[House Hearing, 116 Congress]
[From the U.S. Government Publishing Office]


                HOLDING MEGABANKS ACCOUNTABLE: A REVIEW
                 OF GLOBAL SYSTEMICALLY IMPORTANT BANKS
                  10 YEARS AFTER THE FINANCIAL CRISIS

=======================================================================

                                HEARING

                               BEFORE THE

                    COMMITTEE ON FINANCIAL SERVICES

                     U.S. HOUSE OF REPRESENTATIVES

                     ONE HUNDRED SIXTEENTH CONGRESS

                             FIRST SESSION

                               ----------                              

                             APRIL 10, 2019

                               ----------                              

       Printed for the use of the Committee on Financial Services

                           Serial No. 116-18
                           
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]

                               __________
                    

                    U.S. GOVERNMENT PUBLISHING OFFICE                    
37-449 PDF                  WASHINGTON : 2020                     
          
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                 HOUSE COMMITTEE ON FINANCIAL SERVICES

                 MAXINE WATERS, California, Chairwoman

CAROLYN B. MALONEY, New York         PATRICK McHENRY, North Carolina, 
NYDIA M. VELAZQUEZ, New York             Ranking Member
BRAD SHERMAN, California             PETER T. KING, New York
GREGORY W. MEEKS, New York           FRANK D. LUCAS, Oklahoma
WM. LACY CLAY, Missouri              BILL POSEY, Florida
DAVID SCOTT, Georgia                 BLAINE LUETKEMEYER, Missouri
AL GREEN, Texas                      BILL HUIZENGA, Michigan
EMANUEL CLEAVER, Missouri            SEAN P. DUFFY, Wisconsin
ED PERLMUTTER, Colorado              STEVE STIVERS, Ohio
JIM A. HIMES, Connecticut            ANN WAGNER, Missouri
BILL FOSTER, Illinois                ANDY BARR, Kentucky
JOYCE BEATTY, Ohio                   SCOTT TIPTON, Colorado
DENNY HECK, Washington               ROGER WILLIAMS, Texas
JUAN VARGAS, California              FRENCH HILL, Arkansas
JOSH GOTTHEIMER, New Jersey          TOM EMMER, Minnesota
VICENTE GONZALEZ, Texas              LEE M. ZELDIN, New York
AL LAWSON, Florida                   BARRY LOUDERMILK, Georgia
MICHAEL SAN NICOLAS, Guam            ALEXANDER X. MOONEY, West Virginia
RASHIDA TLAIB, Michigan              WARREN DAVIDSON, Ohio
KATIE PORTER, California             TED BUDD, North Carolina
CINDY AXNE, Iowa                     DAVID KUSTOFF, Tennessee
SEAN CASTEN, Illinois                TREY HOLLINGSWORTH, Indiana
AYANNA PRESSLEY, Massachusetts       ANTHONY GONZALEZ, Ohio
BEN McADAMS, Utah                    JOHN ROSE, Tennessee
ALEXANDRIA OCASIO-CORTEZ, New York   BRYAN STEIL, Wisconsin
JENNIFER WEXTON, Virginia            LANCE GOODEN, Texas
STEPHEN F. LYNCH, Massachusetts      DENVER RIGGLEMAN, Virginia
TULSI GABBARD, Hawaii
ALMA ADAMS, North Carolina
MADELEINE DEAN, Pennsylvania
JESUS ``CHUY'' GARCIA, Illinois
SYLVIA GARCIA, Texas
DEAN PHILLIPS, Minnesota

                   Charla Ouertatani, Staff Director
                            
                            
                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on:
    April 10, 2019...............................................     1
Appendix:
    April 10, 2019...............................................   115

                              
                              WITNESSES
                       Wednesday, April 10, 2019

Corbat, Michael L., CEO, Citigroup...............................     5
Dimon, Jamie, Chairman & CEO, JPMorgan Chase & Co................     7
Gorman, James P., Chairman & CEO, Morgan Stanley.................     8
Moynihan, Brian, Chairman & CEO, Bank of America.................    10
O'Hanley, Ronald P., President & CEO, The State Street 
  Corporation....................................................    12
Scharf, Charles W., Chairman & CEO, The Bank of New York Mellon 
  Corporation....................................................    13
Solomon, David M., Chairman & CEO, Goldman Sachs.................    15

                                
                                APPENDIX

Prepared statements:
    Corbat, Michael L............................................   116
    Dimon, Jamie.................................................   122
    Gorman, James P..............................................   129
    Moynihan, Brian..............................................   143
    O'Hanley, Ronald P...........................................   160
    Scharf, Charles W............................................   168
    Solomon, David M.............................................   175

              Additional Material Submitted for the Record

Budd, Hon Ted:
    Financial Services Forum report entitled, ``The Value and 
      Strength of America's Largest Financial Institutions,'' 
      dated April 2019...........................................   194
Porter, Hon. Katie:
    Testimony excerpts...........................................   220
Pressley, Hon. Ayanna:
    Article from The Root entitled, ``Pinklining: The Financial 
      Threat More Women of Color Are Facing,'' dated July 10, 
      2016.......................................................   226
    Article from Salon entitled, ```Pinklining': How women of 
      color are disproportionately hurt by Wall Street's 
      predatory practices,'' dated June 3, 2016..................   228
Tlaib, Hon. Rashida:
    ``Banking on Climate Change, Fossil Fuel Finance Report Card 
      2019 Summary Version''.....................................   233
    Written responses to questions for the record from JPMorgan 
      Chase, Citigroup, Bank of America, Bank of NY Mellon, 
      Goldman Sachs, Morgan Stanley, and State Street Corporation   239
Corbat, Michael L.:
    Written responses to questions for the record submitted by 
      Representative Ocasio-Cortez...............................   241
    Written responses to questions for the record submitted by 
      Representative Barr........................................   245
    Written responses to questions for the record submitted by 
      Representative Beatty......................................   246
    Written responses to questions for the record submitted by 
      Representative Cleaver.....................................   252
    Written responses to questions for the record submitted by 
      Representative Green.......................................   256
    Written responses to questions for the record submitted by 
      Representative McAdams.....................................   260
    Written responses to questions for the record submitted by 
      Representative Rose........................................   262
    Written responses to questions for the record submitted by 
      Representative Sherman.....................................   263
    Written responses to questions for the record submitted by 
      Representative Tlaib.......................................   266
    Written responses to questions for the record submitted by 
      Chairwoman Waters..........................................   268
Dimon, Jamie:
    Letter to Chairwoman Waters and Ranking Member McHenry.......   289
    Written responses to questions for the record submitted by 
      Representative Barr........................................   290
    Written responses to questions for the record submitted by 
      Representative Beatty......................................   291
    Written responses to questions for the record submitted by 
      Representative Cleaver.....................................   298
    Written responses to questions for the record submitted by 
      Representative Green.......................................   304
    Written responses to questions for the record submitted by 
      Representative McAdams.....................................   309
    Written responses to questions for the record submitted by 
      Representative Ocasio-Cortez...............................   311
    Written responses to questions for the record submitted by 
      Representative Porter......................................   312
    Written responses to questions for the record submitted by 
      Representative Rose........................................   314
    Written responses to questions for the record submitted by 
      Representative Sherman.....................................   315
    Written responses to questions for the record submitted by 
      Representative Stivers.....................................   320
    Written responses to questions for the record submitted by 
      Representative Tlaib.......................................   321
    Written responses to questions for the record submitted by 
      Chairwoman Waters..........................................   322
Gorman, James P.:
    Written responses to questions for the record submitted by 
      Chairwoman Waters..........................................   337
    Written responses to questions for the record submitted by 
      Representative Barr........................................   349
    Written responses to questions for the record submitted by 
      Representative Beatty......................................   350
    Written responses to questions for the record submitted by 
      Representative Cleaver.....................................   359
    Written responses to questions for the record submitted by 
      Representative Ocasio-Cortez...............................   364
    Written responses to questions for the record submitted by 
      Representative Jesus Garcia................................   365
    Written responses to questions for the record submitted by 
      Representative Green.......................................   367
    Written responses to questions for the record submitted by 
      Representative McAdams.....................................   372
    Written responses to questions for the record submitted by 
      Representative Rose........................................   373
    Written responses to questions for the record submitted by 
      Representative Sherman.....................................   374
    Written responses to questions for the record submitted by 
      Representative Tlaib.......................................   377
Moynihan, Brian
    Written responses to questions for the record submitted by 
      Representative Ocasio-Cortez...............................   379
    Written responses to questions for the record submitted by 
      Representative Barr........................................   380
    Written responses to questions for the record submitted by 
      Representative McAdams.....................................   381
    Written responses to questions for the record submitted by 
      Representative Tlaib.......................................   382
    Written responses to questions for the record submitted by 
      Representative Rose........................................   383
    Written responses to questions for the record submitted by 
      Representative Ocasio-Cortez...............................   384
    Written responses to questions for the record submitted by 
      Representative Beatty......................................   386
    Written responses to questions for the record submitted by 
      Representative Cleaver.....................................   390
    Written responses to questions for the record submitted by 
      Representative Jesus Garcia................................   395
    Written responses to questions for the record submitted by 
      Representative Green.......................................   396
    Written responses to questions for the record submitted by 
      Representative Porter......................................   399
    Written responses to questions for the record submitted by 
      Representative Sherman.....................................   402
    Written responses to questions for the record submitted by 
      Chairwoman Waters..........................................   404
O'Hanley, Ronald P.:
    Written responses to questions for the record submitted by 
      Chairwoman Waters..........................................   421
    Written responses to questions for the record submitted by 
      Representative Beatty......................................   475
    Written responses to questions for the record submitted by 
      Representative Barr........................................   565
    Written responses to questions for the record submitted by 
      Representative Cleaver.....................................   566
    Written responses to questions for the record submitted by 
      Representative Green.......................................   582
    Written responses to questions for the record submitted by 
      Representative McAdams.....................................   596
    Written responses to questions for the record submitted by 
      Representative Ocasio-Cortez...............................   598
    Written responses to questions for the record submitted by 
      Representative Rose........................................   599
    Written responses to questions for the record submitted by 
      Representative Sherman.....................................   600
Scharf, Charles W.:
    Written responses to questions for the record submitted by 
      Chairwoman Waters..........................................   604
    Written responses to questions for the record submitted by 
      Representative Barr........................................   612
    Written responses to questions for the record submitted by 
      Representative Beatty......................................   613
    Written responses to questions for the record submitted by 
      Representative Cleaver.....................................   620
    Written responses to questions for the record submitted by 
      Representative Jesus Garcia................................   624
    Written responses to questions for the record submitted by 
      Representative Green.......................................   625
    Written responses to questions for the record submitted by 
      Representative McAdams.....................................   627
    Written responses to questions for the record submitted by 
      Representative Ocasio-Cortez...............................   628
    Written responses to questions for the record submitted by 
      Representative Rose........................................   629
    Written responses to questions for the record submitted by 
      Representative Sherman.....................................   630
    Written responses to questions for the record submitted by 
      Representative Tlaib.......................................   633
Solomon, David M.:
    Letter to Chairwoman Waters and Ranking Member McHenry.......   634
    Written responses to questions for the record submitted by 
      Representative Barr........................................   635
    Written responses to questions for the record submitted by 
      Representative Beatty......................................   636
    Written responses to questions for the record submitted by 
      Representative Cleaver.....................................   643
    Written responses to questions for the record submitted by 
      Representative Jesus Garcia................................   648
    Written responses to questions for the record submitted by 
      Representative Green.......................................   649
    Written responses to questions for the record submitted by 
      Representative McAdams.....................................   653
    Written responses to questions for the record submitted by 
      Representative Ocasio-Cortez...............................   654
    Written responses to questions for the record submitted by 
      Representative Perlmutter..................................   655
    Written responses to questions for the record submitted by 
      Representative Rose........................................   656
    Written responses to questions for the record submitted by 
      Representative Sherman.....................................   657
    Written responses to questions for the record submitted by 
      Representative Tlaib.......................................   662
    Written responses to questions for the record submitted by 
      Chairwoman Waters..........................................   663

 
                     HOLDING MEGABANKS ACCOUNTABLE:
                    A REVIEW OF GLOBAL SYSTEMICALLY
                     IMPORTANT BANKS 10 YEARS AFTER
                          THE FINANCIAL CRISIS

