Senator Elizabeth Warren (D‑MA) and Sen. David Vitter (R‑LA) came to the Cato Institute on Wednesday to call for stricter limits on the Federal Reserve’s ability to prop up large financial institutions with loans guaranteed by taxpayer dollars—which Warren characterized as “shoveling money out the back door.”

Warren noted that, during the financial crisis, most of the focus fell on TARP. “But what a lot fewer people were talking about was how the Fed was shoveling money out the back door in a very quiet way, not to support the financial system overall, but to support very targeted financial institutions. $9 trillion—your money, tax dollars, went out the door, to just three financial institutions.” 

Vitter joked that he and Warren are “the Odd Couple” of Congress, but added, “I think the fact that we’re here working on this together illustrates how broad and legitimate the concern across America is with ‘too big to fail,’ and the fact that it is, unfortunately, alive and well.”

“Left right and middle, I think it’s a very broad concern,” he said. The senators have proposed a bill that would forbid the Fed from lending money to insolvent institutions, and would place a high interest rate on the loans.

Warren mocked the Fed’s current standard of “insolvency” for financial institutions, which they define as not yet having filed for bankruptcy. “The way I read that, they said ‘What we’re going to do is set up a little cart, right in front of the bankruptcy courthouse, and when institutions come to file their papers…we’ll just intercept and say, ‘Would you like a trillion dollars from us instead?’”

Warren argued that giving large institutions a free government guarantee unfairly pushes smaller institutions out of the market.

“The question is, will the insiders control the game—those who’ve got the lobbyists, those who’ve got a lot of money on the table, but a very small, insular group, that, frankly, wants to enhance its profits at the expense of the public,” she said. “You’re driving one set of competitors out of business, and advantaging another set of competitors.” 

“’Too big to fail’ is not over,” she said, “And it is our responsibility in the United States Senate and the United States House of Representatives to do everything we can to turn the rules in the direction of taking away the advantages that the ‘too big to fail’ banks enjoy in this marketplace and in this political system.”