Warren Presses Yellen on Breaking Up JPMorgan Chase
July 17, 2014 • 10:54AM

In the Senate Banking Committee on July 15, Sen. Elizabeth Warren pressured the not-very-forthcoming Federal Reserve Chairperson, Janet Yellen, on breaking up the big U.S.-based banks. This is one major purpose of the Glass-Steagall law for Congress; the Federal Reserve also has, but has never used, this power.

Business Insider reported, "Elizabeth Warren Destroys Janet Yellen Over Living Wills."

Warren questioned her on JPMorgan's "living will", the "plan" concocted by each too-big-to-fail bank under Dodd-Frank, which is supposed to be a design for swiftly putting the failing bank though bankruptcy under FDIC conservatorship (Title I bankruptcy, not Title II bail-in). The last bank which went through bankruptcy was Lehman Brothers, and there was nothing swift about it, as it took three years. These "living wills" which the banks have produced are not, as FDIC officials have acknowledged, credible.

Warren compared Lehman's $639 billion in assets to JPMorgan's $2.5 trillion; Lehman's 209 subsidiaries to Morgan's "unbelievable" 3,391 subsidiaries. The Federal Reserve has repeatedly approved Morgan's "living will" plan for three years: "Can you say it will work?" Warren asked. Yellen replied only that "we are continuing to give them [the banks] feedback...[on]...plans that run into tens of thousands of pages." The clear implication was, "No." On other occasions in the same committee, Yellen has said, "We won't know whether we can resolve a failing SIFI until one fails and we try it."

Warren concluded: "I think the language in the statute is pretty clear. That ... the Fed is required to call it, every year, on whether these institutions have a credible plan. And I remind you, there are very effective tools that you can use if those plans are not credible. Including, forcing these financial institutions to simplify their structure, or forcing them to liquidate some of their assets. In other words, break them up."

That ended the Senate Banking hearing.