Senator Elizabeth Warren (D-MA) told an audience on Tuesday that we are in danger of a repeat of the Great Crash of 2008, and that in some ways, the causes of the last crisis had gotten worse.
Warren pointed out that the one of the major underlying causes of the Crash, the massive concentration of assets in a small group of financial institutions, had actually worsened since the near-total meltdown of the financial sector in 2008 and the subsequent government bailout.
Speaking to the Roosevelt Institute on the future of financial regulation in America, Warren said:
“Today, the four biggest banks are 30 percent larger than they were five years ago. And the five largest banks now hold more than half of the total banking assets in the country. Who would have thought five years ago, after we witnessed firsthand the dangers of an overly concentrated financial system, that the ‘too big to fail’ problem would only have gotten worse?”
Warren went on to call for the reinstatement of the Glass-Steagall Act, the post-Depression era legislation that mandated the separation of commercial banking from investment banking. The law ensured that investment banks could not use depositors’ savings to make potentially lucrative but risky investments.
The law was overturned with the support of the Clinton Administration in 1999, with overwhelming bipartisan support. Clinton’s Treasury Secretary at the time, and one of the key architects of deregulation of the American financial system, Larry Summers, was appointed Director of the National Economic Council in 2009 and held the position until 2010.
Warren, who is the subject of a rumored presidential bid in 2016, has repeatedly called on federal regulators to aggressively pursue banks and financial institutions over improper or illegal activity in both the leadup to and aftermath of the 2008 Crash. Failing that, she said that Congress had to do more to protect the American people from the consequences of any future crash. Warren told her audience:
“If Dodd-Frank gives the regulators the tools to end ‘too big to fail,’ great — end ‘too big to fail.’ But if the regulators won’t end ‘too big to fail,’ then Congress must act to protect our economy and prevent future crises.”