Forum Statement on Warren and Banking

18 Jul 2019

The Forum Sets the Record Straight

CONTACT: Julia Lawless
(202) 457-8766

WASHINGTON, DC – Financial Services Forum President and CEO Kevin Fromer issued the following statement today regarding Senator Elizabeth Warren’s statements on banking:

Businesses of all sizes rely on diversified financial services companies to help them grow and compete here and abroad.  We need large, diversified financial institutions to support our nation’s $20 trillion economy. The Forum will continue to do its part to ensure American banks are in the best possible position to continue to increase economic prosperity for the American people. An efficient and effective regulatory framework coupled with pro-growth laws on the books will help achieve that goal.”

Warren’s statements include several misconceptions regarding large financial institutions.

Here is a look at the facts:

On Glass-Steagall:
The Warren proposal to enact a so-called “21st Century Glass-Steagall Act” is severely misguided, as it would impose significant economic costs to businesses and consumers without any commensurate benefit.

That’s why other policymakers overseeing the financial services sector have little interest in bringing Glass-Steagall back. And, even the Senator herself has acknowledged that the law would not have prevented the financial crisis.

In fact, one of the very papers cited by the Senator—written by a leading liberal economist—concludes that there is “no compelling evidence” for such a measure and observes that universal banks “probably contributed less to the crisis than stand-alone investment banks, so it is not clear what a separation between investment and retail banking would achieve.”

Glass-Steagall had two fundamental provisions.

  • The core provision banned banks from conducting securities activities (like underwriting) and also banned securities firms from taking deposits.
  • Another provision banned affiliations between banks and securities firms within a single corporate entity.

The first provision was never repealed and is still in effect today. Banks are prohibited from conducting securities activities and securities firms are prohibited from taking deposits.

The second provision was repealed in 1999 by the Gramm-Leach-Bliley Act and now financial holding companies may own both banks and securities firms. Research shows that companies are charged lower fees when they are able to obtain multiple services from the same firm.  It’s a classic example of economies of scope, which occurs whenever a firm can produce two related goods at a cost that is lower than if each good was produced separately.

On Financial Regulatory Reform:
Last year, Congress enacted a regulatory reform package that sought to ease the burden for smaller banks.  S.2155 left regulations for the largest banks intact. As the former chairman of the House Financial Services Committee and author of Dodd-Frank noted in the fall,

It does not in any way weaken the regulations we put in there for the largest banks or that were there to prevent the kind of crisis we had 10 years ago.”

Even more, capital requirements for the largest banks have increased substantially. Today capital levels for the nation’s largest banks continue to hover around historic highs, and Forum institutions maintain capital levels that are twice that required by regulators.

To date, Forum members have repeatedly demonstrated the ability to maintain strong capital levels and capital planning processes through severe economic and financial market stress, as evidenced by the 2019 Comprehensive Capital Analysis and Review (CCAR) results.

Together, Forum member institutions have increased their capital by more than 40 percent from nine years ago to over $925 billion; doubled their liquid assets since 2010; and simplified their corporate structures. As of the first quarter of 2019, Forum members maintained an average Tier 1 common equity risk-based capital ratio of 12.3 percent, compared to 4.9 percent in 2009.

On Bringing Consumers into the Financial Mainstream:
Forum member institutions provide access to a wide array of financial products and services to bring consumers into the banking sector. In fact, Forum members with branch locations in the United States, provide low-cost, no overdraft products that are certified by the Cities for Financial Empowerment Fund to help empower customers and bring them into the financial mainstream.

To learn more about how large U.S. financial institutions are safe and sound and supporting the economy click here.


The Financial Services Forum is an economic policy and advocacy organization whose members are the chief executive officers of the eight largest and most diversified financial institutions headquartered in the United States.  Forum member institutions are a leading source of lending and investment in the United States and serve millions of consumers, businesses, investors, and communities throughout the country. The Forum promotes policies that support savings and investment, deep and liquid capital markets, a competitive global marketplace, and a sound financial system.

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