                              ----------                              


                       Wednesday, April 10, 2019

             U.S. House of Representatives,
                   Committee on Financial Services,
                                           Washington, D.C.
    The committee met, pursuant to notice, at 9:01 a.m., in 
room 2128, Rayburn House Office Building, Hon. Maxine Waters 
[chairwoman of the committee] presiding.
    Members present: Representatives Waters, Maloney, 
Velazquez, Sherman, Meeks, Clay, Scott, Green, Cleaver, 
Perlmutter, Himes, Foster, Beatty, Heck, Vargas, Gottheimer, 
Lawson, San Nicolas, Tlaib, Porter, Axne, Casten, Pressley, 
McAdams, Ocasio-Cortez, Wexton, Lynch, Gabbard, Adams, Dean, 
Garcia of Illinois, Garcia of Texas, Phillips; McHenry, Wagner, 
Lucas, Posey, Luetkemeyer, Huizenga, Duffy, Stivers, Barr, 
Tipton, Williams, Hill, Emmer, Zeldin, Loudermilk, Mooney, 
Davidson, Budd, Kustoff, Hollingsworth, Gonzalez of Ohio, Rose, 
Steil, Gooden, and Riggleman.
    Chairwoman Waters. The Financial Services Committee will 
come to order. Without objection, the Chair is authorized to 
declare a recess of the committee at any time.
    Today's hearing is entitled, ``Holding Megabanks 
Accountable: A Review of Global Systemically Important Banks 10 
Years After the Financial Crisis.''
    I now recognize myself for 4 minutes to give an opening 
statement.
    But before I do, I would like to acknowledge that Bruce 
Marks and the Neighborhood Assistance Corporation members are 
here in the audience today. You are welcome.
    Today, this committee convenes for a hearing on the U.S. 
global systemically important banks (G-SIBs). Before us today 
as witnesses we have the chief executives from Bank of America, 
Bank of New York Mellon, Citigroup, Goldman Sachs, JPMorgan 
Chase, Morgan Stanley, and State Street Corporation. At a 
previous hearing on March 12th, we had Wells Fargo's then-CEO 
before the committee to testify.
    Before I begin, let me urge our witnesses to speak for 
themselves. I understand that there is some attempt to get Mr. 
Dimon, per the press reports, to speak for everybody. We know 
that he is very smart. We know that he has been around for a 
long time. But this is not just his show today.
    The purpose of this hearing is to review the activities of 
these megabanks and examine how they are operating today. Ten 
years ago, the CEOs appeared before this very committee to 
discuss the financial crisis and the massive bailout that 
taxpayers provided. A decade later, what have they learned? Are 
they helping their customers and working to benefit the 
communities they serve? Or are the practices of these banks 
still causing harm?
    The U.S. G-SIBs as a group have paid at least $163 billion 
in fines since the financial crisis a decade ago, including 
because of consumer abuses and other violations of the law.
    Over the course of the last 10 years, Bank of America has 
paid $76.1 billion in fines, JPMorgan Chase has paid $43.7 
billion in fines, Citigroup has paid $19 billion in fines, 
Wells Fargo has paid $11.8 billion in fines, Goldman Sachs has 
paid $7.7 billion in fines, and Morgan Stanley has paid $5.4 
billion in fines. But it appears that they have treated those 
fines as simply the cost of doing business.
    All of the megabanks represented on the panel continue to 
rake in massive profits. Since the crisis, the megabanks have 
collectively made over $780 billion in profits, or nearly 5 
times the amount they paid in fines.
    And despite all of the compliance failures under their 
watch, no one has made out better than the CEOs. One made as 
much as $30 million a year, and another made 486 times the 
amount a median employee at their bank is paid.
    It will always be profitable for the banks to swindle 
consumers, investors, and small businesses if no one is going 
to hold them accountable. And so, as policymakers, we must 
evaluate what it will take to rein in chronic lawbreaking by 
the biggest banks.
    What we should not do is to reward them for this behavior. 
Unfortunately, that is precisely what Trump and his allies in 
Congress did with the passage of the tax scam.
    While an estimated 4.6 million hardworking Americans are 
seeing their refunds reduced dramatically, and another 4.6 
million find themselves now owing money to the IRS when they 
file their 2018 taxes, the largest banks have seen a tax 
windfall of $14 billion.
    In addition, Trump's regulators are deregulating the 
megabanks by reducing bank capital standards, easing stress-
testing requirements, and weakening the Volcker Rule. These 
misguided actions come at the expense of financial stability, 
while leaving hardworking Americans to shoulder the tax burden.
    So I am concerned that several of these institutions are 
simply too big to manage their own operations, too big to serve 
our communities, and too big to care about the harm they have 
caused.
    The Chair now recognizes the ranking member of the 
committee, the gentleman from North Carolina, Mr. McHenry, for 
4 minutes for an opening statement.
    Mr. McHenry. This is a hearing in search of a headline.
    Just weeks ago, we had the CEO of Wells Fargo--then-CEO of 
Wells Fargo before this committee to testify on the bank's 
pattern of abusive action towards customers. Every one of their 
regulators had fined them and fined them in the last 2 years. 
Now that organization has been through 2 chief executives in 
just over 2 year's time.
    I supported that hearing. It had legislative intent. It was 
important. Perhaps we are here today, though, simply based upon 
your size. But, as my Democrat friends well know, your size is 
in some ways the product of their legislating. The Dodd-Frank 
Act imposed a massive new regulatory regime. The last document 
I read put thenumber of new regulations at around 400, so it is 
certainly growing your compliance departments.
    Size helps some banks survive, even thrive. Some banks 
could not bear the cost, so they consolidated; others closed 
their doors. In fact, we have over 2,000 banks that are not 
here since the pre-crisis. At the time, that didn't seem to be 
a big concern for some of my friends on the other side of the 
aisle.
    Perhaps we are here today to talk about the health of the 
U.S. banking sector. I can tell you this: the economy has 
grown. And as we know, bank profitability, bank revenue tends 
to track GDP growth. That has been the case, and so they are 
up, too. Banks hold more capital than pre-crisis. That is 
positive. The labor market is strong. That, too, is positive. 
The U.S. added nearly 200,000 jobs in March, a move the New 
York Times recognized as a return to solid growth.
    So why are we here? I fear my colleagues on the other side 
of the aisle are here to attack our economic system, attack the 
nature of our market. I fear my friends want to dictate social 
and environmental policy through government mandates on banks. 
That is not the right approach.
    Earlier this year, I sent a letter to Chairwoman Waters 
asking for a series of hearings on critical issues that could 
pose systemic risk to our economy and the health of our 
financial markets, and thereby, the health of American families 
and their communities. One of the issues I included in my 
letter is Brexit. That is in the headlines today. That shares 
some of the headlines that you all, you seven, are sharing.
    Today, the U.K. prime minister, Theresa May, is attending 
the E.U. summit to present her country's path, or attempted 
path forward in light of their referendum almost 3 years ago. I 
think a more productive use of our time might be to question 
our banking regulators on whether or not they are prepared for 
a hard Brexit on Friday.
    We know approximately $450 trillion in nominal swaps and 
futures flow through the United Kingdom. We should be reviewing 
the implications of a shift of the derivatives market to 
continental Europe and the challenges that poses. What impact 
on derivatives and users here in the United States? What 
effects on the global banking system? We should be using this 
hearing to work together to ensure the proper preparation, and 
ensure that those things are being done for our economy, our 
institutions, and our consumers. That is a bigger issue here.
    And Brexit is not the only issue. Chinese debt and the 
slowing nature of the global economy is a significant issue for 
the American people and for financial institutions. We should 
be focused on that today. And instead, we have seven of you 
with three different business models here before us because you 
are big.
    So I don't think the Majority called this hearing to talk 
about those systemic risk issues. I think that is a failure. 
Now, instead of focusing on these real issues, some of my 
colleagues will use their time to focus on a law they enacted 9 
years ago. They will use their time to talk about how big you 
are, despite the fact it was their policies that spurned, even 
insisted upon your growth. But I would say to our witnesses, my 
focus is going to be on systemic risk, to make sure we are 
focused upon those key issues that matter in the short term and 
the long term.
    Thank you.
    Chairwoman Waters. The Chair now recognizes the 
subcommittee chair, Mr. Green, for 1 minute.
    Mr. Green. Thank you, Madam Chairwoman. Madam Chairwoman, 
we are here today to make headway, not headlines. We are here 
today to protect the American economy. We are here today to do 
the hard work that my friends on the other side declined to do 
in 2008, when we took the hard votes to save the American 
economy.
    We will continue to do this. We were here to see Long Term 
Capital go under. We saw Lehman Brothers become the largest 
bankruptcy in history. We saw Bear Stearns sold. Our global 
systemically important banks (G-SIBs) have combined assets of 
over $11 trillion. Yes, they are said to be too-big-to-fail, 
which does beg the question, are they the right size to 
regulate or are they the right size to downsize? They, indeed, 
have the right to do business, but we have the duty to provide 
oversight. Both can be done, and the American people will 
benefit.
    I yield back.
    Chairwoman Waters. The Chair now recognizes Mr. Barr for 1 
minute.
    Mr. Barr. Gentlemen, this hearing is a unique opportunity 
for each of you to describe the contributions your institutions 
make to the American and global economies. It is also an 
opportunity for you to identify what you consider to be the 
most significant risks to the financial system and how your 
firms are proactively mitigating those risks.
    While there are many threats to our financial system, I do 
not believe that your size alone is one of them. Chairman 
Powell recently stated that our financial system is so much 
better capitalized and has so much more liquidity, it has a 
better sense of its risks and a better ability to manage those 
risks. I hope to hear how you are responding to the risks 
actually identified by FSOC, including cyber security, Brexit, 
and the need for continued efforts to evaluate regulatory 
overlap.
    Finally, I hope to hear about how your firms are resisting 
calls to de-risk or choke off banking services to law-abiding 
businesses, including businesses that are important sources of 
jobs in my home State of Kentucky, including coal mining, 
advance deposit wagering on horse racing, industrial hemp, and 
firearm manufacturing, just because these activities may not be 
politically correct or fashionable among liberal protest 
groups.
    I look forward to your testimony and I yield back.
    Chairwoman Waters. I want to welcome today's panel: Mr. 
Michael L. Corbat, chief executive officer of Citigroup, who 
has been at Citigroup since 1983, and has served as CEO since 
2012; Mr. James Dimon, chairman and chief executive officer of 
JPMorgan Chase & Company, who has been at JPMorgan Chase since 
2004, and has served in his current capacity since 2006; Mr. 
James P. Gorman, chairman and chief executive officer of Morgan 
Stanley, who has been at Morgan Stanley since 2006, and has 
served in his current capacity since 2012; Mr. Brian Moynihan, 
chairman and chief executive officer of Bank of America, who 
has been at Bank of America since 2004, and has served as CEO 
since 2010, and as chairman since 2014; Mr. Ronald P. O'Hanley, 
president and chief executive officer of the State Street 
Corporation, who has been at State Street since 2015, becoming 
president in 2017, and CEO in January, 2019; Mr. Charles W. 
Scharf, chairman and chief executive officer of the Bank of New 
York Mellon, who joined the bank and was appointed CEO in 2017, 
and chairman in 2018; and Mr. David M. Solomon, chairman and 
chief executive officer of Goldman Sachs, who has been at 
Goldman Sachs since 1999, becoming CEO in October 2018, and 
chairman in 2019.
    Without objection, your written statements will be made a 
part of the record.
    Before we begin, I would like to swear in the witnesses. 
Would the witnesses please stand and each raise your right 
hand? Do you solemnly swear or affirm that the testimony you 
will give before this committee in the matters now under 
consideration will be the truth, the whole truth, and nothing 
but the truth, so help you God? If you will respond by saying--
thank you very much.
    Let the record show that the witnesses answered in the 
affirmative.
    Please be seated. Each of you will have 5 minutes to 
summarize your testimony. When you have 1 minute remaining, a 
yellow light will appear. At that time, I would ask you to wrap 
up your testimony so we can be respectful of both the 
witnesses' and the committee members' time.
    Mr. Corbat, you are now recognized for 5 minutes to present 
your oral testimony.

         STATEMENT OF MICHAEL L. CORBAT, CEO, CITIGROUP

    Mr. Corbat. Chairwoman Waters, Ranking Member McHenry, and 
members of the committee, I would like to thank you for this 
opportunity today to talk about Citi's transformation since the 
financial crisis.
    As it was for many Americans in many institutions, the 
crisis was a searing experience for our firm. We greatly 
appreciated the assistance from the U.S. taxpayers and were 
fortunate to be able to repay those debts with significant 
return for our taxpayers. And that experience has made it a 
mission for us to never be in that position again.
    Since the crisis, Citi has become a smaller, safer, 
stronger, and far less complex institution. We have transformed 
our institution not just in terms of capital and balance sheet 
and earnings, but also in terms of control, risk, audit, and 
compliance.
    We also renewed our commitment to the communities that we 
serve. We have gone back to our roots today as a bank. And we 
have two primary lines of business: our consumer bank; and our 
institutional clients group. We are not a financial 
supermarket, we are not an insurance company, and we are not a 
hedge fund.
    As the most global of the banks here today, Citi is rightly 
scaled to serve its clients, many of them U.S. multinational 
corporations, wherever they do business. Whether it is Ford, 
Proctor & Gamble, Colgate, or the United States Government, our 
global network provides our clients with an American 
institution to help them compete in a rapidly changing world 
rather than having to rely on a mix of foreign banks.
    And while we take pride in our work with some of America's 
best-known companies, we also invest in small business. And 
last year, we lent them $12 billion.
    To some extent, our restructuring was the easy part. And as 
we have learned, rebuilding trust is much harder than 
rebuilding your balance sheet.
    That is why we have invested in our culture and made ethics 
the foundation of our firm. In fact, in 2014, our board of 
directors became the first to establish an ethics and culture 
committee. And while we have had issues to overcome since the 
crisis, we have continued to make steady progress at 
strengthening our culture.
    We have also focused on building a truly diverse and 
inclusive culture at Citi. We have made our representation 
goals public, and we have been very transparent about our 
gender pay gap.
    One of our strengths is putting our balance sheet to work 
to improve the communities we serve across the country in 
tangible ways. Last year, we catalyzed more than $26 billion in 
infrastructure investment, including housing and community 
development projects. We often do this when smaller financial 
firms don't have the resources to tackle those difficult 
problems.
    This includes financing the new MLK Hospital in South 
Central Los Angeles, and helping the City of Detroit rebuild 
its street lighting grid. We are especially proud of our role 
as the country's leading affordable housing lender, a title 
that we have held for 9 straight years.
    In 2018 alone, we provided $6 billion to finance more than 
36,000 affordable housing units. We financed the renovation of 
the New England Home for Veterans in Boston. And we have helped 
restore the Ocean Bay Apartments in Far Rockaway, New York, a 
public housing complex which was severely damaged by Superstorm 
Sandy.
    We are also acutely aware of the challenges that the 
approximately 25 percent of Americans who are unbanked or 
underbanked face, and we have been a leader in financial 
inclusion.
    In 2014, Citibank launched the Access Account, an account 
which has low or avoidable monthly charges, no overdraft fees, 
and is one of our fastest growing products. And we now provide 
the 440,000 customers of 25 minority-owned banks, community 
banks, and credit unions with cost-free access to our ATMs.
    Thank you again for the opportunity to speak with the 
committee about the progress we have made as a company. And I 
look forward to your questions.
    [The prepared statement of Mr. Corbat can be found on page 
116 of the appendix.]
    Chairwoman Waters. Thank you, Mr. Corbat.
    Mr. Dimon, you are now recognized for 5 minutes to present 
your oral testimony.

 STATEMENT OF JAMIE DIMON, CHAIRMAN & CEO, JPMORGAN CHASE & CO.

    Mr. Dimon. Chairwoman Waters, Ranking Member McHenry, and 
distinguished members of the committee, we work every day to 
earn the trust and confidence of our customers in the 
communities we serve. It is essential to how we run a healthy 
and vibrant company.
    But we never lose sight--or we will never lose sight of the 
lessons learned. Post-crisis reforms have addressed key 
concerns.
    During the 2008 financial crisis, the U.S. Government took 
extraordinary and unprecedented actions to stabilize the 
system, and we all owe a debt of gratitude to the policymakers 
who stepped in on behalf of Americans.
    We are proud of what we did to help. With markets in 
complete turmoil, we were able to lend to California, New 
Jersey, and Illinois, and additionally loaned or raised for our 
clients $1.3 trillion at consistent and fair rates, in many 
cases far below what the market would have allowed.
    And we provided more than $100 billion to local 
governments, municipalities, schools, hospitals, and not-for-
profits over the course of 2009.
    At the request of the United States Government, and in an 
effort to stabilize the system, we bought the collapsed Bear 
Stearns and later purchased the severely distressed Washington 
Mutual. JPMorgan was there for our clients and customers 
through good times and bad. We didn't cut and run. And I want 
to pause for a moment to thank the 250,000 employees of 
JPMorgan Chase for their extraordinary efforts during these 
difficult circumstances.
    Since the crisis, reforms have made banks much safer and 
sounder in three important areas: capital; liquidity; and 
resolution recovery. Large banks almost doubled the highest 
quality capital to protect against losses. Under the Fed's most 
extreme stress-testing scenario, the combined losses of all 34 
banks was only 6 percent of total capital.
    Large banks have tripled their liquid assets to protect 
against unexpected cash flows, and resolution planning has 
created a credible framework for unwinding a large bank. Lehman 
simply would not happen again. Legislators and regulators 
deserve credit for putting these basic rules in place.
    We all now must look forward for emerging threats to the 
stability of our system. Unregulated non-bank mortgage and 
leveraged lending is growing rapidly and needs to be monitored. 
We need to spend more time on critical issues like AML, BSA, 
cyber, privacy and global competitiveness.
    At JPMorgan, we relentlessly invest in our businesses, our 
people, and the communities in which we operate. In the United 
States, we have raised wages and expanded benefits for 22,000 
entry-level employees, to $16.50 to $18.00 per hour. We 
subsidize more than 90 percent of the medical plan costs for 
employees making less than $60,000 a year.
    In 2016, we introduced Advancing Black Leaders and an 
expanded diversity strategy focused on increased hiring, 
retention, and development of talent within the black 
community. Within the last 2 years, our company has increased 
the number of senior black executives by 40 to 50 percent, and 
last month, JPMorgan unveiled our Advancing Black Pathways 
initiative and brought our Entrepreneurs of Color Fund model to 
greater Washington, D.C., among others.
    At the local level, in more than 30 cities we have sat down 
with diverse groups to identify ways to meaningfully address 
issues, skills, investment, and how to collectively help the 
people of communities. JPMorgan Chase's $150 million investment 
in Detroit was generated by a meeting between myself and Lee 
Saunders, a leader of the labor movement. This has led us to 
develop an investment model, now known as AdvancingCities, to 
help more people move up the economic ladder, and it is 
working.
    America is still the most prosperous nation in the world. 
We are blessed with natural gifts of land and all the food, 
water, and energy we need. We have the most dynamic economy in 
the world, with vibrant businesses large and small, exceptional 
universities, and unparalleled innovation.
    However, there are too many people who are not sharing in 
the prosperity. There are urgent priorities that are holding us 
back. Our education system is driving inequality and lack of 
opportunity. Inner-city school graduates--often less than 60 
percent graduate. Our healthcare costs now represent almost 20 
percent of GDP.
    The U.S. no longer ranks in the top 20 of infrastructure 
spending in the world, and there are many other issues that 
must be addressed. Government and business can work together to 
solve these problems, and if we don't, our moral, economic, and 
military dominance will cease to exist.
    While I have a deep and abiding faith in the United States 
of America and its extraordinary resiliency and capabilities, 
we do not have a divine right to success. The oversight and 
work of this committee is a critical responsibility, and I will 
respond to any questions you have. Thank you.
    [The prepared statement of Mr. Dimon can be found on page 
122 of the appendix.]
    Chairwoman Waters. Thank you, Mr. Dimon.
    Mr. Gorman, you are now recognized for 5 minutes to present 
your oral testimony.

  STATEMENT OF JAMES P. GORMAN, CHAIRMAN & CEO, MORGAN STANLEY

    Mr. Gorman. Thank you, Chairwoman Waters, Ranking Member 
McHenry, and members of the committee. Thank you for having me 
here today.
    This committee has an important responsibility to our 
nation to ensure we have a regulatory framework for the 
financial system that focuses on maintaining the safety and 
soundness of our financial institutions. I share your 
commitment to this goal.
    The financial crisis in 2008 was devastating to our 
country, and unquestionably the most significant event in 
Morgan Stanley's 84-year history. As a result, our management 
and board of directors has spent the better part of the past 
decade working hard to ensure that our firm never experiences 
what we went through then. We also acknowledge that had it not 
been for the support of this Congress and the U.S. taxpayers, 
we as a firm may not have survived.
    Ten years ago, we embarked upon a very aggressive plan to 
remodel Morgan Stanley to ensure its stability in the harshest 
of times and its ongoing financial strength to support our 
clients, our employees, our shareholders, and our communities. 
We made these business changes at the same time that Congress 
designated a new regulatory architecture through the Dodd-Frank 
legislation, which included stress testing, known as CCAR, 
resolution planning, and the living will process, among other 
changes.
    On the whole, we have embraced these regulatory changes, 
and the United States financial system, and Morgan Stanley in 
particular, is stronger as a result.
    With the strategic transformation of our business, we are 
safer, sounder, and more resilient than we were before the 
financial crisis. Our capital has increased every year, rising 
from $34 billion in 2006 to $72 billion at last year-end. We 
have increased our liquidity from less than $50 billion to 
approximately $250 billion, while at the same time shrinking 
our balance sheet and our leverage.
    However, a sound strategy is just the beginning. Employees 
acting with the right values and managing risk appropriately 
will ultimately drive the ongoing strength of our firm. Our 
current focus is to make sure all 60,000 employees operate with 
the right values--a sense of responsibility and 
professionalism, which is what ultimately drives our culture. 
Our employees are deeply committed to that mission.
    We further believe a diverse employee base and leadership 
pipeline are critical to delivering the best of the firm to our 
clients. We recognize that we have significant work to do to 
achieve our diversity goals, and it requires efforts at every 
level of the firm in order to deliver results over the long 
term. We have numerous initiatives aimed at providing our 
employees opportunities for leadership roles and empowering 
them to achieve the visibility and recognition they deserve.
    Our employees have a strong commitment to supporting the 
needs of our clients, while at the same time giving back to the 
communities where they live and work. As an example, we have 
supported the Morgan Stanley Children's Hospital since 1973, 
and our employees regularly give of their time and resources to 
volunteer organizations across this country and the globe.
    At Morgan Stanley, we serve the schools and hospitals in 
our communities, we advise individual families, and we help 
finance institutions, governments, local and global 
corporations. We help them raise capital and manage their own 
financial positions so they, too, remain stable and can grow 
and provide employment opportunities for many others. This 
focus on executing a clear strategy, ensuring sound financial 
footing, and living a culture committed to the right values is 
at the heart of what Morgan Stanley is today.
    Thank you, Chairwoman Waters, Ranking Member McHenry, and 
members of the committee. I look forward to your questions.
    [The prepared statement of Mr. Gorman can be found on page 
129 of the appendix.]
    Chairwoman Waters. Thank you, Mr. Gorman.
    Mr. Moynihan, you are now recognized for 5 minutes to 
present your oral testimony.

