The Washington PostDemocracy Dies in Darkness

CEOs of 7 mega banks challenged by House committee

In one of the tensest moments of the hearing, the chief executive of JPMorgan Chase acknowledged his bank benefited from slavery.

The chief executives of the seven largest U.S. banks testify before the House Financial Services Committee on Wednesday. (J. Lawler Duggan/For The Washington Post)

One by one, the leaders of seven of the country’s largest banks told skeptical House Democrats Wednesday that a decade after the global financial crisis, the industry is financially healthier and less risky.

“Citi had become a smaller, safer, stronger and far less complex company,” Citigroup CEO Michael Corbat told the House Financial Services Committee. The 200-year-old bank, the largest credit-card issuer in the world, has shed several lines of business to focus on core areas such as retail banking, he said.

“We recognize that rebuilding trust is harder than rebuilding your balance sheet,” Corbat said.

James P. Gorman, chief executive of Morgan Stanley, echoed Corbat’s claim. “We are safer, sounder and more resilient than we were before the financial crisis.”

When the committee last held such a hearing, the nation was still reeling from the Great Recession, and the banks’ chief executives were defending having taken billions in taxpayer bailouts. Since then, the banking industry has largely repaid taxpayers and rebounded to record profits.

In addition to Corbat and Gorman, the chief executives of Bank of America, Bank of New York Mellon, Goldman Sachs, JPMorgan Chase and State Street testified. (Missing from the group was Timothy Sloan of Wells Fargo, who was pummeled during a separate hearing last month and stepped down as its chief executive two weeks later.)

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Lawmakers grilled the chief executives on a variety of topics, including the diversity of their companies, overdraft fees, the Trump administration’s efforts to roll back industry regulations and their policies toward gun manufacturers.

One of the tensest moments came when Rep. Al Green (D-Tex.) asked the panel of chief executives to raise their hands if they were not “white men.” After none raised a hand, Green asked if any of them believed they would be succeeded by a woman or a person of color.

None of the executives “appears to believe that your successor will be a female or a person of color,” he said after no hands were raised.

“Do you believe your bank benefited from slavery?” Green asked.

Only Jamie Dimon, chief executive of JPMorgan Chase, said his bank had. In 2005, JPMorgan Chase acknowledged that two of its banking predecessors had received thousands of slaves as collateral before the Civil War and that the bank had also owned hundreds.

The Democratic takeover of the House has intensified scrutiny of big banks, and the industry is hoping the hearing will focus attention on the positive changes it has made rather than the punches it will take as the 2020 presidential election nears.

Sen. Elizabeth Warren (D-Mass.), a fierce industry critic, has made executive accountability — including making it easier to jail chief executives — one of the central themes of her presidential campaign.

“Things are changing a lot. You did well with deregulation in the last Congress. Please do not overwhelm us with requests for deregulation you really don’t need,” Rep. Maxine Waters (D-Calif.), the chair of the committee, warned the executives.

Instead, the banks should focus on coming up with a solution to growing student-debt loads. “You, captains of the universe, are smart enough and creative enough and understand this business enough to see what you can do about these citizens, these young people,” she said.

The nearly-seven-hour hearing offered few surprises as the bank executives defended their track records. Risks to the financial system remain, the bankers said, especially when it comes to cybersecurity and ballooning corporate debt levels.

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Several lawmakers praised Bank of America’s announcement Tuesday that it would raise its minimum wage to $20 an hour by 2021.

Some Republicans questioned the need for the hearing, given the strength of the banks and the economy. “Why are we here?” asked ranking Republican Rep. Patrick T. McHenry (N.C.). “I think a more productive use of our time would be to question our banking regulators about whether or not they are prepared for Brexit.”

There were also tense moments inside the packed hearing room, where a television display scrolled through the multimillion-dollar salaries of the chief executives and how much their companies paid in fines to regulators.

At Citigroup, Corbat’s salary of $24 million last year was 486 times more than the median salary among the bank’s employees, the highest disparity among the banks, said Rep. Nydia M. Velázquez (D-N.Y.). “Do you think that’s fair?” Velázquez asked.

“My compensation is decided by the board,” said Corbat, acknowledging he is fortunate.

Bruce Marks of the Neighborhood Assistance Corporation of America (NACA), a housing advocacy group, interrupted testimony from Bank of America’s Brian Moynihan.

Marks’s comments could not be heard clearly, but after the hearing, Marks said he stood to thank Bank of America for its lending practices. As he stood and began shouting, Waters told him to leave.

“Would you please remove this gentleman from my committee?” said Waters, who had started the hearing by acknowledging Marks’s attendance. “Come on, officers, I don’t have a lot of time. Get him out of here.”

Rep. Alexandria Ocasio-Cortez (D-N.Y.) questioned whether the banks had really changed over the last decade, reading a list of the millions of dollars in fines the banks had each paid in recent years. Noting that young people in her district can go to jail for jumping a subway turnstile, Ocasio-Cortez asked Dimon, the chief executive of the country’s largest bank, why more people had not been punished for the global financial crisis.

“I don’t think people should go to jail for jumping a subway. I think we put too many into jail, and I think if people broke the law they should go to jail,” Dimon said.

Citigroup and Bank of America found themselves stuck in a tug of war between Republicans and Democrats over the banks’ decisions to cut off some services to gun manufacturers after a 2018 mass shooting at Marjory Stoneman Douglas High School in Parkland, Fla., left 17 dead. Bank of America has stopped lending to companies that make “military-style firearms” and sell them to civilians, and Citigroup has set restrictions on the sale of firearms by its business clients, including prohibiting their sale to customers who have not passed a background check.

Several Republicans challenged Bank of America’s decisions. “There are a lot of Americans . . . [who] would disagree with that policy,” Rep. Sean P. Duffy (R-Wis.) said to Moynihan. “It may play well on the East Coast. It may play well in California,” but it is not popular in the rest of the country, he said.

Moynihan has said that at the time the bank made its decision, more than 100 employees had been directly affected by mass shootings. Several were inside the Pulse nightclub in Orlando, where dozens were killed in 2016 in the second-deadliest mass shooting in U.S. history.

Meanwhile, Democrats praised the banks and asked their competitors to consider similar policies.

Rep. Carolyn B. Maloney (D-N.Y.) asked why JPMorgan Chase had not followed in the steps of its competitors, Citigroup and Bank of America. JPMorgan Chase provides $273 million in loans to manufacturers of military-style firearms, Maloney said.

“Everything we do with clients goes through a severe process of review [for] reputational risk,” said Dimon. “There are over 100,000 retailers out there who sell guns. . . . If we think they are doing something wrong, our risk committee stops doing business with them.”

Clarification: This story has been updated to clarify the reason Bruce Marks, the president of NACA, interrupted the hearing.

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