Three years ago this month, the first major financial domino fell as Bear Stearns was forced to accept a "take-under" offer from JP Morgan. We've come a long way from the dark days of 2008 and "the core of the American financial system is in a much stronger position than it was before the crisis," Treasury Secretary Tim Geithner's recently declared. (See: Geithner's Victory Lap: Claims Financial System "Much Stronger" vs. Before Crisis)
Indeed U.S. banks posted net income of $87.5 billion in 2010, the best since 2007. But former TARP Cop Elizabeth Warren isn't as sure as Geithner that the coast is clear.
"I think there are parts [of the system] that have changed but I still worry, a lot," she says. "We have more concentration in the banking industry than we had before [and] we're going to have a 'too big to fail' problem lurking around the edge of this financial system until we've demonstrated how we're going to deal with financial institutions who take on too much risk."
Back in October 2009, when she was chair of the Congressional Oversight Panel,, Warren was "speechless" when asked about record bonuses and lamented that Wall Street executives "can't see that the world has changed in a fundamental way - it's not business as usual. All I can say right now is they seem to be winning this argument."
Today, Warren is serving as a Special Adviser to President Obama, charged with the task of setting up the Consumer Financial Protection Bureau, which she championed.
In 2010, the average cash bonus fell 9% to around $125,000 but overall Wall Street compensation rose 6%. So does Warren still think the banks are winning?
"There's no one in Congress who's talking about the salary structure for the largest financial institutions but there are people in Congress who are talking about 'let's beat back the consumer agency and cut it's funding in half," she notes. "So I think we see where the battle lines are drawn. And given the crisis we just went through, I'm genuinely shocked that's the place where we're fighting. "
Stay tuned for additional clips from this interview, which I'll note occurred before Monday's announcement that Citigroup Chairman Richard Parsons and AmEx CEO Kenneth Chenault were joining President Obama's Council on Jobs and Competitiveness.
- Elizabeth Warren
- Bear Stearns