WASHINGTON — The chief executives of the six largest US banks drew fire from both Republicans and Democrats at a Senate hearing that highlighted challenges facing corporate leaders seeking to navigate partisan strife over hot-button issues including voting rules, climate change and racial justice.
In sometimes tense exchanges on 26 May before the Senate Banking Committee, CEOs including JPMorgan’s Jamie Dimon, Citigroup’s Jane Fraser and Wells Fargo’s Charles Scharf were criticised by Democrats for perceived faults, including excessive executive compensation and overdraft fees.
Banking committee Chairman Sherrod Brown (D., Ohio) faulted the firms for a drop in overall lending amid the pandemic while criticizing Dimon for a large pay gap between the JPMorgan chief and his workers.
Dimon pushed back against criticism over his $31.7m compensation package in 2020. “My compensation is set by the board; they look at multiple factors,” he said. He defended worker pay, saying his firm takes “very good care of our people” in terms of training, healthcare and retirement benefits.
Bank of America’s Brian Moynihan said clients borrowed less from banks outside the federal government’s Paycheck Protection Program, which helped many small businesses pay employees and cover rent and other expenses.
Pennsylvania Senator Pat Toomey, the top Republican on the panel, pressed the firms on their stated support for “stakeholder capitalism.” Dimon led a group of executives who in 2019 said corporate decisions should take all stakeholders — employees, customers and society at large — into account.
“I would just ask you to reconsider this because stakeholder capitalism is meant to diminish the importance of a company’s obligation to shareholders, relative to other stakeholders, and I think that’s a contradiction of the fundamental aspect of capitalism,” Toomey said.
The bankers are due to testify virtually again on 27 May before the House Financial Services Committee. The hearings mark the first time in about two years that the chief executives of major banks have appeared together before US lawmakers.
In prepared remarks, the bankers touted their efforts to help customers and the economy weather the pandemic-induced recession, including deferred loan payments and small-business lending.
“Banks were a part of the solution to beat back the economic impacts of a global pandemic, and now we must continue to work together to ensure a fair and equitable recovery,” said Wells Fargo’s Scharf.
Senator Elizabeth Warren (D., Mass.) criticised JPMorgan for collecting nearly $1.5 billion in overdraft fees in 2020. “You and your colleagues come in today to talk about how you stepped up and took care of customers during a pandemic, and it’s a bunch of baloney,” Warren said.
JPMorgan waived fees upon request for customers who were under stress because of Covid-19, Dimon said, as he and Warren spoke over one another. The bank didn’t waive the charges automatically.
Some questions generated an awkward silence. Senator Tim Scott (R., S.C.) pressed the executives to explain why some of their firms or executives signed a recent statement that expressed opposition to Republican-led voting bills in Georgia and other states.
Asked what specific portions of the Georgia law they objected to, none of the executives responded.
“It came out of our teammates…expressing grave concern,” Moynihan said.
More than 300 companies and their executives — including from Goldman Sachs Group, Bank of America, Wells Fargo and Citigroup — signed a statement last month to “defend the right to vote and oppose any discriminatory legislation.”
The statement didn’t address specific voting legislation, nor did it call on companies to take business action or halt political donations to lawmakers supporting such bills.
Brown asked the CEOs whether they would remain neutral if their employees wanted to form a union. Dimon said no, while others said they would listen to their workers’ concerns.
About 11% of American workers are represented by unions, according to the Bureau of Labor Statistics. In the finance industry, the proportion is 1.1%. Unionisation efforts have garnered attention in recent months, including the failed attempt of Amazon.com warehouse workers in Alabama last month.
The hearings come after blockbuster earnings on Wall Street in the first quarter. JPMorgan notched its highest quarterly profit on record, driven by record revenue from trading stocks. Wells Fargo enjoyed its best-ever quarterly profit in corporate and investment banking.
“Profits have gone up, stock prices have soared, your own compensation is stratospheric—but workers get a smaller and smaller share of the wealth they create…and they’re working harder than ever,” Brown said.
After the 2008 financial crisis, big-bank CEOs were lightning rods for the anger and misery fueled by millions of foreclosures, rising unemployment and a deepening recession. Today, populist ire against the firms has waned, and the banking industry says it is helping to lead the economic recovery.
Banks say they have played a key role in keeping businesses and consumers afloat during the pandemic. They helped disburse almost $796bn in loans through the federal Paycheck Protection Program as of late May.
Still, some of the largest banks restricted loans to current customers or those who had previously taken out loans. Smaller banks picked up much of the slack. They issued 28% of PPP loans, despite holding about 12% of the industry’s assets in 2020, according to the Federal Deposit Insurance Corp.
Overall, loans increased 3.3% in 2020, the lowest annual growth rate since 2013, according to Jason Goldberg, a banking analyst at Barclays. Excluding an estimated $407bn PPP loans last year, 2020 saw a 0.6% decline in lending, the first decrease since 2009, a year that saw the end of an 18-month recession.
Last spring, when some lenders braced for a severe recession, banks tightened lending standards noticeably. Conditions remain tighter than before the pandemic on products including credit cards, auto loans and mortgages.
Demand has ebbed as well. Government lending and record-low interest rates made it cheap for companies to access cash, reducing their reliance on loans from banks.
This article was published by Dow Jones Newswires