Five years after the darkest days of the U.S. financial crisis in 2008, the nation's economy is still at risk from banks that are so large, they cannot be allowed to fail financially, even if they become severely troubled.
So says Sen. Elizabeth Warren, D-Mass., in prepared remarks for a speech she delivered recently at a conference marking the five-year anniversary of the crisis.
At the time, there was a lot of discussion about what should be done about banks that had become "too big too fail," or TBTF.
"Too big to fail distorted the marketplace, creating lower borrowing costs for the largest institutions and competitive disadvantages for smaller ones. There was talk about moral hazard and the dangers of big banks getting a free, unwritten, government-guaranteed insurance policy," Warren said. "Sure, there was talk, but look at what happened. Today, the four biggest banks are 30 percent larger than they were five years ago. And the five largest banks now hold more than half of the total banking assets in the country."
Today's debate concerns whether Congress should do more now to address the risk of TBTF banks or wait until more of the federal regulations required by the Dodd-Frank Act, which sought to remedy the causes of the financial crisis, have been written and implemented.
Warren supports legislation that would do more.
Others want to wait.
Meanwhile, federal agencies have missed 60 percent of the Dodd-Frank rule-making deadlines. One exception has been the Consumer Financial Protection Bureau, which Warren championed and which she said has met all of its statutory deadlines, showing that, "It's possible to get the job done."
"I don't understand the logic," Warren 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."
The fact that so many agencies have missed deadlines hasn't "given us much reason for confidence," Warren said. "The result is that the too-big-to-fail problem remains."
Are your deposits at large banks? Are you worried about them?
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