Inside Financial Services

Elizabeth Warren’s Burning Obsession

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I’ll have more to say shortly about that remarkable speech Sen. Elizabeth Warren gave yesterday at the Levy Institute for Economics in Washington. (Quick speech summary: “I’d like to screw the big banks every way I can think of.”) But as a preview, to get a glimpse of just how severe and skewed a view of the banking business Warren holds, read this account by her, from an afterword to a new edition her book, A Fighting Chance, of a meeting she had in 2013 with JPMorgan Chase CEO Jamie Dimon. It’s long-ish but, revealing:

When the conversation turned to financial regulation and Dimon began complaining about all the burdensome rules his bank had to follow, I finally interrupted. I was polite, but definite. No, I didn’t think the biggest banks were overregulated. In fact, I couldn’t believe he was complaining about regulatory constraints less than a year after his bank had lost billions in the infamous London Whale high-risk trading episode. I said I thought the banks were still taking on too much risk and that they seemed to believe the taxpayers would bail them out — again — if something went wrong. Our exchange heated up quickly. By the time we got to the Consumer Financial Protection Bureau, we weren’t quite shouting, but we were definitely raising our voices. At this point — early in 2013 — Rich Cordray was still serving as director of the consumer agency under a recess appointment; he hadn’t yet been confirmed by the Senate, which meant that the agency was vulnerable to legal challenges over its work. Dimon told me what he thought it would take to get Congress to confirm a director, terms that included gutting the agency’s power to regulate banks like his. By this point I was furious. Dodd-Frank had created default provisions that would automatically go into effect if there was no confirmed director, and his bank was almost certainly not in compliance with the those rules. I told him that if that happened, “I think you guys are breaking the law.”

Suddenly Dimon got quiet. He leaned back and slowly smiled. “So hit me with a fine. We can afford it.” [Emph. added]

A couple of observations.

  1. Elizabeth Warren certainly is excitable. I’ve known Jamie Dimon for 20 years, having spoken with him most recently last month. If there’s anyone in the banking business who has a more even temperament and who’d be less likely to provoke during the course of what’s basically a business conversation, I can’t imagine who that individual might be. And yet Sen. Warren managed to get ticked off at him. Heaven help us. If Elizabeth Warren can’t have a discussion of banking regulatory policy with the CEO of the nation’s largest bank without becoming “furious,” she really does need to think about getting some therapy.
  1. It’s as if Warren believes banks shouldn’t be able to take any risk, ever, at all. Jamie complains about regulatory overreach and Warren brings up . . . the London Whale? Reminder: the London Whale was a trade that Morgan lost money on. It happens. The details of the trade never would have been made public but for the “tempest-in-a-teapot” remark Jamie made that later had to be walked back after the position headed south. Even so, during the quarter that the company recognized the loss, Morgan still earned $5 billion. In the year the trade happened, 2012, Morgan posted record pre-tax earnings of nearly $29 billion. And this is the most egregious offense Warren can come up with?
  1. What makes Warren believe banks are still taking on too much risk? Has she reviewed their loan books? Read their underwriting standards? Checked their reserving policies? Of course not. Sen. Warren has no clue how much risk the big banks are facing. The only reason I can think of that she believes they’re still taking on too much of it is that she doesn’t like risk and she doesn’t like banks and she especially doesn’t like it when the two are combined.
  1. Who appointed Elizabeth Warren D.A.? Now she’s accusing Morgan of “breaking the law” via its violation of certain unspecified CFPB rules. What rules exactly, we don’t know. When the purported violations happened, ditto. The charitable explanation for this odd and open-ended charge is that it’s just an editing error (complete with typo!) that left out needed clarifying information. The less charitable explanation is that Elizabeth Warren is delusional.

It’s hard to come away from reading all this—and reading yesterday’s speech, too—without getting the impression that Elizabeth Warren’s antipathy toward the banks is deep, visceral, and unquenchable. We knew that, of course. It’s also hard not to get the impression that Elizabeth Warren doesn’t quite understand how the banking industry works, or the role the industry plays in creating credit and financing economic growth. That’s too bad. Reasoned skepticism of the banking industry, especially in the wake of what happened in 2008, is entirely healthy and appropriate. It’s less healthy, though, when that skepticism is hysterical.

What do you think? Let me know!

19 Responses to “Elizabeth Warren’s Burning Obsession”

  1. jsc173

    Let’s face it. Senator Warren will hold the banks hostage (if she can) over her inability to become confirmed as Director of CFPB.

    And if she can’t hold them hostage she will do everything within her power to punish them for the sins of the past.


    Ya’ think?

