Sen. Elizabeth Warren (D-Mass.) on Tuesday publicly aired her concerns about the Federal Reserve’s top lawyer, questioning whether he effectively helped Congress kill a key provision of financial reform.
Warren said that Fed General Counsel Scott Alvarez’s public disparagement of rules that would have segregated publicly-insured consumer savings from big banks’ derivatives trading indicate he encouraged the central bank to delay the rule’s implementation. The regulation was repealed by Congress late last year before it could take effect next year, as the Fed had previously intended.
The decision made by the Office of the Comptroller of the Currency and the Fed to stall the implementation of the 2010 Dodd-Frank-mandated regulation gave “Citigroup and other big banks time to get the rule repealed before it ever went into effect,” Warren said, referencing the Wall Street bank’s reported involvement in lobbying for the counterattack.
“Did Mr. Alvarez provide input into the Fed’s decision to delay the effective date of the push-out rule?” Warren asked Fed Chair Janet Yellen at a Senate Banking Committee oversight hearing.
“I don’t know,” Yellen replied. “We usually have phase-ins for complicated rules that require adjustments by financial firms. This has been true of all of the Dodd-Frank rules that we have put into effect,” she added.
“Well, I think this might be worth looking into,” Warren shot back. “The Fed is our first line of defense against another financial crisis, and the Fed’s General Counsel or anyone at the Fed should not be picking and choosing which rules to enforce based on their personal views.”
The senator specifically took issue with Alvarez’s statements “a month before the repeal” before the American Bar Association, “an organization that includes many lawyers who represent banks that are affected.”
“Mr. Alvarez openly criticized the swaps push-out rule, saying ‘you can tell it was written at 2:30 in the morning and so it needs to be, I think, revisited just to make sense of it,’” she said to Yellen, before asking if his criticisms represent official Fed policy.
Yellen said that she and the Fed Board of Governors “considered Dodd-Frank to be a very important piece of legislation that has provided a road map for us to put in place regulations.”
“I’m not seeking in any way to alter Dodd-Frank at this time,” she added.
This isn’t the first problem this month that Warren has had with Alvarez. The senator also noted, in her question time with Yellen, that she and House Oversight Committee ranking member Rep. Elijah Cummings (D-Md.) asked the top Fed lawyer for a briefing on an internal investigation into a leak of market-moving information to a hedge fund-tied intelligence firm, but hasn’t yet received a response to the Feb. 5 letter. When asked by the lawmaker if the Fed Chair could help expedite the process, Yellen told Warren that the Fed would work with Congressional staffers “on a process to be responsive.”
“I’ll take that as a yes,” Warren said.
“Yes,” Yellen replied.
As The Sentinel noted in December, the so-called swaps push out rule repeal was attached to crucial year-end budgetary legislation that became known as “The Cromnibus”. It was narrowly approved of in the House, with Warren leading a charge from the Senate against the bill’s back-door gift to Wall Street and the widely-despised JPMorgan CEO Jamie Dimon personally lobbying legislators for its passage. House Democrats who were among the party’s top recipients of campaign donations from Citigroup and JPMorgan carried the contentious legislation.