  STATEMENT OF BRIAN MOYNIHAN, CHAIRMAN & CEO, BANK OF AMERICA

    Mr. Moynihan. Chairwoman Waters, Ranking Member McHenry, 
you asked us to reflect on our company over the 10 years since 
the financial crisis.
    I became CEO on January 1, 2010, and early on, I made 2 
broad points. First, I acknowledged the damage done by 
decisions in the company and in our industry made pre-crisis 
and that we needed to transform our industry and our company.
    Second, I expressed support for the impending work that 
Congress and regulators would do to address reforms. So 10 
years later, through the Dodd-Frank Act and its attendant 
regulations, and importantly, what we have done to clean up and 
transform our company, the industry and Bank of America are 
better prepared for whatever the future may bring.
    In 2010, we put together a team committed to change our 
company. We had three areas of simultaneous focus. First, we 
had to clean up the mess from my predecessor's 2008 acquisition 
of Countrywide. Second, we transformed and simplified the 
company. We made these changes ultimately in line with Dodd-
Frank. Third, we created a straightforward model to serve 
clients, manage risk well, and focus on stability, 
transparency, and fairness.
    To clean up Countrywide, we dedicated 50,000 teammates who 
helped 2 million customers through modifications and other 
alternatives to foreclosure. We also settled many lawsuits. 
That was largely done by 2015.
    To simplify the company, we divested or closed down more 
than 80 operating units and other activities. We also shrank--
our balance sheet is 20 percent smaller than it was before the 
crisis. We added $100 billion more in capital, and $300 billion 
more in liquidity. During these fixes, we also increased our 
core lending. Today, we have outstanding 35 percent more loans 
to consumers, small businesses, and middle-market companies.
    We also recommitted to our purpose--to serve our clients to 
help make their financial lives better. We do that through 
responsible growth. It has four tenets. First, we have to grow 
to be successful. Second, we have to be customer-focused. This 
focus has led to all-time high customer service scores in our 
company. Along the way, we had to make some policy decisions 
that would help. For example, we ended overdraft at the point 
of sale for debit card transactions in 2010.
    We also focused on small businesses. For example, in 2018 
alone, we originated over $8 billion in small business loans.
    The third tenet of responsible growth is to grow within our 
risk parameters. First off, that requires a strong, engaged 
board of directors that set a clear risk appetite. Couple that 
with an independent risk function of size and scale to govern 
our company. And then it takes a culture of teammates, 200,000 
strong, inspired to live our purpose and do it the right way.
    So today, we have record earnings. And we produce those 
earnings with lower risk. Our market risk is 30 percent lower. 
Our credit risk is at all-time lows and continues to get 
better.
    And finally, responsible growth has to be sustainable. That 
has three elements. We have to drive operational excellence, 
share our success with our communities, and be the best place 
to work for our team.
    Operational excellence allows us to invest, whether it is 
the $3 billion we invest in technology every year, or 
increasing our branches to cover 90 percent of the U.S. 
population over the next 3 years, by adding 350 financial 
centers and 5,000 jobs.
    Second, we share our success with our communities through 
our environmental, social, and governance priorities. Examples 
include: our 10-year, $300 billion environmental business 
initiative for a clean renewable energy future; our corporate 
charity, which now exceeds $250 million a year; our employees 
who volunteer 2 million hours in our communities every year; 
and our $4.7 billion last year in community development lending 
supporting affordable housing and other community priorities.
    And as to governance, our diverse independent board of 
directors brings a range of skills and background, with 44 
percent composition of women and people of color.
    We also have to be a great place to work. And what does 
that mean? In February of 2017, we raised our starting wage to 
$15 an hour. It has gone up since. It will rise to $20 an hour 
over the next 2 years.
    Given the tax reform of 2017, we awarded not one but two 
special bonuses of cash and stock to our teammates for all but 
the top 5 percent--190,000 teammates received over $1 billion 
in additional compensation.
    Last year, we hired more than 27,000 teammates, including 
4,000 from colleges. We have a plan to hire 10,000 teammates 
from our LMI neighborhoods, and we are well ahead of the pace 
in that plan.
    We have a diverse and inclusive team. More than half of our 
global workforce and more than 40 percent of our managers are 
women. People of color make up 45 percent of our U.S. workforce 
and 37 percent of our managers.
    We also provide great cost-effective health benefits, with 
graduated costs for all teammates. For example, we reduced by 
half the employee-paid portion of health benefits 8 years ago 
for our lower compensated teammates. It has not increased a 
dollar since that time.
    With our presence and scale comes a responsibility for 
safety, for soundness, and a responsibility that we be fair, 
accessible, and safe in serving our clients. We are a great 
place to work for our teammates, with a responsibility that we 
serve our communities. We call that responsible growth, and we 
are committed to that. Thank you.
    Chairwoman Waters. Thank you. Will audience members please 
refrain from making any comments in the committee? Order, 
order. The chairwoman is responsible, under the Rules of the 
House and the Rules of the Committee, to maintain order and 
preserve decorum in the room. Members of the audience are 
reminded that disruption-- [Disturbance in hearing room.]
    Would you please remove this gentleman from my committee? 
Come on, officers. I don't have a lot of time. Get him out of 
here. I was nice to him.
    Thank you, Mr. Moynihan.
    [The prepared statement of Mr. Moynihan can be found on 
page 143 of the appendix.]
    Chairwoman Waters. Mr. O'Hanley, you are now recognized for 
5 minutes to present your oral testimony.

  STATEMENT OF RONALD P. O'HANLEY, PRESIDENT & CEO, THE STATE 
                       STREET CORPORATION

    Mr. O'Hanley. Chairwoman Waters, Ranking Member McHenry, 
and members of the committee, thank you for inviting me to 
testify today. Your work is important to the country.
    I was honored to be entrusted to become State Street CEO on 
January 1st of this year. State Street has been headquartered 
in Boston, Massachusetts, since 1792, and today has two main 
lines of business: investment servicing; and investment 
management.
    Our clients are large global institutional investors such 
as pension funds, mutual funds, central banks, sovereign wealth 
funds, endowments and foundations, and insurance companies. We 
operate in 29 countries with over 40,000 employees, 16,000 of 
them in the United States. Last year, more than 40 percent of 
our revenues came from outside the United States.
    Our purpose is to create better outcomes for the world's 
investors and the people they serve. Unlike many other major 
banks, State Street does not serve retail customers directly 
with traditional commercial or retail banking, or provide 
services like mortgages, credit cards, or other consumer 
credit. We also do not engage in investment banking activities.
    Still, we never lose sight of the people we are ultimately 
helping: those saving for retirement, a house or a college 
education; researchers trying to find answers to society's 
biggest challenges; or governments looking to build or improve 
their country's infrastructure.
    Our servicing business includes keeping track of 
investments, often referred to as back office operations. We 
play an important role in the overall infrastructure of 
financial markets, for example, the safekeeping and custody of 
assets.
    We also provide those same institutional investors related 
services, such as foreign exchange, brokerage, and other agency 
trading services, securities finance, and deposit and short-
term investment facilities.
    Within our investment management business, we provide 
pension funds and other institutional investors with a full 
range of investment strategies, including index-based and 
exchange traded funds.
    More than 10 years after the financial crisis, I believe 
the financial system in the United States is safer and more 
resilient. This is largely due to strengthened regulations and 
greater transparency overall. And it is also due to the bold 
action taken by the Congress to stabilize the financial system, 
for which I and State Street are very grateful.
    In 2011, State Street was designated as one of the eight 
U.S. global systemically important banks by the Financial 
Stability Board, because of our role in the financial 
infrastructure that I described earlier. As a G-SIB, we are 
subject to the highest levels of supervision regulation, and we 
take our compliance responsibilities very seriously.
    Since the crisis, our capital and holdings of high-quality 
liquid assets have more than doubled. And we have been subject 
to the Federal Reserve Board's most stringent stress-testing 
and resolution and recovery regimes.
    Along with the rest of the industry, I believe that State 
Street has learned a number of important lessons from the 
financial crisis. One of the most important of them was the 
need to strengthen our top-down risk management systems so that 
we have better transparency around enterprise-wide risks. We 
now have stronger independent control functions and higher 
quality risk analytics.
    The crisis also cast a bright light on the dangers of 
groupthink in corporate leadership. That is one of the reasons 
why our asset management business stepped up its focus on board 
quality and diversity, to promote better business and 
investment outcomes.
    Many of you may be aware of the Fearless Girl statue we 
placed near Wall Street to emphasize the importance of 
diversity on boards and in senior management.
    The crisis also exemplified the risks of short-term 
incentives at the expense of long-term value creation. As 
investors and as a business, State Street has been advocating 
for a greater focus on the long term.
    That includes asking ourselves and the boards of the 
companies in which we are long-term investors whether 
environmental, social, and governance risks have been 
considered. However, we know that we need to do more as an 
industry to regain trust following the crisis.
    We also know that State Street can only be as successful as 
the larger society in which it operates. And we are committed 
to engaging on those issues that will generate shared value for 
all of our stakeholders, including our shareholders, our 
employees, our clients, and our communities.
    Thank you, again, for providing me the opportunity to 
testify today, and I am pleased to answer any questions from 
the committee.
    [The prepared statement of Mr. O'Hanley can be found on 
page 160 of the appendix.]
    Chairwoman Waters. Thank you, Mr. O'Hanley.
    Mr. Scharf, you are now recognized for 5 minutes to present 
your testimony.

STATEMENT OF CHARLES W. SCHARF, CHAIRMAN & CEO, THE BANK OF NEW 
                    YORK MELLON CORPORATION

    Mr. Scharf. Chairwoman Waters, Ranking Member McHenry, 
members of the committee, good morning, and thank you for the 
opportunity to be here today. I appreciate this committee's 
focus on accountability. I work hard to create a culture of 
accountability and compliance at BNY Mellon to ensure we are 
the best we can be.
    I would like to provide a bit of background about the bank 
and our business model before speaking to the financial crisis 
and the advancements we have made over the last decade. In 
2007, the Bank of New York merged with Mellon Financial to 
create BNY Mellon, and today, we are the longest running bank 
in America and a leader in the provision of global custody 
services.
    We operate in more than 35 countries with over 50,000 
employees. We provide investment services and infrastructure 
support for financial markets that help institutions and 
individuals succeed in markets all over the world.
    At BNY Mellon, we are primarily a custody bank, and in that 
capacity, we perform the nuts and bolts administrative 
functions of the financial system. We are not engaged in retail 
banking, nor do we provide financial products such as credit 
cards and auto loans.
    We operate instead as a processing company and a record 
keeper, helping market participants around the world. Our 
businesses include providing custody and other financial 
operational services to government entities, pensions, 
municipal and mutual funds, unions, endowments, corporations, 
and other institutional customers.
    These are simple, straightforward, but important services, 
and we take our responsibilities to our customers and our 
commitment to financial stability very seriously. Our 
specialized role in the global financial system and our 
position as a leading U.S. financial institution allows our 
clients and the U.S. Government to benefit from our unique 
vantage point.
    We work constructively with all stakeholders, including our 
regulators and U.S. policymakers, to provide transparency into 
global asset flows and the state of financial markets. Looking 
back at the financial crisis, BNY Mellon understood then and it 
understands now the gravity of the situation our economy faced.
    Though BNY Mellon's capital position remained strong 
throughout the crisis, we believe the capital investments and 
other efforts undertaken by Congress, Treasury, and the Federal 
Reserve greatly helped stabilize markets and allowed us to do 
more than we otherwise could have to help support and improve 
U.S. financial markets at that time.
    We believe that the global financial system is stronger 
today because of the significant regulatory reforms that have 
been implemented since the financial crisis, but we also 
believe that we should continually re-examine and re-calibrate 
our financial regulations to reflect emerging risks.
    I can say with confidence that BNY Mellon is an even more 
resilient organization today than it was a decade ago. Our bank 
is financially sound, and we work each day to make sure that 
continues. We have simplified our operations and enhanced our 
compliance and ethics processes.
    We are constantly investing in our controls and risks 
systems, and we regularly assess and upgrade our cybersecurity 
infrastructure to meet the challenges posed by new and evolving 
threats. While we don't have direct contact with individual 
consumers, we are committed to supporting our communities 
through our work with unions, retirees, and community partners.
    We also invest in our employees, who are our most important 
asset, and we are proud of our diverse workforce's ability to 
deliver creative insights and solutions that lead to our 
continued success. We believe deeply that diversity, at all 
levels, makes us stronger and contributes to our success.
    Likewise, we understand the importance of serving our 
community. We are proud to be an important part of the history 
and future of New York and Pennsylvania, and we are continually 
making significant local investments.
    We believe it is important that those investments support 
all members of our community, whether it be our educational and 
small business efforts in Pittsburgh, or financing and 
supporting the construction and preservation of approximately 
5,700 affordable housing units in New York City.
    We recognize that we play an important role in the nation's 
financial systems, and we do not take that responsibility 
lightly. We remain committed to retaining your trust, as well 
as that of our regulators and the American public.
    Again, thank you for the opportunity to testify today. I 
look forward to answering your questions.
    [The prepared statement of Mr. Scharf can be found on page 
168 of the appendix.]
    Chairwoman Waters. Thank you, Mr. Scharf.
    And Mr. Solomon, you are now recognized for 5 minutes to 
present your oral testimony.

