Sen. Warren: We Need Regulators Who 'Work For The American People'

Sen. Elizabeth Warren, a Democrat from Massachusetts, says newly released recordings of conversations between Federal Reserve officials show that the same kind of cozy relationships that led to the 2008 financial crisis still dominate Wall Street.

In an interview with Morning Edition, Warren says the recordings provide definite proof of that relationship.

"You really do, for a moment, get to be the fly on the wall that watches all of it, and there it is to be exposed to everyone: the cozy relationship, the fact that the Fed is more concerned about its relationship with a too-big-to-fail bank than it is with protecting the American public," Warren says.

Warren talked to Morning Edition days after ProPublica and This American Life ran stories about Carmen Segarra, a former bank examiner for the Federal Reserve in New York, who in 2012 surreptitiously recorded conversations by Fed officials considering regulatory decisions on Goldman Sachs.

The recordings don't reveal anything outright illegal. Instead, they reveal Fed officials discussing "legal but shady" transactions and then wringing their hands over how to delicately bring them up with the bank.

Warren, who before coming into office led an effort to create the U.S. Consumer Financial Protection Bureau, says that trepidation is another thing wrong with regulators today.

"A regulator doesn't say to a big financial institution: 'Hey! Step right up here. Get your toes on the line, and so long as you can make a legal argument that you have not crossed the line then, hey, we're — we're all cool here,' " she says. "That's not the way regulation of large financial institutions is supposed to work — they're supposed to be using judgment. And remember, part of this judgment is about whether or not there has been compliance with the law. The fact that Goldman could mount a legal defense here is not really the point of these tapes. The point of these tapes is that the regulators are backing off long before anyone's in court making a legal argument about whether or not they came right up to the line or they crossed over the line."

The bottom line, Warren says, is that the United States needs regulators "who understand that they work for the American people, not for the big banks."

Much more of Steve Inskeep's conversation with Warren is on today's Morning Edition. Click here for your local NPR member station.