The Lead with Jake Tapper: Sen. Elizabeth Warren, (D-MA), Is Interviewed About Fed

Interview

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Thank you. Glad to be here.

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Well, you know, if you want to treat this as a cataclysmic event, which certainly the pandemic was, keep in mind it drove inflation in ways that are different from how we usually have it. So, for example, we have seen supply chain kinks that have driven up prices. Then add to that we have a war in Ukraine.

And then one of the big pieces has been a lot of price gouging. We've seen these giant corporations, particularly industries that are very concentrated, really pushing their prices up. So there are three things that are helping push prices up. And do how many of those three can be affected by raising interest rates? None of them.

The whole point is that Powell is using the one tool the Fed has, and that is raise interest rates. But he has said himself in hearings, no, it won't affect any of those things. But here's what it will affect. When the Fed uses language like we're trying to cool the economy or slow down the economy, the translation behind that is we're trying to increase unemployment.

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And in fact, the Fed has said this in the last hearing that I had with Chair Powell when we had him in front of us in the Finance Committee, I looked at the Fed's own predictions, their report in December in which they said, we want to keep trying to slow down the economy. And what we're hoping for out of this is that we increase unemployment by 2 million jobs. Now, that's a lot of people for whom that's a lot of hurt. These are people right now who are paying the rent, putting groceries on the table.

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That's right.

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That's right. And actually, by the Fed's own prediction, it's more than 2 million that is their target here. And the point I want to make is, that's not going to help us on supply chain kinks, it's not going to help us on the war in Ukraine, it's not going to help us on this -- the price gouging from these big corporations. So, I think we ought to be not doing the extraordinary, these extreme interest rate hikes. We've never seen hikes at this rate in the modern economy and bearing down harder on these other costs that are -- these other factors that are driving up cost.

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No. I think what he should say --

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-- he should call, for example, for more on price gouging, but back off using his tool and keep trying to say that he's going to keep using it until he puts 2 million people out of work.

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So, I'm not going to talk about private conversations, but what I will say is I've made it very clear as publicly as humanly possible that I didn't think that he should be reconfirmed as president -- as Chair of the Fed. And I think he's doing a really terrible job. And he's doing a terrible job on both fronts.

Remember, there are two -- only two jobs for the Federal Reserve chair. One is monetary policy, inflation. I think he's doing a very bad job there, and it's risking pushing our economy into a recession. His other job is regulatory oversight. And he has spent five years weakening regulations over these multibillion dollar banks.

I predicted five years ago, the consequence of that kind of weakening would be that we would see these banks load up on risk, build their short term profits, give themselves ginormous bonuses and big salaries, and then some of those banks will explode. And that is exactly what has happened on Chair Powell's watch.

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I think that is where Jerome Powell is trying to drive it, and he's got two different ways he's doing it.

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Well, what he's trying to do is get 2 million people laid off. And one of the things that we need to understand, he wants to raise the unemployment rate by more than a point within a single 12 month period. We have done that before in this country.

In fact, we have done it 12 times before. And out of all 12 times, how many times has it resulted in a recession? The answer is 12. So, that's the direction he's trying to push this, that is a danger to our economy. It's why I said five years ago, I think he's a dangerous man to have in this job.

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Yes.

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The one who is responsible on safety and soundness, that's the part we want to go here, is this financially solvent and stable bank, that's at the Fed for all of these $50 billion and above banks. And that's where it is that Jerome Powell has spent years now weakening the regulations. In fact, I had him at a hearing not long ago in which I talked about the fact that he has weakened the regulations over these banks not once, not twice, but literally dozens of times. And so, I said to him, of all the things you've done for these banks, and a lot of it's way down in the weeds, can you name just one where you kind of tightened the regulations a little bit, where you increased oversight a little bit, and his answer was no.

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I did. Yes.

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No, we have not. But this really is the reminder. This is not a story that just one day fell out of the sky. This is a story that starts back with, you remember the last crash put Dodd-Frank in place, promised the American people we're going to have tough regulations, and that means we're not going to have any more bank failures. Then these multibillion dollar banks, including the CEO of this Silicon Valley bank, come in and say no, no, no.

They want to be treated not like the multibillion dollar banks they are. They said, we're just like those little tiny local community banks that do such a great job of providing local loans and so on. So, regulate us very lightly, they said, because they claimed they posed no risk to the economy.

Now, Donald Trump then ran for president, saying to those banks --

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-- multibillion dollar banks, I will lighten regulations on you. Once he was elected, he put in regulators who believed in deregulation. Then he went to Congress and said to Congress, roll back the part of Dodd-Frank that requires more supervision over these $50 billion in above banks.

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All of them.

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Yes, yes.

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No, he got help from both parties. And then what happened is that Jerome Powell said you've opened the door for much more deregulation, massive deregulation. And he said it. He's actually on the record saying this, because you opened the door, I am now going to go full steam ahead and lighten the regulations.

And then his then vice chair, who was Randal Quarles, said that his job was to change the culture at the Fed in order to let these banks do what they wanted to do to be able to take on risk, run up profits. And I'm going to say he didn't add this part and run the risk of exploding.

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I think right now this really is at the Fed. And then I want to say the regional Fed, to the whole Fed structure, the CFPB, for example, they're dealing with consumer contracts. And that's not the heart of what's gone wrong here. FDIC is trying to figure out how to manage the insurance for depositors.

And actually, I think this is a place, thanks to the intervention that the Treasury was forced to take weekend before last, I think this is a place now we're going to have to have statutory change because, in effect, the Treasury combined with the Fed has said we're going to come in and start backstopping all deposits, backstopping the banks. And that means they're providing, in effect, a form of insurance and not charging for it.

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I think there is. And it's the reminder that there are regulations that are helpful to all of us. And the regulations are about safety. That's what obviously the train derailment was about. It's also about economic safety.

We need a Federal Reserve that is doing its job, and that is to keep these banks safe. Look, no depositor, no small business, no family individual should have to say, I need to see the bank's balance sheet before I know that it's safe --

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-- to put money in a bank. The whole idea is the regulators are supposed to keep those banks safe.

You know, I used to talk about exploding toasters, that you shouldn't have to be an expert on toasters to buy a toaster.

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We ought to know that they're safe. That's what regulations are about. Same thing ought to be true about putting money in banks, it should be safe. Banking should not be a place for risk takers who want to -- who want to build up, you know, fast profit Silicon Valley Bank increase their profitability by 40 percent in the last three years. That's not what we want from banks. We want banks that are boring and that are safe.

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You bet.

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