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**MAY 19, 2023**
Kuttner on TAP
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**** Elizabeth Warren at Her Everyday Best
The senator exposes the corrupt connection between the biggest banks and
their docile regulators.
Elizabeth Warren continues to demonstrate why she is the indispensable
progressive leader in America. She exposes and explains daunting insider
issues in ways that ordinary people can grasp. And there is nobody
better at humiliating corporate malefactors and their chums in
government. Warren is a faithful ally of the Biden administration, but
Biden officials who take a dive for industry can expect no mercy.
This week, the issue was the perennial problem of bank concentration.
The object of Warren's skewering was acting Comptroller of the
Currency Michael Hsu, a close ally of Treasury Secretary Janet Yellen
and a friend of the biggest banks, who never should have gotten the job.
The issue was why Hsu violated his agency's own guidelines in allowing
JPMorgan Chase, the nation's largest bank, to acquire failed First
Republic Bank, rather than two other plausible smaller suitors, PNC or
Citizens Bank.
I recently pointed out in this post
<[link removed]>
that the delivery of First Republic to JPMorgan Chase in a sweetheart
deal was all but guaranteed because JPMorgan had done earlier favors for
the Treasury in assembling a pool of $30 billion in deposits to try to
save the failing bank. That favor was explicitly welcomed by Treasury
Secretary Yellen.
At yesterday's hearing of the Senate Banking Committee
<[link removed]>, Warren probed Hsu's
knowledge of his agency's own metric for measuring the increased
danger to the banking system from the risk that a very large bank will
fail. As Warren reminded a flustered and poorly informed Hsu, the risk
of JPMorgan failing is eight times more damaging to the banking system
than the failure of PNC, and 14 times more dangerous than a failure of
Citizens.
"How do you explain approving a sale to a banking giant that increases
the risk to the banking system by somewhere between nearly 800 percent
and 1,400 percent more than selling to other bidders," Warren asked.
"Did you just ignore the fact that a failure at JPMorgan would blow a
hole in our banking system ... and let them grow by $200 billion?"
Hsu replied in a welter of bureaucratic double-talk, that other metrics
were more appropriate in his decision to allow JPMorgan to take over
First Republic. His glossing over the impact on the system's increased
concentration is doubly problematic because Hsu is the lead regulator in
fashioning new guidelines on bank mergers.
But Warren wasn't finished. **The Wall Street Journal** recently
reported
<[link removed]>
that PNC and other big banks have floated the idea of paying money they
owe to the FDIC in Treasury bonds that are currently worth less than
their face value, due to the Fed's serial interest rate hikes, but
have the FDIC credit them at full value.
Seriously? Warren was incensed.
She wrote a letter to FDIC Chair Martin Gruenberg
<[link removed]>,
a far more public-minded regulator than acting Comptroller Hsu:
"Approval of this proposal would be an outrageous breach of the FDIC's
responsibilities, and I urge you to reject it or any similar approach
that would unjustly enrich big banks at taxpayer expense."
As of this writing, Gruenberg has not replied, but a spokesperson for
the FDIC said that the agency's rules don't allow banks to pay it in
Treasury bonds.
If Elizabeth Warren were not currently serving in the Senate, we would
need to look to the history books to be reminded of how the greatest of
the crusading progressives functioned. Fortunately, we can look to
Warren.
~ ROBERT KUTTNER
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The Vanishing 14th Amendment Case
<[link removed]>
Plaintiffs claiming that the debt ceiling is unconstitutional didn't
file a motion for immediate relief. Therefore, the case has sat dormant.
BY DAVID DAYEN
Curtailing Starbucks's War on Its Unionized Baristas
<[link removed]>
The company is giving raises, but only to workers who haven't
unionized. That's likely illegal, but the NLRB has yet to stop it. BY
STEVEN GREENHOUSE
BlackBerry: When the Tech World Met Wall Street
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The new film charts the conflict between making a good product and
pleasing investors. BY LUKE GOLDSTEIN
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