The heads of Wall Street firms were on Capitol Hill for hearings this week where the big banks are likely to be scolded by members of Congress on both sides of the aisle over issues such as inequality and corporate culture. Sen. Sherrod Brown, D-Ohio, a self-described “progressive,” said that when he became chair of the Senate Banking Committee this year, he planned to subpoena the CEOs to testify as soon as he could.
Why are banks testifying?Since Democrats took control of the House in 2019, the heads of the major banks have been summoned annually to testify in front of the House Financial Services Committee, chaired by Rep. Maxine Waters, D-Calif. The Senate, which held a hearing Wednesday, is following her lead. The House will hold its hearing Thursday.
What are the hot button issues?The U.S. economy is recovering from the pandemic. The banking industry, which was blamed for the Great Recession more than a decade ago, spent most of 2020 and this year trying to appear helpful and willing to work with struggling borrowers and businesses. Banks waived fees and 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, CEO of Citigroup. Most of those measures are going away. Congress will probably have questions regarding 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,” JPMorgan Chase CEO Jamie Dimon said 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 reduction in lending to small businesses hit by the pandemic while the banks bought back their own stock. Bank of America, he said, reduced small-business lending by 14% while buying back about $25 billion of stock. CEO Brian 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 employee’s pay, Dimon responded, “We’re very proud of the opportunities we give to all of our people.”
What do Republicans say?
Senate Republicans pushed back on increased regulation and promoted programs they created last year when they controlled the Senate such as 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. 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.
Who is testifying?
The panel of CEOs testifying this year include Dimon, as well as Goldman Sachs’ David Solomon, Morgan Stanley’s James Gorman and Bank of America’s Moynihan. Fraser is the first female CEO of a big bank.
Bank of New York-Mellon and State Street don’t have consumer financial businesses, so their CEOs weren’t included.