In an otherwise boring Senate Banking Committee hearing this morning (full of empty phrases like “let me get back you” and “I’ll have to check on that”), Elizabeth Warren asked a pointed question: How many of the officials there had actually taken a Wall Street firm to trial? The few people who responded to her question skirted it, until Warren pressed them harder on the issue to discover what we all knew was the case: zero.
Since trials force far more information to surface than settlements do, the public would better understand what’s going on in these Wall Street firms if the Wall Street firms went to trial. But because we haven’t had any trials, the info remains undisclosed.
Warren summed up her position by saying, “I’m concerned that too big to fail has become too big to take to trial.”
And that’s the problem, exactly. So long as Wall Street firms avoid trial simply because of their size, we have a two-tiered justice system. Until Congress and government officials feel the pressure to change the status quo, the best hope for reforming this unethical system is for citizens to proactively switch from a megabank to a local lender. Otherwise, the unethical behavior will continue and will eventually spill over and affect all of us once again in the form of another fiscal fiasco.
Here is the video, with the exact quote.
Okay, we’ve got multiple people here. Anyone else want to tell me about the last time you took a Wall Street bank to trial? [No response.] You know, I just want to note on this: There are district attorneys and US attorneys who are out there everyday squeezing ordinary citizens on sometimes very thin grounds and taking them to trial in order to “make an example,” as they put it. I’m really concerned that too big to fail has become too big for trial.
Here’s the transcript:
WARREN: I want to ask a question about supervising big banks when they break the law, including the mortgage foreclosures, but others as well. You know, we all understand why settlements are important, that trials are expensive and we can’t dedicate huge resources to them. But we also understand that if a party is unwilling to go to trial, either because they’re too timid, or because they lack resources, that the consequence is they have a lot less leverage in all of the settlements that occur.
Now, I know there have been some landmark settlements, but we face some very special issues with big financial institutions. If they can break the law and drag in billions in profits, and then turn around and settle, paying out of those profits, they don’t have much incentive to follow the law.
It’s also the case that every time there is a settlement and not a trial, it means that we didn’t have those days and days and days of testimony about what those financial institutions had been up to.
So the question I really want to ask is about how tough you are about how much leverage you really have in these settlements? And what I’d like to know is, tell me a little bit about the last few times you’ve taken the biggest financial institutions on Wall Street all the way to a trial?
CURRY: To offer my perspective…
CURRY: … of a bank supervisor? We primarily view the tools that we have as mechanisms for correcting deficiencies. So the primary motive for our enforcement actions is really to identify the problem, and then demand a solution to it on an ongoing basis.
WARREN: That’s right. And then you set a price for that. I’m sorry to interrupt, but I just want to move this along.
It’s effectively a settlement. And what I’m asking is, when did you last take — and I know you haven’t been there forever, so I’m really asking about the OCC — a large financial institution, a Wall Street bank, to trial?
CURRY: Well, the institutions I supervise, national banks and federal thrifts, we’ve actually had a fairly fair number of consent orders. We do not have to bring people to trial or …
WARREN: Well, I appreciate that you say you don’t have to bring them to trial. My question is, when did you bring them to trial?
CURRY: We have not had to do it as a practical matter to achieve our supervisory goals.
WARREN: Ms. Walter?
WALTER: Thank you, Senator.
As you know, among our remedies are penalties, but the penalties we can get are limited. And we actually have asked for additional authority — my predecessor did — to raise penalties. But when we look at these issues — and we truly believe that we have a very vigorous enforcement program — we look at the distinction between what we could get if we go to trial, and what we could get if we don’t.
WARREN: I appreciate that. That’s what everybody does. And so, the really asking is, can you identify when you last took the Wall Street banks to trial?
WALTER: I will have to get back to you with the specific information, but we do litigate and we do have settlements that are either rejected by the commission, or not put forward for approval.
WARREN: OK. We’ve got multiple people here. Anyone else want to tell me about the last time you took a Wall Street bank to trial?
You know, I just want to note on this, there are district attorneys and U.S. attorneys who are out there every day squeezing ordinary citizens on sometimes very thin grounds, and taking them to trial in order to make an example, as they put it. I’m really concerned that Too Big Too Fail has become Too Big For Trial. That just seems wrong to me.