Warren Presses Banking Agencies on Morgan Stanley Giveaway, Subsidizing European Customers at the Expense of U.S. Financial Stability
“It is also unclear why regulators would find it in the public interest of the United States to divert American taxpayer deposits away from domestic lending to subsidize European customers.”
“The agencies should revoke it immediately.”
Washington, D.C. – U.S. Senator Elizabeth Warren (D-Mass.), Ranking Member of the Senate Banking, Housing, and Urban Affairs Committee, sent a letter to Michelle Bowman, Vice Chair for Supervision for the Federal Reserve (Fed), Comptroller Jonathan Gould from the Office of the Comptroller of the Currency (OCC), and Travis Hill, Chairman of the Federal Deposit Insurance Corporation (FDIC), raising concerns regarding their agencies’ decision to provide a special exemption to Morgan Stanley that enables the bank to use American taxpayer deposits to subsidize risky financial activities in Europe.
“This exemption violates federal law, diverts deposits away from domestic lending for businesses and households in the United States, and needlessly exposes our country’s banking system to risks in European financial markets. The exemption should be immediately revoked. In addition, I am requesting information from your agencies to better understand this decision,” wrote the Senator.
“A closer look at Morgan Stanley’s proposal only confirms that the bank’s proposed transaction fails both prongs of the 23A exemption test. First, the transaction does not appear to be in the public interest,” wrote the Senator. “The banking agencies have previously defined the public interest as ‘assuring the safety and soundness of the banks, protecting the deposit insurance fund, and limiting the extension of the federal safety net.’ Yet Morgan Stanley’s foreign affiliate nonbank activities, such as trading and investment banking, are highly risky. Bringing them into the insured bank could threaten the safety and soundness of the banking system and increase risks to the Deposit Insurance Fund.”
“Granting the exemption violated Section 23A of the Federal Reserve Act. The agencies should revoke it immediately. If the agencies refuse to reverse this unlawful exemption, future regulators would be responsible for correcting this error and requiring divestiture of the transferred assets and liabilities out of the bank,” the Senator concluded.
The Senator requests answers by June 3, 2026.
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