Elizabeth Warren calls on Janet Yellen for Blackrock “too big to fail”

by

In a hearing by the Senate Banking Committee, Warren noted that the Federal Reserve began designating very large banks as “too big to fail,” giving them stronger oversight granted by Congress at the Dodd- act. Frank. This bill, drafted in the wake of the 2008 financial crisis, created the Financial Stability Supervisory Board, a regulator that can make special control of banks that are considered systemically important at the time, those with more than $ 50 billion in assets.
So why not? BlackRock (BLK), which oversees 180 times that amount of assets, designated too large to fail?

“If a $ 9 trillion investment firm failed, would that probably have a significant impact on our economy?” Warren asked Treasury Secretary Janet Yellen.

Yellen said he believes it is less important to designate a particular company and that it is more important to examine the actions they take. For example, in 2016 and 2017 the FSOC investigated possible damages caused by massive withdrawals of free capital investment funds, which forced asset managers to sell assets, creating fire sales. The same thing happened in March 2020.

A major player touches the brakes on the latest Wall Street fashion

“When it comes to asset management, rather than focusing on designating companies, I think it’s important to focus on an activity like this and consider what the appropriate constraints are,” Yellen said. “It’s not obvious to me that designation is the right tool.”

Warren had none of that. Isn’t the designation itself the one that gives the Fed control, he replied? And because BlackRock isn’t designated, it doesn’t have that extra control, he noted.

BlackRock did not immediately respond to a request for comment.

Yellen admitted that he believes “it is appropriate to designate institutions whose failure would pose a material risk to the financial stability of the United States.”

So Warren wanted to know why a $ 9 trillion institution like BlackRock wouldn’t pose a risk if it failed?

Yellen only responded that the FSOC had investigated BlackRock in the past and will continue to do so in the future.

Warren, not too pleased with this response, called for more immediate action.

“When the match goes strong, the regulators have the task of withdrawing the punch,” he said. “My view on this is that Congress gave you the tools to control risk and it’s important to use them.”

.Source