Executives representing some of the world’s most important banks will testify before the Senate Banking Committee today. Here’s what you need to know.
This hearing — the initial planning of which we scooped back in September — has become an almost annual ritual at this point. Senate Banking Committee Chair Sherrod Brown (D-Ohio) told us Tuesday that “it’s about keeping them accountable.”
The CEOs testifying today include JPMorgan’s Jamie Dimon, Citigroup’s Jane Fraser, Bank of America’s Brian Moynihan, Wells Fargo’s Charlie Scharf, State Street’s Ronald O’Hanley, BNY Mellon’s Robin Vince, Goldman Sachs’ David Solomon and Morgan Stanley’s James Gorman. You can read each of their written testimonies here.
“They control such a huge part of the economy, and this is an economy [where] the rich are getting richer and the middle class struggles,” Brown said. As part of the hearing, the committee released this fact sheet Monday night listing each CEO’s compensation package and a handful of recent headlines either featuring scandals or announcements of shareholder buybacks.
But we expect a predominant focus of this session from both Democrats and Republicans will be ongoing reforms of banks’ capital requirements, a regulatory effort led by Michael Barr, vice chair for supervision at the Federal Reserve.
The banking sector has been a top target in Washington in recent years, from credit card reform to “junk fee” crackdowns to anti-ESG political blowback. But nothing has captured the industry’s ire like capital reform, which includes a series of changes referred to as “Basel III” as well as tweaks to banks’ calculation of long-term debt risks.
The Biden administration’s banking regulators say more capital is needed to shore up the financial system. Banks, meanwhile, have accused the government of failing to show adequate analysis to back up its proposals.
“This isn’t just a matter of impacting big banks,” said Sen. Mike Rounds (R-S.D.). “Basel III endgame will impact consumers, and it’s going to decrease the amount of credit available to families.”
Centrist Democrats also have their share of concerns about capital reform. Sen. Mark Warner (D-Va.) said he worried about the “timing” of capital reform, which we’ve heard before. But Warner said he’d also try to hear the bank execs out while maintaining a bit of skepticism.
“The banking community always says, anytime there’s new regulation, the sky is falling,” Warner said.
Bank executives are also almost always harranged about climate change when they appear in Washington, whether that’s doing too little to address its risks or doing too much to appease activists.
Case in point: Sen. J.D. Vance (R-Ohio) said he’d want to ask “why these banks have allowed the financial system to become so politicized,” while Sen. Chris Van Hollen (D-Md.) said he’d expect an update on “where they are on meeting their climate goals, including de-risking their energy portfolios.”
