Warren Tears Into Fed on Credit Suisse Oversight Before Archegos

(Bloomberg) -- Senator Elizabeth Warren ripped the Federal Reserve for its oversight of Credit Suisse Group AG in the run-up to Archegos Capital Management’s implosion, arguing the regulator badly blundered when it freed the bank from heightened monitoring.

Warren pointed out at a Tuesday Senate hearing that the Fed knew Credit Suisse had problems estimating its potential trading losses because the agency had flagged the Swiss bank over that issue in its 2019 stress tests. She questioned why Credit Suisse, under the watch of Fed Vice Chairman for Supervision Randal Quarles, was among foreign banks released last year from oversight by the Large Institution Supervision Coordinating Committee, which keeps tabs on lenders that pose the greatest risk to the U.S. financial system.

“So you now agree that you made the wrong decision to weaken supervision?” the Massachusetts Democrat asked Quarles, who was testifying before the Senate Banking Committee.

“We did not weaken supervision,” he responded, saying the shrinking U.S. footprint of Credit Suisse and other foreign banks prompted the Fed’s decision. Quarles further argued that the billions of dollars in losses that Credit Suisse suffered in relation to Archegos -- trader Bill Hwang’s family office -- weren’t a result of faulty Fed oversight.

“The losses you are referring to didn’t occur in the United States,” he said.

Warren scoffed at the idea that missteps involving overseas lenders don’t lead to U.S. consequences. She reminded Quarles his term as vice chairman ends in five months, and said, “our financial system will be safer when you are gone.”

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