warning him to not ease bank regulations in the wake of September's liquidity scare.
Warren's Friday letter asked Mnuchin what he thinks caused the spike in short-term lending rates, and why the Federal Reserve may continue to increase bank reserves when the firms are bringing in record profits. The Democratic primary frontrunner also expressed concern that the Federal Stability Oversight Council may back efforts to loosen liquidity laws for major banks.
"These rules were designed to ensure that banks have enough cash on hand to meet their obligations in the event of another market crash," Warren wrote. "Banks are reporting profits at record levels, and it would be painfully ironic if unexplained chaos in a small corner of the banking market became an excuse to further loosen rules that protect the economy from these kinds of risks.
Regulations introduced in the wake of the 2008 financial crisis require banks to hold a certain amount of cash as a cushion for liquidity pressures. Large banks have lodged their complaints about the regulations, as they leave the banks with less free-flowing capital.The Fed has been actively calming money markets after the short-term funding rate spiked to 10% from 2% overnight in mid-September.