  2. Drf523

    This person is dangerous, not only to the Banking industry, but to our country in general. Like many educators, she lives in a world of make believe with no real attachment to reality. The fact that her name has been bantered as a possible Presidential candidate chills me to the bone. As you know, many of the large banks were forced to take Government bailout money when they didn’t need it to make the repayment possibilities skew higher, a fact she either doesn’t know or chooses to ignore. She would prefer government to control all phases of our lives, not just banking, a position we cannot allow to happen.

  3. Greg

    Tom, I’d love to see you and Sen. Warren go toe-to-toe in a debate. Perhaps at one of the conferences you chair? But who am I kidding, she’d never agree to that.

    • Bill

      Man that truly would be the fight of the century!

  4. MJA

    Bashing banks has become EW’s go to rhetoric to snatch a headline. It’s unfortunate for the country that being a brilliant bankruptcy attorney/professor does not provide adequate training to be a legislator. Lately, every time that she opens her mouth, her harping betrays her lack of a fundamental understanding of economics and business. Wondering how long it will be until this sheep in wolf’s clothing is unmasked.

  5. Dan

    What is really scary is how popular Warren is. It illustrates a disturbing lack of understanding how free markets and freedom in general works. Probably points ultimately to some of the risks of giving government an effective monopoly over education.

  6. KIM Xantus

    Tom- your comments are sexist at best insinuating that EW is in need of therapy due to her heated exchange. She is passionate about trying to protect the public against what she has correctly identified as the biggest threat to the country’s security…..

    • Nick

      Sorry, the biggest threat to this countrys security sits in the White House.

    • hildybme

      Sexism aside, Sen Warren speaks on behalf of the American people who don’t want the banks to gamble with thier money and then have to bail them and their stockholders out when they lose the capital they had the responsibility to maintain.

    • Bill

      Ah yes……revert to charges of sexism when you are loosing the argument! Ask yourself which is more important, freedom of speech or “fear of speech”?

    • Polo

      It doesn’t appear you understand the concept. Do you imply that only women have to go into therapy? That sounds a little sexist itself. Perhaps you should seek therapy or at least some remedial training then, how’s that?

  7. North Left Coast

    Remember this: Sen. Warren was an adjunct professor at some no-name university until she claimed “Native American” heritage (still undocumented/unproven by her) to garner her position at Harvard. Classic move by an opportunist. She is not a legal “scholar”, she is a crusader, and banks are her crusade. She’s not the least intelligent member of the Senate, but she’s certainly guilty of letting her passions run roughshod over what intelligence she possesses.

  8. sgr

    Senator Fauxchohontas is adored by the mindless far left of the Democratic party… which includes 90% of the media. She is never asked to explain herself. And she is covered in a way that suggests she possesses a level of intelligence that she shows NO evidence of having. Of course, we are currently suffering through a 7th year of a president who got (and gets) the same kind of free ride. Working out great, isn’t it?

  9. ETO

    I cannot endorse Senator Warren’s populist brand of politics but she is dead right on the level of risk represented in the business models of the mega banks. And it’s not primarily in the loan book.

  10. Stays 72

    What bothers Tom, and the rest of the bank advocates, is they know they can’t buy Senator Warren. She’s not for sale, and furthermore, she’s smarter than Dimon and the rest, and that’s why there is such hysteria about this one senator. And, as far as suggesting she needs therapy because she had a heated exchange with the venerable Jamie Dimon — please Tom, check your sexist commentary at the door — you would have never said that about a male senator.

  11. WCN

    So …
    1. If I can harp on “banks” that’s Main Street vs. Wall Street …. good for my political career
    2. Banks make money from consumers … if I can reposition that as big vs. little guy that too is good for my career in DC
    3. If I can appeal to basic voter ignorance of how banking really works that positions me well with at least the 47% that Romney mentioned so appropo … that too is good for my senate re-election
    This all seems to make sense to me.
    E. Warren

  12. Tom Gates


  13. Ricky Ricardo

    My initial reaction is to paraphrase Ricky Ricardo: “Ay yi yi yi yi!”

    This article is not about Elizabeth Warren it is about Tom Wells, who wants us to know that “Jamie Dimon is a close personal friend of mine”.

    Dimon’s “we’re bulletproof” response to Warren’s accusation that they are breaking the law says far more about Dimon than about Warren.

    Bottom line is this is exactly the WRONG approach to improve our banking system. Personal attacks are ugly. It would be healthy to not repeat the last financial crisis please. A little nuance would go a long way.

    • Ricky Ricardo

      I mistyped and wrote “Tom Wells” when I meant to write “Tom Brown”.

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