Brown Opening Statement At Banking Committee Hearing On Federal Reserve Supervision And Regulation
WASHINGTON, D.C. — U.S. Sen. Sherrod Brown (D-OH) – ranking member of the U.S. Senate Committee on Banking, Housing, and Urban Affairs – released the following opening statement at today’s hearing on “The Semiannual Testimony of the Federal Reserve’s Supervision and Regulation of the Financial System.”
Sen. Brown’s remarks, as prepared for delivery, follow:
Thank you, Mr. Chairman and thank you Vice Chairman Quarles for appearing before the Committee today.
On this very day ten years ago (April 19th, 2008) the Columbus Dispatch reported that 28,000 Ohioans had lost their jobs in the previous month. As the economy collapsed because of Wall Street’s recklessness, a vice president at the Columbus Chamber of Commerce described Ohio’s economy to the Dispatch as, “the worst of all possible worlds.”
For those 28,000 Ohioans, and the millions more that ultimately lost their jobs, ten years ago probably doesn’t feel so far away. The heartbreak, the fear and the stress of losing a home to foreclosure, being forced to switch schools, or needing to postpone buying expensive prescription drugs casts a long, long shadow.
The Fed missed the crisis the last time. It had the power to rein-in predatory mortgage lending, to stop banks from operating with too much borrowed money, and to hold bank executives accountable – and it failed, even as advocates in communities spotted problems and pleaded for it to act.
Because the Fed neglected its mission, and the Bush Administration didn’t do its job, Congress the next year had to pass Wall Street Reform.
Now with legislation coming from this Congress and the work of this Administration, we are on the verge of unraveling many of those reforms. In the words of one banking analyst, “when we fast forward five, ten years from now, the dismantling of the financial infrastructure is going to be greater than anyone could foresee at this time.”
When Washington dismantles protections, Wall Street cheers. Ultimately, Main Street pays the price.
The decisions being made now may lead us to the next crash. When times are good, policymakers, lawmakers and regulators – if they’re not vigilant – can get lulled into a sense that “this time is different.”
The horizon certainly looks clear right now – just as it did during the Bush years right before the crisis, when Mr. Quarles was in charge of overseeing bank policy at the Treasury Department.
Just like back then, big banks are raking in record profits. Just like back then, they’re lining their pockets with stock buybacks. Just like back then, the White House looks like an executive retreat for Wall Street.
The Fed slapped Wells Fargo with a penalty right as Chair Yellen’s term ended. Now, the bank is about to get a big boost from a Fed proposal released last week. Under the new plan, Wells Fargo will be allowed to pay out $20 billion in capital to executives and shareholders, rather than use that money to make loans or prevent bailouts. And – while it is almost inconceivable – the CEO of Wells Fargo got a 36 percent raise in 2017 – even as he presided over one consumer abuse after another.
Collectively, the country’s biggest banks stand to get a $121 billion windfall from a plan that would let them operate on more borrowed money, and with less skin in the game. Really.
While Mr. Quarles talks about this proposal, and the Fed’s many other plans, as a simple “recalibration” or “tailoring” or “re-evaluation” of the rules, we know what that really means. We just heard from CFPB Acting Director Mulvaney last week what he is doing to consumer protections. The end result? Fewer rules guarding hardworking Americans from taxpayer bailouts and financial scammers. More incentives for Wall Street greed.
Somehow “tailoring” only seems to go in one direction these days – whatever direction Wall Street wants.
History tells us what will happen next. The IMF – an international financial agency – studied financial markets since the 18th century. Periods of deregulation usually provoke a crisis. Policymakers “learn their lesson” and then re-regulate. Eventually, the collective amnesia sets in – we know something about that in this Committee – and they deregulate yet again.
When big banks are flush with profits – as they are now – policymakers should be preparing them for rough times ahead. Instead, Washington is repeating a failed pattern of boom and bust. When things go bad once again, executives will get golden parachutes – workers, retirees, and consumers will be left holding the bag. Shameful. Just shameful. Makes me wonder why we’re here.
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