Francis Chung/POLITICO via AP Images
Sen. Elizabeth Warren (D-MA) speaks with reporters at the U.S. Capitol on March 14, 2023.
Elizabeth Warren first came to national prominence in 2008, the last time the brew of corporate and regulatory corruption took down the financial system and crashed the economy. Today’s crisis is not as severe, but the dynamics are identical.
The current banking mess is an echo of 2008 because it blends the speculation of reckless bankers with the corruption of legislators and regulators. In 2018, Congress joined with President Trump to weaken a core provision of the Dodd-Frank Act that Warren had worked to make as tough as possible.
The law was changed to raise the threshold for much tougher bank regulation from $50 billion to $250 billion. It was fast-growing outfits like Silicon Valley Bank that lobbied for the change. Their executives equated larger size with bigger profits, salaries, and bonuses. They took risks they couldn’t handle. These ultimately crashed the banks and risked crashing the system.
In a prophetic Senate floor speech on March 8, 2018, opposing the bill, Warren explained the perversity of the measure. I don’t have space to quote it all, but you should read it.
In part she said, in inimitable Warren fashion:
This is nuts. These are banks that taxpayers bailed out ten years ago. They cheat consumers, cheat communities, cheat markets, and endanger our national security—and still Republicans and Democrats are joining together to loosen oversight … So what’s this all about? You won’t hear this coming from the supporters of this bill, but it’s the truth—it’s about letting these banks snap up smaller banks, consolidate the banking industry, goose banking profits, and expand executive bonuses.
Warren, along with co-sponsor Katie Porter in the House, has now introduced legislation to repeal the 2018 loophole. And this brings up the other unfortunate echo of 2008: The roots of that major financial collapse, like this smaller one, were all too bipartisan.
It was the Clinton administration, far more than either of the Bush administrations, that deregulated finance, allowing bankers and investment bankers to create the toxic exploding securities that took down the economy and required massive bailouts. The alums of that era, like Larry Summers and several protégés of Robert Rubin, continued to exercise their malevolent influence in the Obama presidency.
Then as now, the Democratic Party was really two parties when it came to the regulation of finance—the Warren wing and the Summers wing. The 2018 loophole laid bare the schisms in the party, which persist.
Seventeen Democrats, including four on the Senate Banking Committee, joined Trump and the Republicans in voting for the offending 2018 bill. The AFL-CIO president, the late Richard Trumka, was so appalled by the Democrats’ defection the he wrote each of the offending senators a personal letter calling them out and threatening to withhold labor support in their next campaign.
He wrote, in part:
Dear Senator _
I am extremely disappointed in your vote for the bank deregulation bill that would wipe out post-crisis controls on … 25 of the 38 largest US banks. Banks this size helped cause the 2008 financial crisis, and they received almost $50 billion in bailout money … Your support for this bill will make re-electing you far more difficult.
Several of these Democrats are still in office, including Sens. Bennet, Carper, Coons, Hassan, Kaine, King, Manchin, Peters, Shaheen, Stabenow, Tester, and Warner. Others have become bank lobbyists.
Even after the clear evidence of the bill’s toxic effects, not a single Democrat who voted for the measure in 2018 is sponsoring Warren’s measure to repeal it.
Warren has also called out Fed Chairman Jay Powell, who used the discretionary authority that the 2018 law granted him to weaken bank supervision even further. She urged President Biden not to reappoint Powell as chair, and Biden’s decision to give Powell another term was one of his bigger blunders.
Today, the Democrats remain split down the middle between progressives and toadies for the banking industry. Barney Frank, whose name is on the reformist Dodd-Frank Act, has not only become a paid apologist for the bankers. He has been all over the media, defending the 2018 legislation. He was also a board member of the now-failed Signature Bank. In 2022 alone, his seventh year on the board, Frank received cash compensation of $121,750 and stock awards of $180,182.
It’s a blessing that Elizabeth Warren is there, and a curse that her warnings are so often honored in the breach. As the Bible reminds us, a prophet is not without honor save in her own country.
