Elizabeth Warren Hammers The Endless Failures Of Wall Street Regulators

WASHINGTON -- Sen. Elizabeth Warren (D-Mass.) assailed the nation's top bank regulators on Wednesday for coddling Wall Street offenders and ducking the responsibilities Congress assigned them in the wake of the 2008 financial meltdown.

At a conference hosted by the Levy Economics Institute, Warren called not only for structural change to the banking system but for a revamping of the weak enforcement culture at the Federal Reserve, the Securities and Exchange Commission and the Department of Justice, according to a transcript of her prepared remarks. Although Warren did not cite any officials by name, the regulatory failures she highlighted reflect poorly on a host of key policymakers, including U.S. Attorney Loretta Lynch, nominated to be the next attorney general; Fed General Counsel Scott Alvarez ; and SEC Chair Mary Jo White.

"The Department of Justice doesnt take big financial institutions to trial ever -- even when financial institutions engage in blatantly criminal activity," Warren said. She accused DOJ of turning deferred prosecution agreements, designed for low-level offenders, into "get-out-of-jail-free cards for the biggest corporations in the world."

"The SEC is even worse," Warren said, noting that the agency has repeatedly granted significant regulatory perks to companies that it has charged with civil securities fraud. The senator also criticized the SEC for slow-walking CEO pay regulations required by the 2010 Dodd-Frank financial reform law and for protecting the secrecy of corporate political contributions.

"The SEC needs to get its act together," Warren said. "In all sorts of ways and on all sorts of issues."

The one bright spot in the bank regulatory world? The Consumer Financial Protection Bureau, which Warren praised for returning over $5 billion to wronged consumers since it began operations in 2011. The CFPB was Warren's brainchild, and she helped set up the agency after it was created by Dodd-Frank. Two years later, at her first Banking Committee hearing as a senator, she laid into financial regulators, asking when they had last brought a Wall Street bank to trial (see video above).

Following Wednesday's speech, Warren told HuffPost that she is trying to recast the debate in Washington over the proper role of regulation. Instead of focusing on whether the economy needs more or less government, she said, the battle should be over what makes markets work best.

"The opponents of financial reform have cast the debate as rules vs. markets, that somehow anyone who believes in rules is anti-market," Warren told HuffPost. "Rules are not the enemy of markets. They protect markets from blowing up. The real fight isn't between markets and rules. And it never has been. It's between competitive capitalism and crony capitalism."

Markets don't work, she said, if regulators won't enforce the rules. While the Dodd-Frank law has made the banking system safer, it still has structural problems.

"Let's get real," the senator said in her speech. "Dodd-Frank did not end too-big-to-fail."

Warren reiterated her call to break up the biggest banks. She also said that tax perks that encourage banks to take on excessive debt should be eliminated and that Congress should impose a new financial transactions tax to curb risky high-frequency trading. All of these policies would curb the ability of big banks to take on big risks.

"The fight over financial reform can't be over to back up a little or to back up a lot," Warren told HuffPost. "It has to be about finishing the job."

Warren highlighted a host of major financial scandals that have surfaced since 2008, including the revelation that the multinational bank HSBC laundered drug money. The HSBC case has become particularly politically charged since President Barack Obama nominated Lynch, the prosecutor in charge, to succeed Eric Holder as attorney general. Lynch settled the case without indicting the bank or any of its employees. A few years later, the bank was back in trouble for tax evasion issues.

Senate Republicans have used the embarrassment as an excuse to hold up a vote on Lynch's nomination. If confirmed, she would be the first African-American woman to serve as U.S. attorney general.

Warren also called for a major staffing change at the Federal Reserve, one that would dilute the institutional power of key players at the central bank. While the Fed's Board of Governors is technically in charge of policymaking, staffers including Alvarez and Michelle Smith , chief of staff to Fed Chair Janet Yellen, wield enormous influence. Many major decisions are handled by Fed staffers, rather than the board. And even though board members are appointed by the president and confirmed by the Senate, only the chair has her own staff.

Warren criticized the central bank for allowing staff to sign off on a $9.3 billion mortgage settlement, instead of having the Board of Governors vote on it. All board members should have their own staff, capable of independently researching key policy decisions, she said.

After the speech, the senator insisted that she was not trying to single out any particular staffers.

"The point is structural. The Fed needs to make enforcement a first priority, period," Warren said.