WASHINGTON — After campaigning last year as an outspoken consumer advocate and Wall Street critic, Senator Elizabeth Warren was surprisingly quiet during her first month on Capitol Hill. But that changed on Thursday at the Massachusetts senior senator’s first hearing, when she rebuked federal regulators for settling civil cases with big banks instead of taking them to trial.
Looking at the seven regulators arrayed before the Senate Banking Committee, and noting that she had often sat at the same witness table before becoming a senator, she used her new power to question why the federal government has not been more aggressive.
“The question I really want to ask is about how tough you are — about how much leverage you really have,” Warren said. “Tell me a little bit about the last few times you’ve taken the biggest financial institutions on Wall Street all the way to trial.”
A handful of supporters in the packed hearing room applauded. But none of the witnesses — representing the Securities and Exchange Commission, the Commodity Futures Trading Commission and others — offered a response.
“Anybody?” Warren asked, pursing her lips and raising her eyebrows above her glasses.
The hearing was the committee’s semiannual meeting on the Dodd-Frank financial reform act, implemented in 2010 as a response to the financial crisis. The legislation tightened laws regulating big banks and provided safeguards intended to shield consumers from abusive financial practices.
Republicans had been expected to use the hearing to attack the Consumer Financial Protection Bureau, the government agency whose creation that Warren had championed, especially since one of the witnesses was the agency’s director, Richard Cordray.
But the Republicans, without explanation, held back, in effect clearing the path for Warren to take the limelight. The GOP members stuck to broad lines of questioning and did not specifically assail the consumer agency. Ranking Republican Mike Crapo of Idaho instead criticized other Dodd-Frank measures, saying that proposed rules “are far too complex.”
“I’m concerned that the regulators do not understand the cumulative effect of the hundreds of proposed rules, and that there is a lack of coordination among them,” he said.
Warren seized the hearing to chide regulators for not taking legal stands against Wall Street, saying that the threat of trial is an important tool in keeping big banks in line, despite the vast resources required to do so.
“If a party is unwilling to go to trial — either because they’re too timid or they lack resources — the consequence is they have a lot less leverage,” Warren said. “If [banks] can break the law and drag in billions in profits and then turn around and settle paying out of those profits, they don’t have that much incentive to follow the law.”
The regulators often sought to avoid directly answering Warren’s questions regarding their prosecutions.
“The institutions I supervise . . . we’ve actually had a fair number of consent orders,” Comptroller of the Currency Tom Curry said, referring to out-of-court settlements. “We do not have to bring people to trial.”
“I appreciate that you say you do not have to bring people to trial,” Warren countered. “My question is when did you bring them to trial?”
‘I’m really concerned ‘too big to fail’ has become ‘too big for trial.’ That just seems wrong to me.”’
At another point, Elisse Walter, chairwoman of the Securities and Exchange Commission, defended her agency, saying, “We look at the distinction between what we can get if we go to trial and what we can get if we don’t.”
Warren interrupted her: “I appreciate that. That’s what everybody does. The question I’m really asking is, can you identify when you last took the Wall Street banks to trial?”
“I will have to get back to you with the specific information,” replied Walter, her arms crossed.
Warren had pledged to help rein in wrongdoing by big banks when she ran for the Senate last year, and the financial industry poured millions into the campaign coffers of Warren’s Republican opponent — then-Senator Scott Brown — to keep her out of office.
On Thursday, Warren urged regulators to step up the legal actions.
“There are district attorneys and US attorneys who are out there every day squeezing ordinary citizens on very thin grounds and taking them to trial in order to make an example,” she said.
As for taking on banks, she added, “I’m really concerned ‘too big to fail’ has become ‘too big for trial.’ That just seems wrong to me.”
Warren’s performance drew the praise of some fellow Democrats, including Jon Tester of Montana.
“She obviously understands the issues,” Tester said after the hearing. “She has always been somebody that, from my perspective, is looking out for the little guy. That’s exactly what she was doing.”
A few of those “little guys” sat in the packed hearing room Thursday, including a handful of members of the Neighborhood Assistance Corporation of America. The Boston-based advocacy group fights for affordable home ownership among low- and middle-class families. Bruce Marks, its chief executive, and others from the organization were among those cheering during Warren’s remarks.
“It was a breath of fresh air,” Marks said. “It sends a message to the other senators that they have to step up their game.”
Following the hearing, Warren joined fellow Democrats at a news conference in the Capitol to support the consumer bureau. Senate Republicans have renewed calls to reform the agency with proposals that Democrats say would strip the body of its regulatory teeth.
The consumer watchdog was created as part of the Dodd-Frank act, named after then-Connecticut Senator Chris Dodd and former Representative Barney Frank of Massachusetts. It tightened Wall Street banking regulations, aiming to prevent a repeat of the financial crisis.
Warren emerged as a staunch advocate of including consumer safeguards in the legislation, eventually helping create the agency in 2011. President Obama appointed Cordray over Warren to head the regulator after Senate Republicans vowed to block her nomination.
Warren then won her Senate seat, from which she said she will continue the fight for financial regulations.
“I’m just going to keep pushing,” Warren told a gaggle of reporters who watched Thursday’s hearing. “But I think you got the point.”