WASHINGTON – Elizabeth Warren rose to national prominence as an outspoken consumer advocate decrying Wall Street abuses and became the progressive movement’s darling candidate in last fall’s Senate elections. Like most freshman lawmakers, the Massachusetts Democrat has maintained a low profile during her first few months in office.
That’s starting to change.
Warren, who championed the creation of the new Consumer Financial Protection Board after the mortgage-led financial meltdown five years ago, is beginning to use her Senate Banking Committee perch to push regulators for tougher actions against errant banks.
Warren questioned senior Treasury Department officials Thursday about why there was no criminal prosecution for alleged money laundering by British bank HSBC and no effort to shut it down. HSBC agreed last December to pay a forfeiture and penalties totalling $1.9 billion to settle charges it helped Mexican drug traffickers, Iran and Libya move money around the world.
“What does it take, how many billions of dollars do you have to launder from drug lords and how many economic sanctions do you have to violate before someone will consider shutting down a financial institution?” Warren asked at a Banking Committee hearing on money laundering.
The Treasury officials punted, saying criminal prosecutions are up to the Justice Department, not them.
Last month, Warren won rave reviews from liberals and in the social media after grilling banking regulators on why they agree to settlements with big banks accused of major wrongdoing instead of taking them to trial.
“Can you identify when you last took (one of) the Wall Street banks to trial?” she asked the regulators.
During her campaign, Warren vowed to be a champion for what she characterized as a besieged middle class preyed upon by big banks, Wall Street CEOs, predatory lenders and other well-heeled special interests.
“She is as advertised,” said James Ballentine, chief lobbyist for the American Bankers Association. “She came in and concentrated on being a strong advocate for consumers, and she has certainly done that and a little more.”
During her Senate bid last year, the U.S. Chamber of Commerce warned that “no other candidate in 2012 represents a greater threat to free enterprise” than Warren.
Jim Nuzzo, a Boston-based Republican political analyst, said Warren as a senator has tempered the brash style she had as a consumer activist. “The Senate has show horses and war horses,” said Nuzzo. “She’s made a very smart decision that she’s going to play the war horse.”
Warren has also been wise to shun much of the national press after her election, Nuzzo said, and instead use banking hearings to deliver her message and avoid accusations that she’s showboating.
The financial collapse in 2008 and subsequent federal bailout plus a string of hearings on the lax oversight and high-risk investment practices that led to it stoked public anger. Liberal groups flocked to Warren’s Senate campaign for the late Sen. Edward M. Kennedy’s old seat.
The HSBC settlement was the largest penalty ever imposed on a bank. But the U.S. stopped short of charging executives, citing the bank’s immediate, full co-operation and the damage that an assault on the giant company might cause on economies and people, including thousands who would lose jobs if the bank collapsed.
Critics like Warren see the settlement as evidence that a doctrine of “too big to fail” or at least “too big to prosecute” is still operating long after the 2008 financial crisis.
“If you’re caught with an ounce of cocaine, the chances are good you’ll go to jail,” Warren said at Thursday’s hearing. “If you’re caught repeatedly, you can go to jail for life. Evidently, if you launder nearly $1 billion for drug cartels and violate our government’s sanctions, your company pays a fine and you go home and sleep in your own bed at night. I think that’s fundamentally wrong.”
Warren came to Washington in 2008 to head the congressional panel overseeing the bank bailout program. She carved a national profile in her advocacy for the creation of a new, independent federal financial consumer protection agency.
The consumer bureau, created by the 2010 financial overhaul law known as the Dodd-Frank Act, gained new powers to reach deep into the most mundane decisions of money-transfer agents, mortgage bankers, auto lenders and virtually anyone else who provides financial products and services. Its decisions are changing the mortgage application and foreclosure process, the way people lodge complaints against financial companies and, in some cases, what fees they can charge.
President Barack Obama tapped Warren to set up the new Consumer Protection Finance Bureau, but Republicans blocked efforts to make her its first director.
Warren turned to a Senate bid. She beat GOP Sen. Scott Brown last fall in one of the most expensive and hard-fought Senate contests of 2012. Before taking office, she signalled that her brash style as a consumer advocate might yield to a different approach.
“Sometimes it will mean working quietly in the shadows, and other times it will be speaking up forcefully,” she said. “I’m willing to do either. I just want to find the way to get things done.”