  STATEMENT OF DAVID M. SOLOMON, CHAIRMAN & CEO, GOLDMAN SACHS

    Mr. Solomon. Chairwoman Waters, Ranking Member McHenry, and 
members of the committee, I appreciate the opportunity to 
discuss with you the changes our firm and the industry have put 
in place in the 10 years since the financial crisis.
    I appreciate this committee's focus on accountability. As 
the new chairman and CEO of Goldman Sachs, on behalf of the 
36,000 employees of the firm, I am proud to tell you we just 
celebrated our 150th anniversary.
    Our clients from around the world range from pension funds 
and retirement funds, endowments, foundations, large and small 
businesses, State and local governments, start-ups and 
individuals, and what remains true today is that our employees 
work every day to provide these clients with best-in-class 
service and to work hard to earn their trust.
    Today, the U.S. financial system is substantially safer and 
more resilient. Financial institutions hold significantly more 
capital and they have materially reduced their leverage and 
their holdings into liquid assets. Since the end of 2007, 
Goldman Sachs equity has more than doubled, our leverage has 
decreased by more than 60 percent, and our liquidity has more 
than tripled.
    We are confident that we can withstand very substantial 
market shocks, and the Federal Reserve's rigorous stress test 
affirms that. Dodd-Frank has made the system safer and we have 
made important progress in adapting to that regulatory 
environment.
    However, after 10 years of experience, it seems appropriate 
to assess whether improvements can be made to avoid 
duplication, inconsistency, and undue costs, in particular on 
our customers and our clients.
    In addition to the Dodd-Frank reforms, we have made a 
number of important enhancements that relate to our business at 
Goldman Sachs. We undertook a 3-year review of the firm's 
business standards and practices, the most extensive review in 
the firm's history, and implemented a number of important 
recommendations, ranging from conflicts of interest to 
transparency and disclosure.
    The changes we made are part of a much longer, much larger 
ongoing commitment by our firm to be more self aware, open to 
change, and to learn the right lessons from experience. We know 
that we will inevitably make mistakes, but we commit to learn 
from them and respond in a way that meets the high expectations 
of our clients and our customers, shareholders, employees, 
regulators, Congress, as well as the broader public.
    As it relates to our business strategy since the crisis, 
Goldman Sachs has recently entered the consumer finance market. 
In 2016, we launched our digital consumer platform called 
Marcus. In designing Marcus, we spoke with more than 10,000 
people across the country to understand their banking needs.
    As a result, we value simplicity and transparency, and 
these are at the core of our consumer products. Marcus is 
evolving into a suite of products and services that can help 
millions of people save, borrow, and spend. We offer online 
savings accounts and certificates of deposit and we currently 
have a savings account rate of 2.25 percent with no monthly 
fees, no transaction fees, and no overdraft fees.
    We also provide customizable, no fee, fixed-rate personal 
loans, which are generally used to consolidate higher interest 
rate debt, or as an alternative to credit cards or other higher 
rate debt.
    One central issue to our broader ability to compete is 
diversity, and I am motivated personally to make real, lasting 
change to improve the diversity of Goldman Sachs. We are 
committed to long-term goals and to increasing the 
representation of diverse communities across all levels of our 
firm, and we hold managers accountable in advancing these 
goals.
    Lastly, I believe we have built a highly impactful set of 
programs that have created opportunities for thousands of women 
entrepreneurs and small businesses. In the last 10 years, we 
have committed more than $2.5 billion to initiatives that 
provide more access to capital, training, and broader community 
support.
    Through our 10,000 small business initiative, we provide 
education by partnering with community colleges, business 
support services, and greater access to capital to thousands of 
small businesses across all 50 States, Puerto Rico, and the 
District of Columbia.
    I am particularly proud that Goldman Sachs is one of the 
largest private contributors to community colleges in the 
United States. Since 2001, we have also committed approximately 
$7.8 billion to our Urban Investment Group to benefit low- to 
moderate-income communities.
    Approximately 80 percent of the Urban Investment Group's 
investments are located in or serve minority communities, and 
last year we announced Launch with GS, a $500 million 
initiative to invest in women-led companies and investment 
managers, which we will expand to include businesses founded, 
owned, or led by people of color.
    Looking ahead, we see tremendous opportunities to deploy 
our investing capital and expertise around core themes that 
define our country's success and progress, including the 
environment, health care, education, infrastructure, and many 
other areas.
    Thank you for the privilege of being here today. I am happy 
to answer any questions that you have.
    [The prepared statement of Mr. Solomon can be found on page 
175 of the appendix.]
    Chairwoman Waters. Thank you very much.
    Before I begin my questions, I would like to take a moment 
to recognize a very special guest in the audience, Reverend 
Jesse Jackson, founder and president of the Rainbow PUSH 
Coalition, who has been involved in fighting for access to 
capital, small business loans, and community development.
    Reverend Jackson?
    [Applause.]
    Thank you very much.
    Let me begin--and I am going to take 5 minutes for 
questioning. Much has been reported about how Deutsche Bank has 
been a pathway for criminals, kleptocrats, and allies of Mr. 
Putin, to move illicit funds out of Russia, but recent 
information shows that some of your institutions have also been 
providing services for Russian individuals or entities that may 
be engaging in questionable transactions.
    In particular, I would like to ask Bank of America, 
Citibank, JPMorgan, and Morgan Stanley to answer the following 
question: Has your respective bank conducted any reviews to 
identify and assess Russian-related accounts?
    Bank of America? Mr. Moynihan?
    Mr. Moynihan. Yes, Chairwoman Waters, we obviously comply 
with all sanctions as required by law and the Federal 
Government, and so we review that on a constant basis, whether 
it is Russian accounts or not.
    Chairwoman Waters. Thank you very much. If so, did you 
identify any suspicious accounts or transactions?
    Mr. Moynihan. Not to my knowledge, but we do regularly 
investigate all accounts.
    Chairwoman Waters. So you have no reason to have taken any 
actions as a result of your findings, is that right?
    Mr. Moynihan. Not that I am aware of.
    Chairwoman Waters. Thank you. Let me ask Citibank next?
    Mr. Corbat. Thank you, Madam Chairwoman. We take our 
responsibilities around AML very seriously--
    Chairwoman Waters. Yes. But has your respective bank 
conducted any reviews to identify and assess Russian-related 
accounts?
    Mr. Corbat. We have conducted thorough investigations and 
can't comment on an ongoing investigation--
    Chairwoman Waters. Okay. So did you identify--you are 
saying that as a result of your investigation, you did 
identify, maybe, some suspicious accounts or transactions?
    Mr. Corbat. I can't comment on an ongoing--
    Chairwoman Waters. You can't comment on that. So you have 
not taken any action as a result of your findings because you 
can't comment, is that right?
    Mr. Corbat. We take it very seriously and we are always--
    Chairwoman Waters. Okay, Morgan Stanley, what about you? 
Has your respective bank conducted any reviews to identify and 
assess Russian-related accounts?
    Mr. Gorman. We conduct regular reviews consistent with U.S. 
sanctions.
    Chairwoman Waters. Very good. Did you identify any 
suspicious accounts or transactions?
    Mr. Gorman. Not to my knowledge, Chairwoman Waters.
    Chairwoman Waters. And so you have not taken any action, is 
that right?
    Mr. Gorman. That is correct.
    Chairwoman Waters. Thank you very much. Mr. Corbat, you 
mentioned that you had downsized somewhat, you have eliminated 
some business lines. Have you determined that that helped to 
make management easier in your bank?
    Mr. Corbat. In our bank, we have downsized considerably 
since the financial--
    Chairwoman Waters. How many business lines did you 
downsize?
    Mr. Corbat. Seventy.
    Chairwoman Waters. And has it made management easier?
    Mr. Corbat. Yes, it has.
    Chairwoman Waters. Mr. Dimon, what about you? Have you 
eliminated any business lines?
    Mr. Dimon. We, every year, look at all of what we call 
hobbies and small businesses and things that cause problems and 
close them down, so the answer is yes.
    Chairwoman Waters. How many business lines have you 
eliminated?
    Mr. Dimon. If I remember correctly, 17.
    Chairwoman Waters. Has it made management better?
    Mr. Dimon. Sure.
    Chairwoman Waters. Thank you. What about you, Mr. Gorman?
    Mr. Gorman. Yes, we have downsized a number of different 
businesses.
    Chairwoman Waters. Has it made management better?
    Mr. Gorman. It certainly makes it organized--
    Chairwoman Waters. Thank you. Mr. Moynihan, have you 
downsized any business lines and stuck to your core business?
    Mr. Moynihan. Yes, we have, as I said in my opening 
statement--
    Chairwoman Waters. Has it made management easier and 
better?
    Mr. Moynihan. It has made it more focused, yes.
    Chairwoman Waters. Thank you. Mr. O'Hanley, what about you?
    Mr. O'Hanley. Yes, we have.
    Chairwoman Waters. Has it made management better?
    Mr. O'Hanley. Yes, it has.
    Chairwoman Waters. Mr. Scharf, what about you?
    Mr. Scharf. I am not aware of that.
    Chairwoman Waters. You are not aware of what is happening 
in your bank?
    Mr. Scharf. I am not aware that we have downsized or 
eliminated businesses.
    Chairwoman Waters. So you have not reviewed, and you don't 
know, is this something you think you need to take a look at?
    Mr. Scharf. Chairwoman Waters, I have reviewed the 
businesses that we are in and I don't think that we should be 
eliminating businesses that we are in, and to the best of my 
knowledge, we didn't exit businesses since the crisis.
    Chairwoman Waters. Mr. Solomon? I can't hear you.
    Mr. Solomon. I apologize. We have eliminated a handful of 
businesses since the crisis.
    Chairwoman Waters. Thank you. Today, there are more than 44 
million Americans who owe--this is the student loan crisis--
$1.56 trillion in student loan debt. Last month, this committee 
received testimony that last year, one million student loan 
borrowers defaulted, which is on top of the one million 
borrowers who defaulted the year before.
    What are you guys doing to help us with this student loan 
debt? Who would like to answer first? Mr. Moynihan?
    Mr. Moynihan. We stopped making student loans in 2007.
    Chairwoman Waters. Oh, so you don't do it anymore. Mr. 
Corbat?
    Mr. Corbat. We exited student lending in 2010.
    Chairwoman Waters. Mr. Dimon?
    Mr. Dimon. When the government took over student lending in 
2010 or so, we stopped doing all student lending.
    Chairwoman Waters. Thank you. What about small business? 
You mentioned that you were making loans to small businesses. 
Small business operators can't walk into your bank and get 
accounts. You kind of shoved that off to community development 
organizations.
    Who can say that you have made an important business line 
lending to small businesses?
    Mr. Moynihan. Chairwoman Waters, as I said earlier, we made 
$8 billion in loans up to $100 million size last year, and we 
have operating accounts for about 9 million small businesses.
    Chairwoman Waters. Thank you. My time is up.
    The gentleman from North Carolina, Ranking Member McHenry, 
is recognized for 5 minutes.
    Mr. McHenry. Well, about that, small business lending, Mr. 
Moynihan, does Bank of America lend to small businesses?
    Mr. Moynihan. As I said, we made $8 billion in new small 
business--
    Mr. McHenry. The answer is yes or no.
    Mr. Moynihan. Yes.
    Mr. McHenry. You lend to small businesses. Mr. Corbat, do 
you lend to small businesses?
    Mr. Corbat. Yes, we do, we--
    Mr. McHenry. Mr. Dimon, do you lend to small businesses?
    Mr. Dimon. We do business with 4 million small businesses.
    Mr. McHenry. All right, fantastic.
    So let me get back to systemic risk here. Let's get back to 
this fundamental question. We see what is happening in China's 
slowing pace of the Chinese economy. We see the slowing pace of 
the E.U. economy, and we see the debate going on between the 
U.K. and the E.U. in their relationship and the potential of a 
no-deal Brexit on Friday.
    So let's talk about systemic risk, and I just want to ask 
the panel--and I hate to do this, but there are seven of you. 
Just simple, you can give me an affirmative or a negative, 
however you see fit. But in the event of a hard Brexit, a no-
deal Brexit on Friday, does that pose a challenge to the 
international financial system?
    Mr. Corbat. A challenge, but we don't see systemic risk.
    Mr. McHenry. You don't see systemic risk, but a challenge, 
right? Distinction?
    Mr. Dimon. It is a challenge. We are prepared for it, but 
we don't know all of the potential outcomes from it.
    Mr. Gorman. I would agree with my colleagues. I think it is 
a challenge, but it is certainly not--rises to systemic.
    Mr. Moynihan. I would agree. It is a challenge. We spent--
the industry spent a lot of time preparing for it, and I also 
agree that it is not entirely certain exactly what will happen, 
but it is a challenge.
    Mr. O'Hanley. We have spent a great deal of time preparing 
for it on our own behalf and for our clients. I think it will 
be a challenge for the world economy.
    Mr. Scharf. I also believe it will be a challenge. I think 
we and our clients are prepared for it, but I don't believe we 
understand all of the potential ramifications.
    Mr. Solomon. I believe it will be a challenge. We have 
spent a lot of time preparing for ourselves and our clients, 
but I think it is hard to see some of the second or third 
derivative risks that could come out of that outcome.
    Mr. McHenry. Okay. So according to your public filings, Mr. 
Corbat and Mr. Scharf, your two institutions have the greatest 
exposure to the U.K. of any institution on the panel, so let me 
ask you this question--do you have contingency plans for a no-
deal Brexit on Friday?
    Mr. Corbat. Since Article 50 was filed, we have prepared 
with a mindset and an eye towards a hard exit. So, yes, we have 
plans in place.
    Mr. Scharf. We also have been planning for a hard Brexit.
    Mr. McHenry. Okay, so in light of that, what is the nature 
of your plans? Mr. Corbat?
    Mr. Corbat. We have relocated our bank out of the U.K. to 
Ireland, which passports, and so it is fully compliant with 
E.U. banking. We have moved our broker-dealer, or a portion of 
our broker-dealer from the U.K. to Germany, to Frankfurt, and 
it is licensed and it is operational, and we have moved the 
necessary people--front office, middle office and back office--
to support those.
    Mr. McHenry. And has this taken a portion of your time over 
the last 3 years for this contingency planning?
    Mr. Corbat. It certainly has.
    Mr. McHenry. Okay. And it is an important issue for you.
    Mr. Corbat. It is.
    Mr. McHenry. Okay.
    Mr. Scharf?
    Mr. Scharf. We have a bank that is headquartered in 
Belgium, and we have moved a series of the activities of the 
company from the U.K. to Belgium. We also have built up control 
functions and moved individuals onto the continent and away 
from the United Kingdom. Probably most importantly, we have 
worked very closely with our clients on moving their 
transactions into different entities and all of the required 
paperwork that goes along with that.
    Mr. McHenry. Okay, and so let me segue to China, another 
issue of systemic risk for the Federal Reserve, in the latest 
disclosure of their meeting minutes. Along those lines, Mr. 
Solomon, your institution recently divested or sold off your 
investment, the Commercial Bank of China. Previously, Mr. 
Moynihan, Bank of America had investments along the same lines 
in China, I believe, prior to your ascent to CEO and chairman 
of your organization.
    So in light of that, Mr. Solomon, is this an eye towards 
the challenges of the Chinese economy, or was this about 
simplifying your business? Was this about systemic risk, or the 
regulation of Chinese banks, the intervention of Chinese banks?
    Mr. Solomon. We had made that investment years ago--at the 
time, that bank was going public in the international markets, 
in partnership with them. It was a financial investment, and 
there came a point in time when the financial investment had 
seasoned, and so we sold it. It wasn't related to the broader 
issues of the economic relationship between the U.S. and China.
    Mr. McHenry. All right, thank you all for your testimony. I 
think systemic risk is an important discussion and topic today, 
as well as overall regulation.
    I yield back.
    Chairwoman Waters. Thank you very much.
    The gentlewoman from New York, Ms. Maloney, who is the 
Chair of our Subcommittee on Investor Protection, 
Entrepreneurship, and Capital Markets, is recognized for 5 
minutes.
    Mrs. Maloney. Welcome.
    After the Parkland shooting last year, where a lone gunman 
killed 17 students and staff with a military-style 
semiautomatic rifle, two of the banks on this panel, Citibank 
and Bank of America, stepped up to the plate and adopted formal 
policies limiting their business with certain gun industry 
clients, and I want to publicly thank them.
    Now, Mr. Dimon, last week you published your letter to 
shareholders. In the section on responsible banking, you wrote 
the paragraph that is up on the screen right now. You said that 
turning down clients with low character is ``often the only way 
to be a responsible bank.''
    Well, actions speak louder than words on guns, Mr. Dimon, 
and from what I can tell, these are just words to you. Let's 
talk about some of the actions on your bank's activities. Even 
after the horrific massacres at Sandy Hook, Las Vegas, and 
Parkland, JPMorgan has arranged about $273 million of loans for 
the manufacturers of military-style firearms, the same weapons 
that are being used in mass shootings all over our country.
    Even worse, last year JPMorgan took partial ownership of 
Remington, the manufacturer of the exact gun that was used to 
kill 20 children in the Sandy Hook shooting, and JPMorgan has 
refused to adopt a policy to ensure responsible lending to the 
gun industry, even though you claim that client selection is 
important, and even though two of your competitors have already 
adopted these policies.
    So my question is, will you live up to your own rhetoric? 
Will you commit to adopting a formal policy that ensures 
responsible lending in your bank's business with the gun 
industry?
    Mr. Dimon. Everything we do with clients goes through a 
severe process of review, reputational risk, et cetera. We have 
very small relations with gun manufacturers. They are the same 
gun manufacturers who make military equipment for the United 
States military and for the United States police force, which 
we hold in the highest regard.
    Regarding sellers of guns, there are over 100,000 retailers 
out there who sell guns. Every single one that we do business 
with, we do a thorough review. They are audited by the ATF, in 
spite of the fact, only 6 percent a year. They are regulated by 
State and Federal Government, and if we think they are doing 
something wrong, our Risk Committee stops doing business with 
them.
    Mrs. Maloney. Well, that is not what I was asking. I was 
asking you to adopt a formal policy for your bank on 
