WASHINGTON — The CEOs of the biggest banks went before Congress on Wednesday with plans to discuss how helpful Wall Street was for borrowers and businesses during the pandemic. Senators, reflecting the deep partisan divide between Democrats and Republicans, spent much of the hearing wanting to talk about political hot button issues like climate change, guns and voting rights.
The hearing in front of the Senate Banking Committee marks the start of two days of hearings which have 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 THE HOT BUTTON ISSUES?
The banks are appearing in front of Congress as the U.S. economy is recovering from the pandemic. The industry, which was blamed for the Great Recession more than a decade ago, has spent most of 2020 and now 2021 trying to appear helpful and willing to work with struggling borrowers and businesses. Banks across the country waived fees, put millions of mortgages into forbearance to shore up Americans’ distressed finances in the pandemic.
“We are a very different bank than the one that entered the financial crisis more than a decade ago,” said Jane Fraser, the new CEO of Citigroup.
Most of those measures are now going away, and senators pushed the CEOs to promise they would not push anyone into foreclosure or bankruptcy as a result of the pandemic after the relief measures expired. Democratic senators also pushed hard what banks are doing to increase diversity among their ranks, and address systematic financial inequality between Black and Latino households and white households.
“You’ve heard from everyone on this panel that we’re trying to do more,” said JPMorgan Chase CEO Jamie Dimon, in response to questions over how well banks were doing in lending to minorities and the poor.
INEQUALITY REMAINS A TOP ISSUE.
Brown criticized the CEOs for the banks reducing lending to small businesses hit by the pandemic while buying back their own stock. Bank of America, he said, reduced small business lending by 14% while buying back some $25 billion of stock. Moynihan parried the attack, saying, “The good news is that we can do both.”
Challenged by Brown on the wide gulf between bank CEOs’ compensation and the average employees’ pay, Dimon responded “We’re very proud of the opportunities we give to all of our people.”
Sen. Elizabeth Warren, a long-time critic of the big banks, pushed hard on the banks on why they collected overdraft fees during the pandemic.
In a tense exchange, she called Dimon “the king of the overdraft fee,” maintaining that JPMorgan collects more than seven times in the fees per account than its competitors.
“I think your numbers are totally inaccurate,” Dimon told her.
“This past year has shown that corporate profits are more important to your bank” than helping struggling people, Warren said.
WHAT ARE REPUBLICANS TALKING ABOUT?
Senate Republicans pushed back on issues like increased regulation and promote programs they created last year when they controlled the Senate like the Paycheck Protection Program.
Sen. Pat Toomey of Pennsylvania, the senior Republican on the panel, said the banking industry showed remarkable resilience during the pandemic recession. But he expressed an idea with cultural currency among conservatives, saying he was concerned about growing pressure on banks “to embrace wokeism” and promote social activism through their practices.
“Thanks to capitalism, life is better for the vast majority of Americans than it has ever been.” Toomey said.
Sen. Tim Scott, R-S.C., challenged the CEOs on their public opposition to Georgia’s new Republican election law. Critics say the sweeping rewrite of Georgia’s election rules will restrict voting access, especially for voters of color, and it has become a flashpoint in the polarized political battle cleaving the country.
“What part of that law was discriminatory or restricted access?” Scott asked the CEOs. “It did not prevent anyone from voting.”
WHO IS TESTIFYING?
The panel of CEOs testifying this year is smaller and has changed slightly. 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, who is first female CEO of a big bank.
Gone are the two CEOs of two banks, Bank of New York-Mellon and State Street. Both of those banks don’t have consumer financial businesses, and their previous appearances in front of Congress were seen as a waste of time.