems quickly without taking enforcement steps.
“The precedent value of an admission at the SEC, for example, is of substantial consequence potentially for shareholders...and other litigation that may be working off the same set of facts,” Tarullo said.
“What we are most interested in is making sure that any violations or unsafe and unsound practices are remedied as quickly as possible.”
However, the Fed has pursued higher fines and made other efforts to ramp up enforcement against big banks, Tarullo said.
Reporting by Emily Stephenson; Editing by Karey Van Hall and Andrew Hay