responsible business like your competitors have with the gun 
industry.
    Mr. Dimon. We can certainly consider that, yes.
    Mrs. Maloney. Going on to the next question, in 2009, I 
passed the Credit Card Act, which the Consumer Financial 
Protection Bureau (CFPB) says has saved consumers $16 billion a 
year. And by the way, all of you on this panel opposed that 
legislation, even though it has not hurt your bottom line at 
all.
    And now I am trying to do the same thing for overdraft, 
because unfair overdraft fees cost consumers $15 billion a 
year. So I was looking at CFPB's Consumer Complaint Database, 
and there are over 1,500 complaints about abusive overdraft 
fees.
    A surprising number of your customers, Mr. Dimon, 
complained about Chase engaging in one of the worst overdraft 
practices, recording transactions so that the largest 
transaction, such as a rent payment, is processed first, which 
maximizes the number of overdraft fees you can charge the 
customer.
    A typical complaint from one of your customers is up on the 
screen right now. My bill, the Overdraft Protection Act, would 
make this practice illegal because you are essentially gouging 
your most vulnerable clients, the ones who are living paycheck 
to paycheck.
    So let me ask you, given that your bank clearly won't end 
this practice voluntarily, do you think it is time to simply 
prohibit these kinds of abusive overdraft practices by laws? 
That is what my bill would do, and I welcome your comments, Mr. 
Dimon and others, on overdraft.
    Would you accept a law banning this practice? Would you 
support such a law?
    Mr. Dimon. The overdraft policy as it stands today, which 
was changed, by the way, in 2009, is that the client has to opt 
in. They are given a choice on opening the account, about 
whether they want to have overdraft features or not. Remember, 
those overdrafts very often stop--
    Mrs. Maloney. What about reordering transactions?
    Mr. Dimon. They often stop from paying far worse fees 
elsewhere.
    Mrs. Maloney. My time has expired. May I ask for a response 
in writing from the panelists who have retail business?
    Chairwoman Waters. The gentlewoman from Missouri, Ms. 
Wagner, is recognized for 5 minutes.
    Mrs. Wagner. Thank you, Madam Chairwoman.
    And welcome to all of you. One of the questions that I 
always like to ask, when considering action or inaction as a 
Member of Congress, is how does this hearing, this bill, or 
this regulation create jobs and grow the economy in my district 
of St. Louis, Missouri, and across the nation? My constituents 
want good-paying jobs and opportunities for themselves and 
their children, their families.
    Mr. Solomon, can you discuss how your institution supports 
access to capital for consumers to buy a home, start a 
business, or send their kids to college?
    Mr. Solomon. Sure. We generally have not been a consumer 
bank, but we have just started a very, very small consumer 
business. At this point in time, we take deposits and we make 
small unsecured loans for consumers that amount from $3,500 to 
$40,000. But it is a very, very small business. We are not 
currently in the business where we make mortgages for 
consumers, but we might at some point in the future.
    Mrs. Wagner. Mr. Moynihan, could you answer that question? 
How are you helping my constituents get capital to buy homes 
and start a business and send their kids to college?
    Mr. Moynihan. Sure. We provide, obviously, mortgage loans 
to about 3 or 4 percent of the American population. We do it 
directly. Last year, that was $50 billion in mortgage loans.
    But recently, we recognized that the time to save for a 
down payment has become longer under the current rules and 
regulations. So we built a $5 billion program to speed up the 
time, to help people who may not be advantaged by having 
parents or someone who could give them the money. It is down 
payment assistance. It is 3 percent down. And that goes on our 
balance sheet. Good credit quality. And we do programs like 
that.
    And last year, we did $4.7 billion in low- and moderate-
income affordable housing. Not only homes to own, but homes to 
rent and a good place to live, which we think--
    Mrs. Wagner. How much in low- and moderate-income housing?
    Mr. Moynihan. $4.7 billion last year. Since the crisis, 
probably $35 billion, $40 billion.
    Mrs. Wagner. Right. You all are not just banks that provide 
credit and loans. You are also providing hundreds of thousands 
of good-paying American jobs. Could we quickly go down the 
line? And I would ask each one of you--if you are able--to 
quickly answer, how many people do your institutions employ 
here in the United States of America?
    We will start at the end here, Mr. Corbat, with you.
    Mr. Corbat. 67,000.
    Mr. Dimon. Over 150,000.
    Mr. Gorman. I believe 45,000.
    Mr. Moynihan. In the U.S., 190,000--or 180,000.
    Mr. O'Hanley. 16,000 in the United States.
    Mr. Scharf. 26,000.
    Mr. Solomon. A little less than 20,000 in the United 
States.
    Mrs. Wagner. Great. Thank you. Large financial institutions 
play an important role in the broader banking ecosystem.
    Mr. Gorman--or anyone, actually, who can answer best--can 
you talk about your relationship with banks of other sizes, 
like community banks and regional banks? While I am sure you 
compete with other banks for some services, do you not also 
provide critical services to many of the smaller banks and 
institutions?
    Mr. Gorman. Yes, we do. We engage in a number of activities 
for them, whether it is raising capital, helping them manage 
their liquidity, providing various forms of financial advice, 
and being there as a participant in the markets, with other 
financial institutions.
    A lot of the smaller financial institutions don't have the 
technology, some of the capability that the larger institutions 
are blessed to have, simply because of their scale.
    Mrs. Wagner. Anyone else? Mr. Corbat?
    Mr. Corbat. Yes. We provide financial services for banks of 
all shapes and sizes, community banks, regional banks, national 
banks. And every bank sitting at this table with me is a client 
of our bank.
    Mrs. Wagner. Very good point.
    I also serve as the ranking member on our Diversity and 
Inclusion Subcommittee. Mr. Moynihan, who drives diversity and 
inclusion at Bank of America?
    Mr. Moynihan. I do. And the other management team members 
drive it.
    Mrs. Wagner. You know, it is interesting. Most people talk 
about diversity and inclusion as kind of an H.R. issue. Why is 
it important to you as a CEO, and to the business?
    Mr. Moynihan. We want to have a company that would be the 
best place to work. We want every teammate to come to us and 
simply be able to say, ``No matter who I am when I come in the 
door, I can be all I want to be while I am here.''
    Mrs. Wagner. Do you have pathways to more senior positions 
that are filled with qualified people who have successfully 
added diversity to your company?
    Mr. Moynihan. Sure. We are 50 percent women, 40-plus 
percent women managers. Just in the last 3 years, the top 3 
layers in the company went from about 35 percent women to 45 
percent women. In terms of people of color, we are 45 percent 
overall, people of color, and 37 percent people of color 
managers.
    And we continue to watch that in every unit, in every 
business review. We are making progress to the goal of having 
our company reflect society at large. But importantly, we want 
to make sure that people can go from an entry job to our jobs. 
And that is what we are striving for.
    Mrs. Wagner. Great. Thank you very, very much. My time has 
expired.
    I yield back, Madam Chairwoman.
    Chairwoman Waters. Thank you.
    The gentlewoman from New York, Ms. Velazquez, is recognized 
for 5 minutes.
    Ms. Velazquez. Thank you, Madam Chairwoman.
    Mr. Corbat, the Citigroup board awarded you more than $24 
million in compensation for 2018. According to the bank's 2019 
proxy statement, the median compensation for employees at Citi 
was $49,766.
    As a result, Citigroup has the dubious distinction of 
having the largest discrepancy between CEO compensation and 
median employee salary of any of the institutions present here 
today, a remarkable 486 to 1 ratio. Does this ratio seem fair 
to you? I cannot hear you, please.
    Mr. Corbat. Congresswoman, I don't think that is fair to 
me, to judge. I would say that I completely acknowledge that I 
am very fortunate. I started at our firm 36--
    Ms. Velazquez. I am just asking if that seems fair to you, 
the ratio of the amount of money that you are making compared 
to the $49,000 that the average employee is making.
    Mr. Corbat. My compensation is decided by our board and 
voted on by our shareholders every--
    Ms. Velazquez. Okay. I understand, you don't set your own 
salary. Few people do. But we do set salaries for the people 
who work underneath of us.
    So if you are not happy with the pay ratio at your firm, 
there are two ways to correct it, because believe me, it 
doesn't look good. Lower your salary or raise the salary of 
others.
    So let me ask you this question, if you were an employee 
and you saw your boss making $486 for every dollar you made, 
how would you feel about that situation?
    Mr. Corbat. I would be hopeful that there is opportunity to 
continue to advance within the firm.
    Ms. Velazquez. Well, that's just unbelievable. And this is 
why people who live in a bubble or ivory towers cannot 
understand why there is so much anger out there, especially 
among students and millennials who graduate with student debt 
in one hand and a diploma in the other.
    Mr. Dimon, last week in your annual letter to shareholders, 
you stated that, ``Simply put, the social needs of far too many 
of our citizens are not being met.'' You also noted that, 
``Income inequality is getting worse.''
    However, in that same note to shareholders, you observe 
that Congressional Republicans' tax cut helped raise your 
bank's profits by $3.7 billion last year alone. In fact, it has 
been estimated by the FDIC that major banks made an additional 
$28.8 billion in profit last year through the Republicans' tax 
cut.
    One reason so many financially struggling Americans like 
those referenced in your note view these cuts as unfair is that 
while the individual tax cuts expire, the majority of corporate 
tax cuts were made permanent.
    So I would like to ask you a simple yes-or-no question. 
Given your acknowledgement of worsening income inequality, and 
given banks' record profits, would you at minimum support 
unsetting the corporate tax cut?
    Mr. Dimon. No.
    Ms. Velazquez. Mr. Dimon, when working families see that 
their tax cut is set to expire but your company's is made 
permanent and is posting a record $32.5 billion in a single 
year as a result, can't you see why so many Americans find your 
income inequality comments disingenuous? Can you see why that 
position strains credibility?
    Mr. Dimon. Yes, but it is incorrect. The American 
Government reduced tax rates on businesses to make America 
competitive. We have been sending trillions of dollars of 
capital overseas--
    Ms. Velazquez. How can we make America--
    Mr. Dimon. --because we were competitive--
    Ms. Velazquez. Reclaiming my time, how can we make America 
competitive when there is a large number of young people who 
are graduating and they see no future?
    Mr. Dimon. Right. So this group pays all of their employees 
quite well, including medical, retirement. Minimum wage is 
usually at $18, $37,000 a year, something like that.
    Competitive business will drive wages and jobs over time. 
What we do on the individual side is separate. So in that same 
letter, I supported expanding the earned income tax credit to 
help people--
    Ms. Velazquez. I yield back my time.
    Mr. Dimon. --who are making less money--
    Chairwoman Waters. Thank you. The gentlelady yields back.
    The gentleman from Oklahoma, Mr. Lucas, is recognized for 5 
minutes.
    Mr. Lucas. Thank you, Madam Chairwoman.
    And I would just offer an observation to our panel, as I 
begin my questions. I come from a multigeneration--a group of 
debtors. So understand my perspective as a customer to the 
financial institutions.
    In addition to my responsibilities on this committee, 
though, I also serve as ranking member of the House Science 
Committee. And for just a moment, let's talk about the issues 
that impact your customers, the safety and security of their 
information and, for that matter, their money.
    On the Science Committee, among other things, we have 
jurisdiction over a portion of the cybersecurity regulatory 
regime. And your institutions bear a lot of responsibility for 
cybersecurity, due to the business that you are engaged in.
    But the regulatory structure for cybersecurity is, in many 
ways, just as complex as the financial regulations. The sheer 
number of agencies involved in the issue is astounding.
    The White House, OMB, DHS, NIST, FDIC, the Fed, OCC, SEC, 
and CFTC are just some of the Federal agencies with 
cybersecurity policies applicable to your institutions. And 
this says nothing of the State-based or international 
regulations that are also in place, for you all to depend on in 
dealing with your customer base.
    We can all agree that cybersecurity is of the utmost 
importance. But I find myself wondering about the cost of 
implementing this large web of regulations.
    Could you elaborate further on how you comply with these 
various cybersecurity rules, since this is critically important 
to your customers and my fellow citizens?
    Mr. Dimon. I think--
    Mr. Lucas. Be brave, Mr. Dimon.
    Mr. Dimon. We spend $600 million a year in cyber. All of us 
spend huge amounts of money to protect privacy, the system. I 
agree with you, cyber risk is probably the biggest risk the 
financial system faces in the world. It is a global risk.
    And you are absolutely correct. All of those folks get 
involved, and it makes it very complicated. But on a good and 
happy note, after this meeting, most of us are going over and 
meeting with a bunch of those agencies and our top security 
officers, to try to get it a little more coordinated so we can 
do a better job of protecting the United States of America.
    Mr. Moynihan. I think that I would add to that, in that 
working with these colleagues plus the broader groups of 
colleagues in our industry, you will find that the financial 
services industry, despite all the things you talked about, 
has, like many things, just taken it upon themselves to drive 
successful implementation.
    And so we all spend a lot of money, as Jamie said. But the 
important thing is, we make available, through FSARC and FS-
ISAC and the various groups, all the information we can glean 
all the way through the system.
    So if we find an issue, we make sure everybody in the 
financial system knows it, as fast as humanly possible, whether 
it is big banks, small banks or everything in between.
    And that is something, I think, that we have driven in our 
industry, irrespective of the number of regulators and the 
amounts of different people looking at it. We believe it is 
incumbent upon us to protect ourselves.
    Mr. Lucas. Clearly, and the impact not on just your 
operations, but even my smallest financial institutions in 
Oklahoma, they stress and strain even more trying to address 
those issues, and as a society, as we moved away from checks 
and cash to all the electronic transactions, it is a bit 
unnerving to the folks.
    Again, anyone else care to touch on this, how you are 
trying to address this issue?
    Mr. O'Hanley. What I would add to this is that I do believe 
that cyber is a clear and present danger to the financial 
system, and I think that we have to move from an adversarial-
based system into one where there is real cooperation between 
and among the institutions, which exists now, but between and 
among the institutions and regulators.
    Mr. Gorman. Congressman, just to give a sense of scale, 
Morgan Stanley, 5 years ago, we spent approximately $50 million 
on cybersecurity. This year, we are spending in excess of $400 
million on it, building so-called fusion centers in Baltimore, 
New York, Singapore, and Glasgow, all designed and working hand 
in hand with the government agencies.
    This is the single most existential threat to the financial 
system, in my opinion.
    Mr. Corbat. And Congressman, I would close by saying that 
it is not just the interest of what we do in America to protect 
America's interests, it is what these institutions also do 
around the world in terms of cyber, in terms of protecting our 
American clients' information.
    Mr. Lucas. With that, Madam Chairwoman, I yield back.
    Chairwoman Waters. Thank you very much. The gentleman from 
California, Mr. Sherman, is recognized for 5 minutes.
    Mr. Sherman. We are here because of what happened 10 years 
ago, but due to post-traumatic stress, we forgot what happened 
10 years ago. Ten years ago, Hank Paulson, in your industry, 
came to Congress with their TARP program, the Toxic Asset 
Recovery Program. The plan was for the Federal Government to 
buy toxic assets from you, that is to say to buy the worst 
mortgages in the back of your vault.
    If we had spent $700 billion on toxic assets, we would have 
lost the lion's share of the $700 billion, and the effect on 
our social structure, if we were having this hearing, and the 
Federal Government had lost the lion's share of $700 billion, 
would be that everybody in this room would be a socialist. That 
is the effect it would have had on our social fabric.
    Instead, this House stood strong, this House demanded 
changes. They jettisoned the idea of buying toxic assets and 
instead bought preferred stock, and the only reason we got our 
money back and the only reason that capitalism continues to be 
the majority view in this country is because we didn't buy 
toxic assets, but instead, by buying preferred stock, we got 
our money back with interest.
    Real capitalism is that every bank of every size competes 
fairly, but too-big-to-fail is too big to exist. For 10 years, 
Senator Bernie Sanders and I--and I invite more co-sponsors 
this year--have been putting forward our bill to say too-big-
to-fail is too big to exist; the giant institutions need to be 
broken up.
    Why? I will give you the capitalist reason why. The IMF 
study says that you derive an 0.8 percent cheaper cost of funds 
because Wall Street knows, big money knows that if you are 
going down, you will be here and they believe we will bail you 
out, whereas a medium or small bank, if they go down, their 
creditors are not getting bailed out, to the extent they are 
over the FDIC limit.
    Let's talk about consumer protection. I would like you to 
raise your hand if you don't impose forced arbitration 
provisions on your regular middle-class customers. Everyone 
is--let the record show that, with the exception of Mr. Gorman, 
every hand went up.
    So, Mr. Dimon, that means if one of your customers, say, 
had a phony account opened by an overzealous one of your 
employees and they already had one account with you, but all of 
a sudden, the different account got opened, they would be free 
to go to court?
    Mr. Dimon. We prefer arbitration, but we give them $500 to 
take us to a small claims court, so they are free to go to 
court.
    Mr. Sherman. Wait a minute. You get a phony account, your 
credit rating goes down, you miss an opportunity to buy a 
house, 2 years later, that house is worth $100,000 more and you 
get to go to a small claims court about that?
    So you are saying that you will not allow the regular court 
system to be available to them. Is that correct, Mr. Dimon?
    Mr. Dimon. I think that is the regular court system.
    Mr. Sherman. The small claims court is a separate court 
system. You will not allow them to go to Federal court, you 
will not allow them to go into a court of general jurisdiction. 
Is there anyone--well, I will do it again, is there anyone here 
who would allow a regular, middle-class customer to, if they 
had a dispute, go to a regular court of general jurisdiction? I 
see one hand went up--Mr. Corbat's hand went up.
    I want to focus on Ms. Maloney's bill. For one, it would 
