VIDEO: Elizabeth Warren Grills Treasury Secretary on Too Big to Fail

At a Senate banking committee hearing Tuesday, Sen. Elizabeth Warren (D-Mass.) grilled Treasury Secretary Jack Lew on too-big-to-fail banks—financial institutions that are so large that their failure would endanger the entire financial system.

“How big do the biggest banks have to get before we consider breaking them up?” she asked.

Too big to fail is far from over. The largest financial institutions are still ballooning in size. In the past few years, banks have been beset by one scandal after another—from money laundering, to rate-fixing, to foreclosure fraud, and have mostly received wrist-slaps as punishment—probably because, as Attorney General Eric Holder recently warned, prosecuting too-big-to-fail banks for bad behavior might spook the entire financial system.

Too big to fail almost died three years ago. Warren noted that as the 2010 Dodd-Frank financial reform law was being crafted, an amendment was proposed that would have broken up the banks, but it didn’t pass—in large part, she reminded Lew, because the Treasury Department (then under Treasury Secretary Timothy Geithner) was against it.

“Have you changed your position,” Warren demanded, referring to the Treasury department. “Or are you still opposed to capping the size of banks?”

Lew responded that “ending too big to fail is our policy and we’re aiming to do it.” But Warren wouldn’t let him weasel out of the question with generalities. “I want to focus you in here,” she pushed. “My question is about capping the size of largest financial institutions.”

Lew refused to commit. “Our job right now is to implement…Dodd-Frank,” he said. “I think this is not the time to be enacting big changes.”

“Let me try the question a different way,” Warren persisted. “How big do the biggest banks have to get before we consider breaking them up?” she asked, adding that the largest American banks are 30 percent larger than they were five years ago. “Do they have to double in size? Triple in size? Quadruple in size? Before we talk about breaking up the biggest financial institutions?”

Lew said that too big to fail “is an unacceptable policy”, but urged Warren to have some patience.

She’d have none of Lew’s excuses: “What we’ve seen…is one scandal after another in these largest financial institutions,” she said. “It’s clear they have not changed their risk bearing practices nor have they decided that they’re suddenly going to start following the law.”

FACT:

Mother Jones was founded as a nonprofit in 1976 because we knew corporations and the wealthy wouldn't fund the type of hard-hitting journalism we set out to do.

Today, reader support makes up about two-thirds of our budget, allows us to dig deep on stories that matter, and lets us keep our reporting free for everyone. If you value what you get from Mother Jones, please join us with a tax-deductible donation today so we can keep on doing the type of journalism 2019 demands.

We Recommend

Latest

Sign up for our newsletters

Subscribe and we'll send Mother Jones straight to your inbox.

Get our award-winning magazine

Save big on a full year of investigations, ideas, and insights.

Subscribe

Support our journalism

Help Mother Jones' reporters dig deep with a tax-deductible donation.

Donate

We have a new comment system! We are now using Coral, from Vox Media, for comments on all new articles. We'd love your feedback.