Warren named a deadline. June 3.
Sen. Elizabeth Warren sent letters Wednesday to the Fed, OCC, and FDIC demanding they revoke the Section 23A exemption granted to Morgan Stanley in March, which lets the bank fold its Frankfurt-based investment bank into its U.S. holding company. The practical effect: Morgan Stanley funds its German unit’s fixed-income trading and investment banking operations with cheaper, federally insured deposits. Warren’s framing: a federal subsidy for the bank’s European profitability, cleared without a public-interest justification.
The three agencies “provided no analysis or evidence” that the exemption serves the public interest, Warren wrote. Profitability, efficiency, and cost savings aren’t statutorily permitted justifications under Section 23A. Congress added that restriction in 1933 specifically to prevent banks from using federal deposit insurance to subsidize nonbank affiliate activities.
She called out Vice Chair Michelle Bowman directly. Bowman’s voting statement claimed no U.S. bank had suffered material financial losses from overseas activities. Warren called that “directly and obviously contradicted by recent history” — pointing to Citi’s 2006 Section 23A waiver, which amplified financial crisis losses, and JPMorgan’s 2012 London Whale scandal, where $6 billion in bad credit derivatives trades in London drew more than $1 billion in fines from the Fed, OCC, and CFTC.
Warren’s demand for every Section 23A waiver application since the Trump administration’s second term began is the tell: she’s not just targeting Morgan Stanley. She’s building a case that regulators have been quietly widening the federal safety net across multiple institutions. If the June 3 deadline passes without a satisfactory answer, she’s threatened to make divestiture the next chapter.
“Future regulators would be responsible for correcting this error and requiring divestiture,” she wrote.
Marcus Webb