prohibit manipulating the order in which you debit an account 
in order to maximize overdraft protection.
    How many--please raise your hand if I can count on your 
lobbyists here in Washington, and you all have them, to support 
a bill that will prevent manipulating the order in which 
accounts are debited? Not a single hand--oh--ah. Thank you.
    Mr. Dimon. I would need to see the whole bill.
    Mr. Sherman. What?
    Mr. Dimon. The whole bill.
    Mr. Sherman. Okay, but this one provision you would 
support?
    Chairwoman Waters. Thank you. The gentleman from Florida, 
Mr. Posey, is recognized for 5 minutes.
    Mr. Posey. Thank you, Madam Chairwoman, and thank you, 
witnesses, for appearing today. I have noticed a recent trend 
to withhold or withdraw banking services from completely legal 
businesses, which seem to have found disfavor with the media or 
in some political groups.
    And so my question is exactly what your bank's policy is on 
that matter and your rationale behind that policy, and we will 
start with Mr. Corbat.
    Mr. Corbat. Our bank's policy is that we have a screening 
process that has taken on any significant business decision 
through our business practices committee, and when that 
committee can't come to a decision, it is ultimately escalated 
to the board.
    We then have the creation of a policy which we then publish 
and enforce with our clients as we go forward.
    Mr. Posey. Okay. Do you do that on every single account 
that is opened at your bank?
    Mr. Corbat. No, this is not necessarily account-specific. 
This would be more issue-specific.
    Mr. Posey. Well, can you give me an example of some of the 
businesses that you don't think you should do business with?
    Mr. Corbat. Well, I think we have taken stances, as was 
earlier talked about, in terms of our interaction with 
retailers in the United States around the best practices of--
    Mr. Posey. No, just give me some examples of people you 
don't like to do business with, or you are not doing business 
with, or that you refuse to do business with.
    Mr. Corbat. Well, people we don't like or are not doing 
business with, I would say would be sanctioned individuals in 
the United States today.
    Mr. Posey. Okay. Any industries you don't particularly care 
for?
    Mr. Corbat. I'm sorry?
    Mr. Posey. Any industries you don't particularly care to do 
business with?
    Mr. Corbat. None in particular.
    Mr. Posey. Okay.
    Mr. Moynihan, same question?
    Mr. Moynihan. We have an ESG committee that is a group of 
businesspeople and various members from our senior team who 
make a decision on what we do. And so these are based on us 
taking a look at what we think the right thing for our 
teammates and the communities we serve are.
    Mr. Posey. So are there any completely legal businesses in 
this country that you don't do business with, or that you will 
not do business with?
    Mr. Moynihan. Sir, I assume you are referring to this 
decision we made after having over 100 teammates who were 
directly affected by these horrible situations and people in 
places like Las Vegas, the Parkland shooting--100-plus of our 
teammates, the Pulse Nightclub, 5 were in there, that group 
came to the conclusion that we ought to continue to work with 
manufacturers of certain firearms, et cetera, but for people 
who wouldn't modify their practices for a limited gun type, we 
made a decision that we would ask them to change. If they 
didn't, we wouldn't do business with them, but it was based on 
our teammates pushing the issue.
    Mr. Posey. Any other businesses besides the weapons 
industry?
    Mr. Moynihan. Many years ago, one of my predecessors made a 
decision about the way we would work with tobacco companies in 
the United States, and I think these come up one at a time, and 
we make a decision. Our relationship with various energy 
companies is determined by--we have oil companies we do 
business with. We have some coal companies we don't do as much 
business with. But it is all based on our determination based 
on our committees and our teammates making a decision.
    Mr. Posey. Okay.
    Mr. Dimon, you already said that you are okay with making 
loans to people who manufacture weapons for our military and 
stuff, and I appreciate your comment.
    Mr. Solomon, same question to you.
    Mr. Solomon. We have a process of vetting.
    Mr. Posey. Okay. Anybody that you have found objectionable?
    Mr. Solomon. There are no industries, but there are certain 
companies in certain industries based on practices that we 
won't specifically deal with.
    Mr. Posey. Okay. Such as?
    Mr. Solomon. We don't do business with companies that 
manufacture assault weapons, bump stocks or high-capacity 
magazines.
    Mr. Posey. Okay.
    Mr. Scharf?
    Mr. Scharf. Our clients are predominantly financial 
institutions and asset managers.
    Mr. Posey. Speak up a little bit.
    Mr. Scharf. Our clients are predominantly financial 
institutions and asset managers, and we do a series of 
suitability reviews on those clients and make individual 
determinations.
    Mr. Posey. Are there any you have found objectionable and 
you don't want to do business with?
    Mr. Scharf. No.
    Mr. Posey. Okay.
    Mr. Scharf. Not as an industry.
    Mr. Posey. Okay.
    Mr. Scharf. As individuals, yes.
    Mr. Posey. Mr. Gorman?
    Mr. Gorman. Yes, sir. We have a franchise committee which 
evaluates different transactions for companies. Obviously, we 
don't--
    Mr. Posey. Okay, I am running out of time. Have you found 
any you don't want to do business with?
    Mr. Gorman. We have restricted our activities for those 
having retail sales of automatic and semiautomatic weapons.
    Mr. Posey. Okay.
    Mr. O'Hanley, you are the only one left here.
    Mr. O'Hanley. We serve investors, so--
    Mr. Posey. I understand that. Any investors you have 
refused to do business with because political groups don't like 
them?
    Mr. O'Hanley. No.
    Mr. Posey. Okay, thank you.
    Thank you, Madam Chairwoman. My time has expired.
    Chairwoman Waters. The gentleman from New York, Mr. Meeks, 
who is the Chair of our Subcommittee on Consumer Protection and 
Financial Institutions, is recognized for 5 minutes.
    Mr. Meeks. Thank you, Madam Chairwoman.
    And let me just also emphasize another reason why we are 
here is the lack of trust that the American people, the average 
American people are having now in our financial institutions. 
We have to fix that trust.
    And one of the reasons why we have that lack of trust is 
what Ms. Maloney has said when you talked about overdraft 
checking. People feel they are getting ripped off with 
overdraft checking. So that is why I urge you to make sure that 
your policies change, because that then gives the American 
public an idea that they are getting a fair deal.
    The other reason why we are here is--and I know you have 
stated in your testimony that most of you have recovered fully. 
Well, when I look at individuals in my district who lost their 
homes, they have not recovered fully. They are still suffering. 
Many who had owned homes and now are permanent renters, and 
they are in financial decline.
    It prevented them from allowing their children to go to 
school, like my parents, who bought their home and were able to 
utilize that investment so that I could get educated. That is 
part of what the problem is here. And so the societal ills of 
foreclosure are tremendous.
    So I will ask Mr. Moynihan, I guess, Bank of America had a 
lot. Are you and your company looking at any alternatives to a 
foreclosure that can keep a borrower in their home even in the 
face of financial shock? I never hear--I mean, this is 
something that the American people want, something that is 
given to them. So have you looked at any alternatives that we 
could do to keep someone--and particularly, if they are a 
responsible borrower--in their home?
    Mr. Moynihan. Yes. We work with borrowers who are having 
difficulty possibly leading to foreclosure, as we have said 
consistently, even in cleaning up the Countrywide situation. It 
is the last resort for the borrower and the last resort for the 
lender and investor in the security.
    And so we do everything we can to do modifications in all 
different types, and we have done many, many of them. The good 
news is for the portfolio, because of all the work we did to 
clean up the Countrywide mess, we just don't have as much 
delinquency as we had at that point.
    But we have spent a lot of time working with those 
borrowers. We opened 26 centers around the United States to 
talk to them face-to-face after the start of our team taking 
over. Fifty thousand teammates to work on them. So we have done 
lots of--
    Mr. Meeks. Let me just say, because I have had tremendous 
problems in having certain mortgages modified or refinanced, 
and a lot of them, and that is why I asked you the question, 
Mr. Moynihan, were with the Bank of America. And so it is--and 
it is a continuing basis, and these folks have never, never 
recovered.
    Let me move quickly--I'm running out of time. Let me ask 
Mr. Gorman of Morgan Stanley, because you mentioned in your 
testimony, you were talking about diversity. And I want more 
than just a comment.
    I want to know exactly what is being done to accomplish 
your diversity goals? And that question is not only diversity 
goals within the firm, but with vendors, external investment 
managers that work on various Morgan Stanley platforms. Please 
be specific to what the ``goals'' are, and please define what 
success is, and how accountability is measured and tracked.
    Mr. Gorman. Congressman, diversity and belonging--and I use 
that word explicitly, rather than inclusion--is critical to our 
institution. The sense of inclusion is, somebody chose to 
include you. A sense of belonging is, it is your place. You 
belong there, whatever your gender, whatever your color, 
whatever your preference, whatever your difference from the 
majority, you belong. So that is--
    Mr. Meeks. Yes, but that is why I was asking for some 
specificity. Because access to your platforms for example, for 
minority firms. I want to know specifically what you are doing, 
what your goals are and how you intend to accomplish those 
goals? How do you measure it?
    Mr. Gorman. Well, yes, Congressman. We have a number of 
initiatives, working with diverse and minority-owned 
businesses, but with our minority-owned vendor management 
program, working with different asset managers that are run by 
and owned by minorities and women. We have employee programs to 
bring women back to work--
    Mr. Meeks. And when you use--I am almost out of time--the 
word ``minority,'' I want to know, do you break it down so that 
we know whether you are talking about women, whether you are 
talking about African-Americans, whether you are talking about 
LGB, do you break it down in that?
    Mr. Gorman. Absolutely. And we have--
    Mr. Meeks. I am out of time. So let me just ask you, I 
would like to get a detailed report on exactly what it is and 
how you market and who you are doing business with, so that I 
would know.
    And I would ask--
    Chairwoman Waters. Thank you very much.
    Mr. Meeks. You know, something that everybody--
    Chairwoman Waters. Thank you very much. Your time is up.
    The gentleman from Missouri, Mr. Luetkemeyer, is recognized 
for 5 minutes.
    Mr. Luetkemeyer. Thank you, Madam Chairwoman.
    Gentlemen, the Fed is proposing something called the 
enhanced supplementary leverage ratio (ESLR). And there are 
those who contend that the ESLR proposal would lower capital 
levels at your banks by $121 billion.
    Three questions. Is that figure accurate? Does it take into 
account capital at the holding company level? And if so, how 
much capital would actually leave the organization if the 
proposed modification to the SLR is made?
    Who would like to take that one? Anybody? Nobody?
    Mr. Scharf. I am fine to start. The figure is not accurate 
because there are other capital restrictions under which we 
would operate. We estimate that it would probably reduce the 
capital we would have to hold by less than 5 percent.
    Mr. Luetkemeyer. Okay.
    Mr. Corbat, you were indicating you want to say something?
    Mr. Corbat. In the case of Citi, it is not accurate. I 
think by the Federal Reserve's own calculation, there are 23 or 
24 different types of capital being calculated.
    And the enhanced supplemental leverage ratio for our 
institution is not the binding constraint. Stress-testing or 
CCAR capital is. So that leverage can move wherever it may 
move, and it is not going to be a reduction to our capital.
    Mr. Luetkemeyer. Mr. Solomon, I think you want to say 
something?
    Mr. Solomon. No, I was going to repeat what you said. It 
doesn't take into account holding capital--holding company 
capital--
    Mr. Luetkemeyer. Right.
    Mr. Solomon. Goldman Sachs, it doesn't reduce our binding 
constraint for capital.
    Mr. Luetkemeyer. Okay. Perfect. Thank you.
    Mr. Dimon, as you know, I have been raising alarms with 
regard to CECL. I believe it can have a really detrimental 
effect on our economy. I have heard from industries, and from 
banks in particular, insurance companies, credit card 
companies, the housing industry, that they will suffer because 
of an ill-advised accounting standard that it is.
    Do you have any concerns about CECL? And how would you 
believe it would affect the economy as a whole, in particular 
financial institutions?
    Mr. Dimon. So CECL is where a bank puts up loan loss 
reserves for the full life of the loan, upfront. And for 
JPMorgan, I don't have concerns. We have announced the number. 
It would be something like $6 to $8 billion, depending on what 
environment we are in.
    I do think you should all be looking at what it is going to 
do to smaller banks. I think it would put smaller banks in a 
position that when a crisis hits, they will virtually have to 
stop lending because putting up those reserves would be too 
much at precisely the wrong time. So I do think this becomes an 
issue for you all to reconsider.
    Mr. Luetkemeyer. One of the concerns I have is, I don't 
think that FASB has actually looked at and studied the effects 
of this, and the cyclicality of this such that they didn't look 
at mark-to-market and look what happened there when we had a 
downturn. It exacerbated the situation. I think the same thing 
could happen with CECL. Do you agree with that?
    Mr. Dimon. I think CECL will constrain banks at precisely 
the wrong time. Yes.
    Mr. Luetkemeyer. Okay. Do you see an effect on the GSEs, on 
Freddie Mac and Fannie Mae?
    Mr. Dimon. I have not--
    Mr. Luetkemeyer. Because they are going to have to reserve 
just like--
    Mr. Dimon. It is a very good question. I have just not 
studied it.
    Mr. Luetkemeyer. Okay. Very good.
    Anybody else have an opinion on the effect on Freddie and 
Fannie?
    Mr. Moynihan? No?
    Mr. Moynihan. Not on Freddie and Fannie.
    Mr. Luetkemeyer. Okay. Moving on. I have a lot of financial 
services companies that are very concerned about the cost of 
compliance, especially smaller banks. All of you are big 
enough. You can probably absorb the costs. But the problem is 
that at some point, you have to pass this all along.
    But the Bank Secrecy Act is something--I think a couple of 
you mentioned in your testimony--that is very difficult to pass 
on. Can you give me a cost of what it takes to comply with the 
Bank Secrecy Act with regard to SARs, CTRs, and how many do you 
send to FinCEN a month?
    We will just go down the line here. Mr. Corbat?
    Mr. Corbat. For Citi, we have between 13,000 and 14,000 
people who spend full-time working on BSA, KYC, and AML. And we 
spend in excess of a billion dollars a year to be compliant.
    Mr. Dimon. Our number is a little bit higher than that. And 
we file something like 200,000 SARs a year to the Federal 
Government.
    Mr. Gorman. It is a much smaller issue for our company, 
given the nature of the business. So, hundreds of millions.
    Mr. Luetkemeyer. Mr. Moynihan?
    Mr. Moynihan. It is a little hard to isolate because it is 
a part of everybody's job. But there are hundreds of thousands 
of SARs filings. And the question that we have raised--and we 
talk to various authorities is--is there value in those? Do 
they provide value? So the question isn't how much you spend, 
it is whether it is giving the value that it should.
    Mr. Luetkemeyer. Right. You have to go to FinCEN to get the 
number there.
    One last question here. Mr. Corbat and Mr. Dimon, you had 
an opportunity to bring a big company to your neighborhood 
there, Amazon. Were either one of you involved in financing 
that, potentially financing the relocation of the headquarters?
    Mr. Corbat. Sorry, funding?
    Mr. Luetkemeyer. Yes. To funding the move there.
    Mr. Corbat. We were not involved with funding.
    Mr. Luetkemeyer. Okay. Do you know, economically, what kind 
of impact it is going to have on your city to not have that 
business locate there?
    Mr. Corbat. I don't know the specific numbers.
    Mr. Luetkemeyer. I understand it was 25,000 jobs initially. 
I am sure there are more ancillary jobs, as well. Is that what 
you have heard?
    Mr. Corbat. That is what I read. Correct.
    Mr. Luetkemeyer. Okay. Thank you very much.
    I yield back.
    Chairwoman Waters. Thank you very much.
    The Chair wishes to inform Members that votes are currently 
pending on the Floor. We will briefly recess for votes and 
resume the hearing immediately after. The committee stands in 
recess.
    [recess]
    Chairwoman Waters. I want to thank our witnesses for their 
patience. We just finished with the votes on the Floor, and we 
are going to resume our questions from the members of the 
committee.
    The gentleman from Missouri, Mr. Clay, who is the Chair of 
our Subcommittee on Housing, Community Development, and 
Insurance, is recognized for 5 minutes.
    Mr. Clay. Thank you, Madam Chairwoman.
    According to recent data, 42 million Americans are employed 
at small businesses with less than 100 employees, and there are 
30 million small businesses which employ almost half of the 
country's private workforce.
    According to the Federal Reserve Bank of New York, 
community banks and community development financial 
institutions achieve net lender satisfaction scores of 73 
percent and 76 percent respectively, which measures the overall 
experience small businesses have with their lenders. That 
compares with only 49 percent satisfaction rate for large 
banks.
    Reasons for this discrepancy include unfavorable repayment 
terms, higher interest rates, and issues related to consumer 
complaints. While you have modestly been increasing your small 
business lending, last year your banks accounted for only 25 
percent of all loans to small businesses, which frankly is not 
good enough.
    As drivers of our economy, we must promote small 
businesses, and any impediments in access to credit can 
undermine their business, leading to job loss. Mr. Moynihan, 
the CFPB has not collected the small business lending data that 
it is supposed to do under Section 1071 of Dodd-Frank.
    Unlike the mortgage market, we have far less information 
about what is happening in the small business space, including 
potential discrimination. To ensure we have a fair marketplace, 
shouldn't policymakers have access to that kind of data?
    Mr. Moynihan. Well, I think just on small business lending 
generally, as I said earlier, we did $8 billion of originations 
last year. Our portfolio is over $36 billion to small loans 
defined by the FDIC data, which is public loans to under a 
million dollars in size.
    So it is a major business for us and I would say that our 
satisfaction level runs 84 percent by our surveys. So we are 
heavily involved in small business and not all of that data is 
perfect--that data is publicly available, so I am not sure what 
the CFPB is going to collect, but I think the data at the FDIC 
has been delivered for years to give them all loans outstanding 
under a million dollars that you made, we can supply that data, 
and that is what I was citing to you, sir.
