When he was about to take his turn questioning a panel of bankers from the six largest Wall Street banks and investment banks, Bill Huizenga, a senior Republican member of the House Financial Services Committee from Michigan, took a moment to greet panelist Jane Fraser, Citigroup CEO. Acknowledging her promotion to the top Citi job in March 2021, Huizenga said, “Congratulations — and welcome to the frying pan.”
He wasn’t exaggerating.
In back-to-back hearings in late May, members of the Senate Banking Committee and then the House Financial Services Committee sizzled the nation’s leading financial services leaders. In addition to Citi, the CEOs Bank of America, Goldman Sachs, JPMorgan Chase, Morgan Stanley, and Wells Fargo all occupied the hotseat — virtually.
The financiers took fire from both political sides. Democrats typically asked questions and made observations indicating their concerns about employee pay levels, racial and gender balance in the executive ranks, fair products, assistance to people impacted by job loss or other economic fallout from Covid-19, and the risk of foreclosures.
Republicans tended to criticize large financial institutions that they said appeared to favor “woke capitalism” and they attacked indications that the leaders and their institutions favor “stakeholder capitalism,” the desire to serve interests beyond those of company owners. The Republicans also attacked lending policies that excluded certain “unpopular” industries, notably coal mining, and gun manufacturing.
Recognition’s Sell-By Date:
Both hearings gave the bankers an opportunity to make short statements about efforts their institutions had made to help the public through the Covid period and to discuss steps being taken to address social concerns that arose over the last year or so. These statements were essentially dismissed as politicians on both sides zeroed in on their own agendas.
Sherrod Brown (D.-Ohio), Chairman of Senate Banking, for example, painted a picture in his opening statement of Wall Street banks against America, and asked pointed questions about what the six leaders present would do if employees considered unionization. (None favored it and at most gave neutral answers.) Maxine Waters (D.-Calif.), in her opening, discussed slowdowns in processing minority business loan applications, “branch deserts,” overdraft fees “raked in” during the pandemic and more
Waters also stated, in reference to both hearings, that “today’s testimony concludes two historic days, which are a true testament of the accountability that comes from Democratic control of the House and Senate.”
Feisty Exchange Over Overdraft Fees During Pandemic
One of the liveliest exchanges during the Senate Banking hearing came between Sen. Elizabeth Warren (D.-Mass.) and Jamie Dimon, Chairman and CEO at JPMorgan Chase. Warren’s comments at times approached vitriolic.
The senator pointed out that federal regulators had said that if banks had a negative balance at the Federal Reserve during the Covid crisis the Fed would waive overdraft charges. She said regulators encouraged banks to give consumers the same treatment.
She then said to the CEOs of Chase, Citi, Bank of America and Wells Fargo: “Could you please raise your hand if you gave the same automatic protection to your customers and automatically waived all of their overdraft fees?”
A few seconds later, Warren cited figures from Pew Research indicating that working people, including minorities, paid $4 billion in overdraft fees during the pandemic.
Warren singled out Dimon because “you are the star of the overdraft show. Your bank collects more than seven times as much money in overdraft fees per account than your competitors.” She often talked over Dimon as he attempted to answer questions.
“I think your numbers are totally inaccurate, but we’ll have to sit down privately to go through that. I also want to point out that we did not overdraft at the Fed account.”
—Jamie Dimon, JPMorgan Chase
Warren brushed that aside and asked if Dimon knew how much the bank collected in overdrafts in 2020. Dimon said he didn’t have the number at hand, but “upon request we were waiving fees if they were under stress due to Covid.”
Boring in, Warren claimed that the bank charged nearly $1.5 billion in overdrafts in 2020 and that if the bank had automatically waived all overdrafts it still would have made billions in profits.
“You and your colleagues came in today to talk about how you stepped up and took care of customers during the pandemic,” Warren said. “And it’s a bunch of baloney. If fact, it’s about $4 billion worth of baloney.”
She thrust: “But you could fix that right now. Mr. Dimon, will you commit right now to refund the $1.5 billion you took from customers during the pandemic?”
“No,” Dimon riposted.
Warren turned (virtually) to the three other consumer banks and asked if they would do so. Without waiting, she continued, “I didn’t think so. So no matter how you try to spin it, this past year has shown that corporate profits are more important to your bank than offering just a little help to struggling families, even when we are in the middle of a worldwide crisis.”
During the House committee hearing, Rep. Carolyn Maloney (D.-N.Y.), who was a prime author of past overdraft legislation, specifically followed up on Warren’s line of questioning in the earlier Senate hearing.
She turned to Charles Scharf, CEO and President, Wells Fargo, and demanded to know what his institution was doing. Scharf reeled off several options, including two new accounts and “Overdraft Rewind” service that allows a look-back to prevent overdrafts when a direct deposit is received.
“We’re looking to become more consumer friendly, but it’s certainly something that we will continue to look at,” said Scharf. He noted that the two accounts had been offered for over six months.
Maloney appeared not to be aware of these efforts and asked some questions about the new offerings. She noted that she couldn’t see why a consumer would not choose one of those options, rather than paying $35 for an overdraft caused by buying a cup of coffee or a sandwich.
Capitalism, ‘Woke Capitalism,’ and the Old-Line Energy Business
“The financial system proved to be remarkably resilient during Covid, but I am concerned about increasing pressure on banks to embrace ‘wokeism’ and appease the far Left’s attacks on capitalism,” said Pennsylvania Senator Pat Toomey, the ranking Republican on the committee.. “I worry that continuing down this path may lead to distorted credit allocation, activists seeking to make political change through the financial system instead of the democratic process, and ultimately, diminished prosperity for Americans.”
“Decisions are being made to pacify political activists who want to do what the law cannot do, which is shut down legal American businesses.”
— Blaine Luetkemeyer, House of Representatives
Much of the Republican questioning and criticism of the industry during the hearings concerned the propriety of cutting off fossil fuel companies and other firms in industries unpopular with liberals.
During questioning, Toomey asked Citicorp’s Fraser about her bank’s policies.
“My understanding is that Citigroup is committed to ending all financing for thermal coal companies by 2030. And frankly, there might still be a need for some thermal coal after that date,” he said. “But my real question for you is, have you established or do you plan to establish a similar policy prohibiting the financing of either oil or natural gas, aside from if the economics would dictate that you shouldn’t provide the financing?”
Fraser took the long view in her answer.
“Our goal is to support our clients responsibly and help them transition to cleaner energy, to create jobs in the future,” she said. “This is going to require investing in new technologies and helping them develop. So what we’re looking at doing is working with our clients in the transition and to support them in doing so, so that we can balance the evolution.”
In the House committee hearing, rhetoric sometimes grew heated. Republican Rep. Blaine Luetkemeyer of Missouri reflected on the anti-fossil-fuel stances major financial institutions have pledged to: “What’s worse is that these decisions clearly are not made as a matter of conscience, for investments in China prove that. These decisions are being made to pacify political activists who want to do what the law cannot do, which is shut down legal American businesses.”
Chase’s Dimon, in the Senate hearing, seemed to be promoting a middle approach to the climate debate.
“We need a really mature conversation on climate. We need carbon tax. We need industry policy. It’s not just about banks stopping financing. We’re going to need oil and gas for a long time. It can be made a lot cleaner. So the conversation should be about how we’re going to accomplish this in the right way,” Dimon said.
He added that if the challenge were met the wrong way, “we won’t reduce CO2 … because it’ll simply move elsewhere and we can damage the economy. So I just beg you, let’s have a rational conversation, mature and thoughtful, how to go about it?”