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Bank CEOs push back on capital requirements in Capitol Hill hearings

Bank CEOs push back on capital requirements in Capitol Hill hearings


Chief executive officers of the country’s seven largest consumer-facing banks tackled queries on inflation, racial equality in home lending, regulatory burdens and their views on an economic slowdown as two days of public hearings on Capitol Hill got under way Wednesday.

The seven included JPMorgan Chase & Co.’s
JPM,
-2.88%
Jamie Dimon, Citigroup Inc.’s 
C,
-1.95%
Jane Fraser, Wells Fargo & Co.’s
WFC,
-2.63%
Charlie Scharf and Bank of America Corp.’s 
BAC,
-2.99%
Brian Moynihan.

U.S. Bancorp 
USB,
-2.36%
CEO Andy Cecere, PNC Financial Services Group Inc. 
PNC,
-3.28%
CEO William Demchak and Truist Financial Corp. 
TFC,
-2.73%
CEO William Rogers Jr. also spoke.

As the bank CEOs tackled a wide variety of questions and touted their positive roles as capital providers in the economy, the U.S. Federal Reserve was poised to raise interest rates by an expected 75 basis points to help tame inflation.

Also read: Consumer Bureau to push banks to refund more victims of scams on Zelle and other payment services

Maxine Waters, a California Democrat who chairs the House Committee on Financial Services and presided over the hearing, said banks have become repeat offenders when it comes to regulatory infractions.

“These fines pale in comparison to the billions of profits and amount to nothing more … than another cost of doing business” for banks, she said.

Patrick McHenry, a North Carolina Republican, said the Democratic leadership of the committee was posturing with midterm elections just a few weeks away.

“I disagree with this hearing because it’s theater, not oversight,” McHenry said.

He accused Democrats of stifling product innovation through over-regulation of banks that he said limits options for consumers “at a time when they can least afford it.”

Waters directed her first questions at Wells Fargo, asking if Scharf would confirm allegations that the bank conducted bogus job interviews with people of color to boost its diversity recruitment numbers.

Scharf said the bank is in the middle of an investigation “to make sure we understand every nuance” but declined to answer the question directly.

“No one should go through an interview without the benefit of knowing they could have a reasonable shot of getting that job,” Scharf said. He said the bank’s hiring of diverse candidates is up significantly.

He reiterated past comments that it will take “multiple years” to fix all the ills at the bank after he took over as CEO three years ago.

The bank executives said increasing capital requirements would leave less money on their balance sheets to lend.

JPMorgan Chase’s Dimon said “things went too far” after the implementation of the Dodd-Frank bank regulations.

“The requirements raise the cost of lending and damage markets,” Dimon said. The capital requirements, he said, will restrict lending “at precisely the wrong time” as the economy weakens.

Bank of America’s Moynihan said, “There’s no question that increasing our capital requirements by 1% makes us not able to lend $160 billion.”

Citi CEO Fraser said inflation remains a major challenge and that it will impact credit scores and reduce consumer savings.

“We’ve been fortunate to have the consumer in good health coming into it, but we suspect we’ll be in for tougher times ahead,” Fraser said.

On the subject of recession prospects, Dimon mostly reiterated his thoughts from May, when he predicted an economic hurricane but said he wasn’t sure if it would be a blockbuster storm or a more minor downturn.

The Senate Committee on Banking, Housing and Urban Affairs under Chair Sherrod Brown, an Ohio Democrat, takes up the topic of banking on Thursday at 9:30 a.m. Eastern time in a hearing streaming live here. The hearing of the full committee is billed as the Annual Oversight of the Nation’s Largest Banks.

Read: Fed says banks could withstand 10% unemployment, 55% stock price drop in annual stress test

Also read: JPMorgan exec sees roughly 50% chance of ‘mild’ recession and eyes chance to hire laid-off bankers



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