    Mr. Clay. And how much consideration is given to the bottom 
line of your bank when you make these decisions on how much you 
invest in small businesses?
    Mr. Moynihan. Well, it is a major part of our franchise, it 
is 9 million small businesses directly, 3 million customers who 
also have small business we do through the consumer side. And 
so we do it, it is a competitive business with all of the 
participants--the 7,000 banks that are out there.
    Forty percent of our small businesses are women-owned 
businesses. It is a robust, disciplined practice for us all 
over the country and the team that leads that, Sharon Miller 
leads it for us, and does a fantastic job.
    Mr. Clay. Thank you for that response. Since the financial 
crisis, Citigroup has had a troubling pattern. In March of 
2019, the OCC fined Citibank $25 million for violating the Fair 
Housing Act. The bank had a program to provide discounts on 
closing costs or reductions in interest rates to certain 
eligible customers seeking a mortgage.
    The bank failed to offer these benefits to all eligible 
customers. Some customers were adversely affected because of 
their race, color, national origin or sex. The bank agreed to 
provide 24,000 customers, impacted by the bank's 
discrimination, approximately $24 million in redrafts.
    Why didn't Citibank have appropriate policies and 
procedures in place to ensure that it did not illegally 
discriminate when it implemented a program to provide benefits 
to certain customers seeking a mortgage? Mr. Corbat?
    Mr. Corbat. Congressman, first off, I would like to 
apologize to those of our clients who were affected and didn't 
receive that, as we would call it, relationship pricing 
benefit. It was an incident or an episode that we self-
identified and self-reported to our regulators and came up with 
our remediation to go back because it is our full intention and 
it is in our interest to make sure that our customers receive 
the benefits to which they are entitled.
    Our own work would say that of those 24,000 people, there 
weren't race, ethnicity, or gender biases in the data that we 
compiled and we would say that in there, our shortcoming or our 
error really was one of not having our employees properly 
trained--
    Chairwoman Waters. The gentleman's time has expired. The 
gentleman from Michigan, Mr. Huizenga, is recognized for 5 
minutes.
    Mr. Huizenga. Very quickly, Mr. Corbat, I will let you 
finish your sentence, at least, so finish that.
    Mr. Corbat. Thank you. It was that we hadn't trained our 
employees properly to actually execute and implement the 
relationship program that we had in place. We have now remedied 
that and look forward to the opportunity to do better.
    Mr. Huizenga. And reclaiming my time on that, I am going to 
try and move quickly, gentlemen. Sorry, it is a very large 
panel, and I would note to one of my colleagues earlier who 
talked about the tax relief that you all corporately have 
received and that America has received to try to make us more 
competitive, there was some lamenting about that not being 
permanent for personal income tax rates.
    All we needed to do was actually get the Democrats to 
engage on that and they could have voted to make those 
permanent, I might add, so that is--now I don't expect a 
comment on that, but as someone who was publicly opposed to the 
bailouts that had happened under Dodd-Frank, I was not in 
Congress at the time, but I am dealing with the echo effects of 
it yet today, I was very frustrated to see that and having to 
explain to colleagues--or I am sorry, to constituents about why 
that had gone on.
    And I have had a chance to express, to at least a couple of 
you personally, that you cannot count on this Congressman to 
ever allow that to happen again or to vote for a situation like 
that again, but part of the action here in what we are trying 
to do is make sure that it never happens again on anybody's 
watch.
    But I do have one main line of questioning in this, and I 
would like to have all of you answer very quickly. It can be 
yes or no or just briefly. Are you properly capitalized, 
properly sized and stable so that you can survive without 
hardworking Americans' taxpayer dollars having to be put back 
into the system and having the taxpayer on the hook?
    So, Mr. Corbat, are you properly sized, capitalized and 
stable?
    Mr. Corbat. We are properly sized, we are scaled to serve 
our clients.
    Mr. Huizenga. Okay, great. Mr. Dimon?
    Mr. Dimon. Yes.
    Mr. Huizenga. Mr. Gorman?
    Mr. Gorman. Absolutely.
    Mr. Moynihan. Yes.
    Mr. O'Hanley. Yes, we are.
    Mr. Huizenga. Mr. Scharf?
    Mr. Scharf. Yes, we are.
    Mr. Huizenga. All right. Mr. Solomon?
    Mr. Solomon. Yes, we are.
    Mr. Huizenga. Okay. Well, I appreciate that. There had been 
a lot of discussion about whether you were too big to manage 
and whether you really were stable and whether you were 
properly capitalized, and I think the numbers do speak for 
themselves on that.
    I want to quickly move to Brexit, because this is of some 
real significance. We are 2 days away from a hard exit. London 
is the center of the derivatives market, there are nearly two 
billion contracts that were written there in 2018 alone, 
hundreds of trillions of dollars that flow through there.
    The U.K. has been dominant in this space, and because of 
the regulatory regime imposed by the Bank of England and the 
Financial Conduct Authority, and in fact every globally active 
financial firm maintains a presence in London, I assume you all 
do. Does anybody not? Everybody does, okay.
    Well, Chairman Giancarlo highlighted--he has a quote here 
that, ``London is and will remain a global center for 
derivatives trading and clearing,'' and he also added that, 
``The package of measures will provide a bridge over Brexit 
through a durable regulatory framework upon which the thriving 
derivatives market between the U.K. and the United States may 
continue and endure.''
    And so I am very concerned about why the--regardless of 
whether the Brexit outcome is--whatever that is--are your 
institutions going to be needing to do more direct trading with 
continental banks through those regulated by the Bank of 
England, or how are you planning on having this happen?
    I will take--Mr. Corbat, you--
    Mr. Corbat. As I stated earlier, we have set up a vehicle 
now that encompasses our U.K. operation. We have separated our 
European operation from that. We have banks, we have brokerages 
in both jurisdictions and at this point, our--
    Mr. Huizenga. Are you going to have to be dealing more with 
the main--with the continental banks then, directly?
    Mr. Corbat. I don't believe so.
    Mr. Huizenga. No? Okay. All right, anybody else care to 
weigh in on that? But you feel prepared--and I think Mr. Dimon 
or somebody earlier had said uncertainties, but we have put the 
planning in place, correct?
    Is this actually--is this area an area that you need to be 
in? What are you doing for the world economy? Mr. Gorman? Mr. 
Dimon?
    Mr. Gorman. We need to be in Europe, absolutely. Listen, we 
collectively finance the largest institutions in the world, a 
predominant number of which are in the U.S., so we absolutely 
need to serve them globally.
    Mr. Huizenga. All right, thank you, and I will be 
submitting some questions for the record, and I do want to say 
thank you to Mr. Dimon and Mr. Corbat for your involvement in 
Detroit. Coming from Michigan, it's very important work that 
you have been doing.
    Chairwoman Waters. The gentleman from Texas, Mr. Green, who 
is also the Chair of our Subcommittee on Oversight and 
Investigations, is recognized for 5 minutes.
    Mr. Green. Thank you, Madam Chairwoman. I especially thank 
you for your courage in standing up for consumers. As I look at 
the panel, and I am grateful for your attendance, the eye would 
perceive that the seven of you have something in common.
    You appear to be white men. I may be mistaken. If one among 
you happens to be something other than a white male, would you 
kindly extend a hand into the air? Kindly let the record 
reflect that there are no hands in the air and that the panel 
is made up of white men.
    This is not a pejorative. You have all sermonized to a 
certain extent about diversity. If you believe that your likely 
successor will be a woman or a person of color, would you 
kindly extend a hand into the air? Let the record reflect, for 
fear that you may not hear me, just raise your hand now so that 
I will know you are there. Raise your hand, please.
    All of you? Sir? Apparently, you don't hear me over on the 
end. Would you kindly extend a hand into the air if you can 
hear me? Next to the gentlemen who raised his hand, would you 
extend a hand, please? With the glasses? I will--perhaps I 
should call your name.
    Mr. Scharf, would you--thank you. I know it is difficult to 
go on the record sometimes, but the record has to be made. All 
white men and none of you, not one, appears to believe that 
your successor will be a female or a person of color.
    Is your bank likely to have a female or person of color 
within the next decade? Kindly extend a hand into the air. Two, 
three, four, five. All right, five. Without giving the 
commentary that I would dearly like to give, I will move on.
    You know, I am sitting next to a reverend and I have heard 
him say that he would rather see a sermon than hear a sermon. 
Let us have an opportunity to see a sermon when you return.
    My next question has to do with something near and dear to 
my heart, since my ancestors were slaves. In 2005, is it true 
that JPMorgan released information indicating that it directly 
benefited from slavery? Would the representative from JPMorgan 
respond?
    Mr. Dimon. I do believe that in 2005, we made a report 
about potential transactions that involved slavery between 
JPMorgan or its heritage companies back in the 1800s.
    Mr. Green. In fact, there was an indication, I believe, 
that you accepted loans against the slaves as collateral. True?
    Mr. Dimon. I believe that to be true. Yes.
    Mr. Green. For edification purposes, have any of the other 
banks compiled a study as to whether or not you have benefited 
from slavery? If so, raise your hand, please.
    Let the record reflect that none have raised a hand. Not 
one has raised a hand.
    Do you believe that your bank benefited from slavery in 
some way, in terms of its business practices? If so, raise your 
hand.
    If you do not believe that it benefited, raise your hand.
    Let the record reflect that all but Mr. Dimon raised a 
hand. Thank you.
    Let's move on. I am concerned now about the raise that Bank 
of America has indicated it will accord. I think that you 
indicated that there will be a raise in the near future. Is 
this correct?
    Mr. Moynihan. Yes. We said that we would raise our minimum 
starting pay from the current level of about $15.50, $16 an 
hour, to $20 an hour in the next 2 years.
    Mr. Green. Is there a bank that will have an amount that 
will exceed the $20 per hour within the same period? If so, 
would you raise your hand? Or if you currently pay more than 
$20 an hour, raise your hand, please.
    Well, Bank of America, you are to be commended for what you 
are doing in terms of raising the wage.
    I thank all of you. My time is up. But I do want you to 
know that we believe you can do better.
    I yield back.
    Chairwoman Waters. Thank you.
    The gentleman from Wisconsin, Mr. Duffy, is recognized for 
5 minutes.
    Mr. Duffy. Thank you, Madam Chairwoman.
    Mr. Moynihan, what kind of footprint do you have in the 50 
States?
    Mr. Moynihan. We cover about 80 percent of the population 
today. And that is by places that, historically, we were in and 
we continue to build out--
    Mr. Duffy. Do you have a presence in all 50 States?
    Mr. Moynihan. We have commercial banking and Merrill Lynch 
that might--I am not sure we are quite in all 50 States now, 
but we are close. Not retail banking.
    Mr. Duffy. What is the name of the bank you represent?
    Mr. Moynihan. Bank of America.
    Mr. Duffy. The Bank of America. Do you think the policies 
of the Bank of America represent the values of all of America?
    Mr. Moynihan. I think we have a purpose. We have a company 
that has a great purpose. We have 200,000-plus teammates at 
work and we continue to build the company--
    Mr. Duffy. Where are you from?
    Mr. Moynihan. Southeastern Ohio.
    Mr. Duffy. And you live now where?
    Mr. Moynihan. In Boston.
    Mr. Duffy. Do you ever go back to Ohio?
    Mr. Moynihan. Yes.
    Mr. Duffy. Wisconsin, Minnesota, Oklahoma, Texas?
    Mr. Moynihan. Yes.
    Mr. Duffy. You go to those places? I bring that up because 
I look at the gun policy. And I think that there are a lot of 
Americans whom you serve, who would really disagree with that 
policy. It might play well in the East Coast, might play well 
in California. And maybe your bank is not the Bank of New York 
or California, it is the Bank of America.
    And I would just point out that you can look at guns. But 
do you bank Hollywood, do you know? Any movie studios?
    Mr. Moynihan. We bank movie studios. We bank all kinds of 
companies.
    Mr. Duffy. Do you bank anyone that makes video games?
    Mr. Moynihan. I think we do.
    Mr. Duffy. I think you do, too. Have you watched any movies 
that come from Hollywood?
    Mr. Moynihan. Yes, sir.
    Mr. Duffy. Do you have an exclusion on any Hollywood movies 
that use guns? Because I don't think there are many Hollywood 
movies that come out that glorify the use of guns.
    Mr. Moynihan. Sir, I was being precise before, that our 
decision was based on teammates, a hundred-plus teammates who 
were in places of horror.
    Mr. Duffy. But you also have teammates, Mr. Moynihan, who 
abide by the law and follow the rule of law and appreciate 
their Second Amendment.
    Mr. Moynihan. The Second Amendment is the rule of law in 
this land. We agree with you.
    Mr. Duffy. Okay. Well, your policy doesn't necessarily 
agree with the Second Amendment, does it?
    Mr. Moynihan. The policy is about people that--we asked the 
companies that manufactured these type of arms, for sales to 
citizens, if they would amend their practices to somehow put a 
governor on it so our teammates wouldn't be in that position.
    Believe me, with 200,000 people, we have people who 
represent everybody in this--every idea you could have in 
America.
    Mr. Duffy. Exactly. But you say, I will take a role on 
these guns.
    Mr. Moynihan. Yes.
    Mr. Duffy. But I am still going to--we have had guns in 
America for a long time.
    Mr. Moynihan. Right.
    Mr. Duffy. The things that have happened recently are 
horrific. Is it that guns have just come into America or has 
something else changed? Maybe your bank should look at what 
else is going on in America, that is changing people's mindset 
to pick up a gun and do a horrific thing or use a crockpot or 
use a knife or a machete or a U-Haul.
    Something is happening. And to take away the rights of law-
abiding American citizens where I live, I would tell you that 
does not comport with my view of America. And if you are not 
going to look at movies and families and video games, we find 
it somewhat problematic.
    Did you also comment that you don't bank some energy 
companies? Is that right?
    Mr. Moynihan. We bank some energy companies, and there are 
some that we don't.
    Mr. Duffy. Which ones don't you bank?
    Mr. Moynihan. We had a policy to work our way out of our 
portfolio, people who did what we used to call, where I grew 
up, strip mining. But it is about mountain top removal and 
the--
    Mr. Duffy. How about energy? How about oil and gas?
    Mr. Moynihan. We do that.
    Mr. Duffy. You do? Okay. How about coal?
    Mr. Moynihan. We still have coal relationships--
    Mr. Duffy. Okay.
    Mr. Moynihan. But they are winding down.
    Chairwoman Waters. Excuse me one moment. Mr. Moynihan, 
would you please speak up and speak into the microphone?
    Mr. Duffy. If you would pause--if I could get my few--
    Chairwoman Waters. Thank you.
    Mr. Duffy. --seconds back on the clock? Thank you.
    I just want to make a note to the panel. I appreciate what 
you do for America. I think Mr. Dimon says it well. If you all 
are a lot smaller, does your work necessarily go to--in my 
district, I might say, Nicolet Bank or River Valley Bank or 
Connexus Credit Union?
    If you guys don't bank the big deals that you bank, they 
don't go to small banks, do they? Don't they go to the Bank of 
China? Doesn't your business go somewhere else, Mr. Dimon?
    Mr. Dimon. It would go to other banks, larger banks 
overseas who could do the business.
    Mr. Duffy. Which means we have less influence in the global 
financial markets, right? Would you say, Mr. Dimon, that we are 
a leader in global finance?
    Mr. Dimon. I think that America is a leader in global 
finance. And I hope to God that we remain that for the 
foreseeable future because it is a critical part of having a 
very healthy--
    Mr. Duffy. And when you impose--I might ask the ranking 
member for 10 more seconds that was taken from me.
    Chairwoman Waters. I'm sorry, Mr. Duffy, we have Members 
who are waiting.
    Mr. Duffy. Madam Chairwoman, you took 10 seconds from my 
time.
    Chairwoman Waters. Mr. Duffy, if you insist, go ahead and 
take another 5 seconds.
    Mr. Duffy. Thank you. I guess--maybe I will follow up, Mr. 
Dimon, in regard to what impact you have on global sanctions 
that come from America on foreign countries that are bad actors 
that take place through your global influence--
    Chairwoman Waters. Your time has expired. The gentleman 
from Missouri, Mr. Cleaver, who is the Chair of our 
Subcommittee on National Security, International Development, 
and Monetary Policy, is recognized for 5 minutes.
    Mr. Cleaver. Thank you, Madam Chairwoman.
    I want to follow up just slightly on my colleague, Judge 
Green. I think some of you are already practicing the Rooney 
Rule, and others of you aren't. Those of you who are not 
practicing the Rooney Rule as it relates to hiring, would you 
just show your hands so I can see?
    The Rooney Rule, where--it started in the NFL where 
Commissioner Rooney said when you interview for general 
managers and coaches, NFL teams, you must interview a diverse 
group of candidates. If we applied it to banking, are any of 
you doing that? Everybody?
    I am not sure I under--okay, let's pretend the Rooney Rule 
applies to banks. How many of you have such a policy? All 
right, I am getting ahead of--that doesn't work because I am 
not sure we are understanding the same way.
    But at any rate, everybody talked about diversity, and my 
colleague raised the issue, and I was just trying to find out 
if that was a part of the structure of your bank in terms of 
human resources, where you automatically made sure that all 
sectors of the population had access to those upper-level jobs.
    I don't know if you are familiar with this consumer lending 
discrimination in the era of fintech report produced by 
Berkeley. If you are not, I would suggest you get a copy of it. 
I think it is quite telling.
    One of the things they have found in their study was that 
in the fintech world, which I think is growing, they found 
that--everyone said we have eliminated this--any level of 
discrimination because algorithms are making the decisions. But 
the report shows that there was a subtle and unintentional 
discrimination actually factored into the writing of the 
algorithms.
    Are any of you familiar with the study? It's a very good 
study. How many of you are involved with fintech? And so you 
use algorithms, obviously, to make those decisions of people. I 
am hoping that you will read this report, and I am very 
serious, because I think people may be walking around with the 
assumption that because we are using algorithms, there is 
absolutely no chance that we are going to make any decisions 
based on anything other than pure qualifications. And the study 
shows that that is exactly the opposite of what is happening.
    My time is running out. I wanted to ask one other question. 
When we gathered in this room in 2008, I almost fainted from 
