WASHINGTON – CEOs of the largest banks went to Congress on Wednesday to discuss how helpful Wall Street was to borrowers and businesses during the epidemic. Senators held much of the hearing to talk about political hot button issues like climate change, guns and voting rights, reflecting the deep partisan divide between Democrats and Republicans.
The hearing in front of the Senate Banking Committee marks the beginning of a two-day hearing that has become an annual tradition on Capitol Hill since Democrats took control of Congress in 2019. The House will hold its hearing on Thursday.
What are Hot Button Issues?
With the American economy recovering from the epidemic, banks are coming to Congress. The industry, which was blamed for the Great Recession more than a decade ago, has spent much of 2020 and now 2021 trying to appear helpful and willing to work with struggling borrowers and businesses. Banks across the country waived fees, pledging millions to shore up the troubled finances of Americans in the epidemic.
“We are very different from the bank that entered the financial crisis more than a decade ago,” said Jane Fraser, Citigroup’s new CEO.
Most of those measures are now going away, and senators have prompted CEOs to promise they will not push anyone into foreclosure or bankruptcy as a result of the pandemic after the relief measures expire. Democratic senators also emphasized what banks are doing to increase diversity within their ranks, and remove the systemic financial inequality between black and Latino families and white families.
“You’ve heard from everyone on this panel that we’re trying to do more,” Jamie Dimon, CEO of JPMorgan Chase, said in response to a question about how well the banks were doing in lending to minorities and the poor.
Inequality remains a major issue.
Brown criticized CEOs for banks lending to epidemic-hit small businesses when buying back their own stock. He said Bank of America has reduced loans to small businesses by 14% and bought back about $25 billion of stock. Moynihan avoided the attack, saying, “The good news is that we can do both.”
Challenged by Brown over the wide gap between bank CEO compensation and average employee salaries, Dimon responded “We are very proud of the opportunities we have given to all of our people.”
Sen. Elizabeth Warren, a longtime critic of big banks, emphasized on the banks as to why they collected overdraft fees during the epidemic.
In a tense exchange, he called Dimon the “king of overdraft fees”, noting that JPMorgan collects more than seven times the fee per account compared to its competitors.
“I think your numbers are completely wrong,” Dimon told her.
Warren said, “This past year has shown that corporate profits are more important to your bank than helping struggling people”.
What are Republicans talking about?
Senate Republicans pushed back on issues such as increased regulation and promoted programs created last year when they controlled paycheck protection programs such as the Senate.
Sen. Pat Tommy of Pennsylvania, a senior Republican on the panel, said the banking industry showed remarkable resilience during the epidemic recession. But he expressed a view with cultural currency among conservatives, saying he was concerned about the growing pressure on banks to “emerge awareness” and promote social activism through their practices.
“Thanks to capitalism, life is better than ever for the vast majority of Americans.” said Tommy.
Sen. Tim Scott, R.C. Challenges CEOs over public opposition to Georgia’s new Republican election law. Critics say a broader rewrite of Georgia’s election rules would restrict access to voting, particularly to voters of color, and it has become a flashpoint in the polarized political battles that divide the country.
“What part of that law was discriminatory or restricted access?” Scott asked the CEO. “This did not stop anyone from voting.”
Who is testifying?
The panel of CEOs testifying this year is small and has changed little. Familiar faces include Dimon as well as Goldman Sachs’ David Solomon, Morgan Stanley’s James Gorman and Bank of America’s Brian Moynihan. A new face on the panel is Fraser, the first female CEO of a large bank.
Two CEOs of two banks, Bank of New York-Mellon and State Street, visited. Both of those banks do not have consumer financial businesses, and their previous appearance before Congress was seen as a waste of time.