By Andrew Ackerman and Orla McCaffrey
WASHINGTON -- The chief executives of the six largest U.S. 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
rights, climate change and racial justice.
In sometimes tense exchanges Wednesday before the Senate Banking
Committee, CEOs including JPMorgan Chase & Co.'s Jamie Dimon,
Citigroup Inc.'s Jane Fraser and Wells Fargo & Co.'s Charles
Scharf were criticized 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 Mr. Dimon for a large pay gap between the JPMorgan
chief and his workers.
Mr. Dimon pushed back against criticism over his $31.7 million
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 Corp.'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 Sen. Pat Toomey, the top Republican on the panel,
pressed the firms on their stated support for "stakeholder
capitalism." Mr. 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," Mr. Toomey said.
The bankers are due to testify virtually again on Thursday
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 U.S. 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 Mr. Scharf.
Sen. Elizabeth Warren (D., Mass.) criticized 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," Ms. Warren said.
JPMorgan waived fees upon request for customers who were under
stress because of Covid-19, Mr. Dimon said, as he and Ms. Warren
spoke over one another. The bank didn't waive the charges
automatically.
Some questions generated an awkward silence. Sen. 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," Mr.
Moynihan said.
More than 300 companies and their executives -- including from
Goldman Sachs Group Inc., 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.
Mr. Brown asked the CEOs whether they would remain neutral if
their employees wanted to form a union. Mr. 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%. Unionization 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," Mr. 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
$796 billion 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 $407 billion 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.
Write to Andrew Ackerman at andrew.ackerman@wsj.com and Orla
McCaffrey at orla.mccaffrey@wsj.com
(END) Dow Jones Newswires
May 26, 2021 17:05 ET (21:05 GMT)
Copyright (c) 2021 Dow Jones & Company, Inc.
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