all of the bad news we were given about what was about to 
happen to the economy. We had about 7,500 banks in the country. 
We are down to about 5,000, and dropping, as you know. Medium 
to small banks are unable to survive.
    What are you doing to be able to respond to the needs of 
the unbanked, the barely-banked, in comparison to the people 
who are naturally and normally catered to by your banks? 
Anybody?
    Mr. Moynihan. I think--this is following up your--for your 
colleagues, but before you, on small business, one of the ways 
that we do a lot with small business directly, but we also work 
with the CDFIs, who--
    Mr. Cleaver. I know, but--I hate to interrupt you. Bad 
manners. But I mention it because--
    Mr. Moynihan. This is on the consumer side, sir? Is that 
what you are--
    Mr. Cleaver. No, I want to know, is there any effort, any 
move--
    Mr. Moynihan. Absolutely.
    Mr. Cleaver. --toward dealing with the unbanked and the 
barely-banked?
    Mr. Moynihan. Sure. And for example, for people who--for 
Americans who receive benefits, a lot of us will waive the fees 
to change that to give them free ATM withdrawals and things 
like that. We continue to work on the problem. We think it is a 
problem with our industry, and--
    Mr. Cleaver. Thank you.
    Chairwoman Waters. The gentleman from Ohio, Mr. Stivers, is 
recognized for 5 minutes.
    Mr. Stivers. Thank you, Madam Chairwoman.
    I would like to wish all of the witnesses a Happy New Year. 
It is 2019. We have a strong economy in the United States. We 
have low unemployment. We have 3 percent to 4 percent economic 
growth, and we have strong, well-capitalized banks. So rather 
than relitigating the Dodd-Frank Act, I would like to talk 
about the pressing financial issues and financial challenges 
and current issues of today.
    My first question--and I would like to go down the line, 
and if you could each be brief--for each of you is, what do you 
think the biggest risk to our financial system is today?
    Mr. Corbat. Our ability to talk ourselves into the next 
recession.
    Mr. Dimon. I think probably the growing--the cyber we 
already mentioned is the biggest. I think the growing non-bank 
segment. I don't think it is systemic yet, but I think it is 
growing very rapidly. It should be closely monitored.
    Mr. Gorman. Global growth is slowing. U.S. growth is 
slowing a little bit. Global growth is slowing, and ultimately, 
that will have an impact on ability to service credit around 
the world, and that impacts the financial system.
    Mr. Moynihan. I agree about cyber, as we spoke about 
earlier. Nonbanks not being under the tent is a critical issue, 
and ultimately, we are all going to reflect the economy, as 
James said, and so we will ebb and flow with it. But right now, 
we see America economy solid.
    Mr. O'Hanley. Cyber, as we spoke about earlier, and also 
the fact that growth is slowing around the world.
    Mr. Scharf. I agree with that: cyber first; and slowing 
growth second.
    Mr. Solomon. Cyber, certainly, first. I would also say 
slowing growth around the world, but in particular, the 
difficulties that lie ahead in the relationship between the 
U.S. and China.
    Mr. Stivers. Great. So let the record reflect that cyber 
was a consensus item, as was slowing growth around the world. 
And a big tip of the hat to folks who also mentioned the 
nonregulated financial industries.
    I want to shift for just a second, to follow up on 
something that Mr. Duffy asked, and--because he talked mostly 
to you, Mr. Dimon, I will follow up. He talked about the 
American sanctions that we are able to levy on the rest of the 
world when they are bad actors or criminals. And we had 
Secretary Mnuchin in here yesterday. He spoke to the fact that 
the importance of the dollar and the large financial 
institutions we have are critical to our ability to enforce our 
sanctions.
    Mr. Dimon, you already spoke to the fact that your large 
customers, if you didn't bank them, would be banked by foreign 
national banks. In the absence of U.S. banks, if we only had 
big foreign banks, how do you feel like big European banks or 
state-owned banks in China would do at helping us enforce 
American sanctions against bad actors and rogue regimes around 
the world, for example, Iran?
    Mr. Dimon. The sanctions have to be executed by the banks 
in America, and it is because we move all of that money and 
because we do exactly what the OFAC and Treasury and they tell 
us what to do, but we have to execute it.
    The second thing is you have to have a reserve currency, so 
the strength in America plus the strength of banking system is 
the reason you can effectuate sanctions.
    Mr. Stivers. So would all of you agree that having large 
financial institutions is good for America's national security? 
Can you just raise your hand if you agree with that statement? 
Let the record reflect that everyone raised their hand.
    Because cyber was such a consensus item--I have a minute 
and 24 seconds to deal with that very important issue now. 
Would each of you agree that a static standard does not work, a 
government standard that sets the standard today, that tomorrow 
is outdated almost the day it is ineffective, you want to--Mr. 
Dimon, I will let you start with that one.
    Mr. Dimon. Absolutely, it changes every day, it is going to 
be going on throughout their lives, and it is really critical.
    Mr. Stivers. Great, and while I have 55 seconds left, I 
want to mention anti-money-laundering, it came up in some of 
the comments that you made. Across the board, you all fill out 
suspicious activity reports.
    Could you raise your hand if you do not get any feedback 
from the government when you fill those out? Does anybody get--
let me ask it the other way. Could you raise your hand if you 
do get feedback on your suspicious activity reports?
    Great, let the record reflect that none of these 
institutions get feedback from FinCEN. We have to work hard to 
make a better system where you actually get feedback and know 
that the information you are giving them is helping us catch 
the bad guys and keep our financial system clean.
    So we all are going to work with the Treasury Department 
and FinCEN to improve that process. Thank you all for your time 
today.
    Chairwoman Waters. The gentleman from Connecticut, Mr. 
Himes, is recognized for 5 minutes.
    Mr. Himes. Thank you, Madam Chairwoman, and thank you to 
the panel for being here today. I was sworn in, in January of 
2009, and joined this committee shortly thereafter, and being 
on this committee at that time was like walking the next day 
through a city that had been the subject of a nuclear 
explosion, and the echoes of that go on today and I think drive 
our politics.
    The American people saw trillions of dollars of value 
disappear for reasons they didn't fully understand and then 
they saw this institution do what it had to do, which was to 
bail your institutions, in many instances, out.
    And so what the American people saw at the time was our 
government is there for the large financial institutions, but 
it wasn't there for us, and it de-legitimized you, it de-
legitimized us, it de-legitimized the regulators, and I think 
that is the single factor driving our politics today--well, not 
the single factor, but an important factor driving our politics 
today.
    And so I don't ever want to go through that again, because 
I think we can maybe, maybe sustain one of those, but I don't 
think that this democracy can sustain another. So I just have 
one question for all of you, and it is actually a slightly more 
specific version of Mr. Stivers' question.
    As you sit here today, what product, financing mechanism or 
market do you think is generating systemic risk that we should 
pay attention to? If I am doing the math right, that gives you 
each 30 seconds. So I am just going to ask you to name a 
product or a market and very quickly what you think we should 
do about it, starting with Mr. Corbat.
    Mr. Corbat. People have talked a lot about leveraged 
lending and what that has done. I don't believe to date it is 
systemic because most of it is being driven outside of the 
regulated financial system.
    Mr. Himes. Thank you. Mr. Dimon?
    Mr. Dimon. Yes, I would say leveraged lending and student 
lending, which is also growing rapidly and deteriorating very 
rapidly.
    Mr. Gorman. You know, I go back to what we discussed at our 
risk committees. I would say right now, a lot of focus on the 
international markets. As I said earlier, a slowing global 
economy, that is going to give rise to credit risks. We have 
had a series of crises where--
    Mr. Himes. We probably can't do anything about the global 
economy. I am really looking for a product, a market or a 
service that we should be worried about.
    Mr. Gorman. I'm sorry, I was taking the market as 
geographic, I apologize. You know, obviously the amount of 
credit in the corporate sector is large by historical 
standards. I don't think it is dangerous, but it is large and 
something I would be watchful of.
    Mr. Himes. Thank you.
    Mr. Moynihan. I think, at the end of the day, one of the 
lessons learned from the crisis was about leverage in the 
places that my colleagues mentioned, and student lending is the 
biggest on the personal side in terms of impact right now, and 
on the corporate side, it is leveraged finance.
    Mr. Himes. Mr. Moynihan, if I can, if leverage worries you, 
does that mean we should be thinking about increasing, 
generally speaking, capital reserves and capital standards?
    Mr. Moynihan. We have capital standards that are tested 
under a worse scenario than the 2008 crisis, and we end up with 
more capital after that than we started the 2008 crisis with. 
That is the purpose of stress testing, and the results are 
published every year for you to look at.
    Mr. Himes. Okay, thank you. Mr. O'Hanley?
    Mr. O'Hanley. I would be concerned about student loans and 
I would also be concerned about anything that is pushing 
activity into the shadow banking system.
    Mr. Scharf. I would agree with both of those things.
    Mr. Solomon. Though not systemic yet, the growth in the 
shadow banking system is mentioned and I would also say that 
there have been significant changes over the last 10 years in 
market structure, and none of it has been tested under stress. 
So more index product, ETF product, machines, not tested under 
stress.
    Mr. Himes. Thank you. I have another minute or so. Many of 
you mentioned shadow banking, so, Mr. Solomon, just to pick on 
you, are we talking hedge funds, private equity, what else are 
we talking?
    Mr. Solomon. There has been significant credit formation as 
we have been talking about--people talk about leveraged 
lending, sometimes they think about leveraged lending on the 
banks of the largest institutions here, but there is more and 
more direct lending being done in separate vehicles that is not 
regulated, not scrutinized.
    At the moment, I don't think it is systemic, but it is 
growing, it is obscured and I think it is something over time, 
if the cycle continued, we won't have a closer look at.
    Mr. Himes. Okay, so should this committee--since many of 
you mentioned shadow banking, should this committee be taking a 
hard look at moving these entities that are doing shadow 
lending into a regulated environment?
    Mr. Solomon. I personally think that there should be a hard 
look at a better understanding of what is there. Potentially as 
it grows, if it continues to grow, that would be something to 
consider, but certainly it needs a harder look and more 
transparency.
    Mr. Himes. Okay, thank you. I yield back the balance of my 
time.
    Chairwoman Waters. Thank you. The gentleman from Kentucky, 
Mr. Barr, is recognized for 5 minutes.
    Mr. Barr. Thank you, Madam Chairwoman. Mr. Corbat, let me 
start with you. Could you please describe the U.S. economy and 
the global economy without your institution? Could you press 
the button?
    Mr. Corbat. I think the global economy would be a different 
place without Citi and the banks here. You know, in the last 
year or so, we have actively engaged with and financed and 
supported over 700 U.S. companies around the world, and if we 
weren't there to do that, as I said in my opening statement, 
that would fall into the hands of foreign banks.
    And as we know, in the world of cyber sanctions, 
competition, the playing field is not necessarily level, so I 
think we act as an important agent for our companies abroad.
    Mr. Barr. Mr. Dimon, same question. What does the world 
look like without your institution? Or if your institution were 
forcibly broken up, and particularly in a downturn?
    Mr. Dimon. Okay, a company like JPMorgan moves 
approximately $6 trillion around the world every single day for 
our clients, which a large part is obviously American 
corporations. A lot us finance these corporations, $2 billion, 
$10 billion, $15 billion, in markets around the world, multiple 
bond issues. That would all have to be done by other large 
banks not based in the United States of America.
    And I don't know what the long-term effect is. I would tell 
you, a country that does not have a strong, healthy banking 
system, including the large banks--there are roles for 
community banks and large banks--you will not have a strong 
economy. And you could just go around the world and you could 
see that phenomenon.
    Mr. Barr. Would that weaken American competitiveness?
    Mr. Dimon. Absolutely.
    Mr. Barr. Mr. Gorman, same question.
    Mr. Gorman. There are many parts of our business that would 
have an impact. But the two that are obvious are, we are the 
number one or two manager of wealth in the world. We manage 
$2.5 trillion of individuals' money for their retirement, their 
financial wellness. That is obviously critical to those 
individuals and to their families.
    And secondly, we are responsible for about 21 percent, 22 
percent of all equities trading around the world. So efficient 
and effective markets depend upon institutions like us being 
able to make markets. If we are not doing it, there would be a 
huge gap.
    Mr. Barr. Mr. Moynihan, what would happen to the U.S. 
economy and U.S. competitiveness if Bank of America were 
forcibly broken up?
    Mr. Moynihan. I think they have talked about larger 
companies. But I think what the phenomenon, the success of the 
American business is that midsized companies operate around the 
world. So a manufacturer of lug bolts out of the Midwest, 
supplies into China to go in cars manufactured there, is a 
successful company.
    And we have to help companies like that figure out the 
world. So not only is it the largest companies. As the world--
the global economy is taking place, smaller midsize companies 
operate on a global basis. And we have to--and if we weren't 
there to support them, it takes global reach but done locally 
to make that work.
    Mr. Barr. And Mr. O'Hanley and Mr. Scharf, as you all 
answer this question, obviously, pay particular attention to 
the unique custody services that you offer.
    Mr. O'Hanley. So we process 10 percent of the world's 
financial assets. And by operating at that scale, we are able 
to deliver our services at a very low cost. The American 
investor, pension funds, endowments, foundations would suffer 
dramatically without us being able to operate at that scale.
    Mr. Barr. Mr. Scharf?
    Mr. Scharf. Congressman, what I would add to that is that 
we service institutions of all sizes, from very small ones to 
$300 million pension funds, to up to $6 trillion asset manager. 
And so those institutions are going to look for companies of 
size, to provide their services to them.
    And so if it is not us, sitting up here today, it would 
likely be a big foreign bank.
    Mr. Barr. And by the way, Mr. Solomon, describe the U.S. 
economy without your institution.
    Mr. Solomon. Our institution provides services largely to 
corporations, governments and corporations, institutions around 
the world. We are also one of the larger money managers around 
the world.
    If we don't provide these services, someone else will have 
to. That organization needs to be broad, global, multi-product. 
It most likely would not be a U.S. institution if these 
institutions here weren't providing those services.
    Mr. Barr. All of you have testified about how your 
institutions are more resilient, you are better capitalized, 
there is higher liquidity, less leverage now. But what if we 
overdo it in terms of a G-SIB surcharge that would make 
American institutions less competitive to your foreign 
counterparts? Anyone can answer that question in the remaining 
time.
    Mr. Dimon?
    Mr. Dimon. What happens with that is it starts to slowly 
push business into shadow banks, non-banks, foreign banks. That 
is not taking place right away, but it is a risk over a decade 
or so.
    [disturbance in hearing room]
    Mr. Barr. Madam Chairwoman, I will reclaim my time.
    Chairwoman Waters. The committee will come to order. One 
moment, Mr. Barr. Thank you for removing the disturber from the 
room.
    Mr. Barr. Reclaiming my time, which is only 3 seconds left.
    Chairwoman Waters. You may reclaim your time.
    Mr. Barr. Thank you, gentlemen, for your testimony today. I 
yield back.
    Chairwoman Waters. Thank you.
    The gentlewoman from Ohio, Ms. Beatty, who is the Chair of 
our Subcommittee on Diversity and Inclusion, is recognized for 
5 minutes.
    Mrs. Beatty. Thank you, Madam Chairwoman.
    Let me first start by the door that was opened by Ranking 
Member McHenry when he said this committee was about Democrats 
wanting headlines. Well, I do want headlines.
    I want the headlines to read that Beatty wants business 
diversity in banks. I want the headlines to read that Beatty 
finds all-white-male CEOs with C-suites in boards lacking 
diversity, unacceptable. I want the headlines to read that 
Beatty demands change. I want the headlines to read that she is 
not anti-banks.
    So as I sit here today, let me say to you, by your own 
numbers, some 504,000 employees, I have 135 employees who work 
in financial institutions in my bank. So I really think that 
you are too big not to employ African-Americans, minorities, 
and other forms of diversities and females in your pipeline in 
high positions in the bank.
    So for me, it is about changing the culture. And let me 
just tell you. You have answered the questions, I am not so 
sure I understood the hand-playing game, while I appreciate my 
colleagues asking you the questions. So I am going to do it a 
little differently because I am the chairwoman of Diversity and 
Inclusion.
    I am going to ask you to simply go down the line and say 
yes or no. So I want to know, would you put in writing that you 
will develop a diversity plan for me that includes pipeline and 
what you will ask your board and what will you do at the C-
suites?
    Mr. Corbat, yes or no?
    Mr. Corbat. We already have that plan in place.
    Mrs. Beatty. No. That--I need it. So the question is, will 
you put it in writing to me as the chairwoman? Yes or no?
    Mr. Corbat. Yes.
    Mr. Dimon. Absolutely. We are devoted to get it done right.
    Mr. Gorman. Yes.
    Mr. Moynihan. Yes, we have. It is--ours is publicly 
disclosed.
    Mrs. Beatty. No, I want it sent to me. Let's be really 
clear. I want it in writing, addressed to me. Yes or no?
    Mr. O'Hanley. Yes.
    Mr. Scharf. Yes.
    Mr. Solomon. Yes.
    Mrs. Beatty. Okay. So now the question is, we look at the 
some $5 to $7 trillion. So for me, business diversity. Who are 
you using with your assets, your international funds? So I want 
to know, yes or no, do you have an African-American, a minority 
or female company that manages your assets? Yes or no?
    Mr. Corbat. We are not in the asset management business.
    Mrs. Beatty. Or any of your funds--your bank funds, your 
pension, your members' funds. Your money.
    Mr. Corbat. I am not sure.
    Mr. Dimon. I am pretty sure that answer is yes.
    Mr. Gorman. Yes. We have minority-owned firms that manage 
money.
    Mr. Moynihan. Yes, I think we do.
    Mr. O'Hanley. Yes, we do.
    Mr. Scharf. I believe, yes.
    Mr. Solomon. Yes, we have minority managed firms that 
manage money.
    Mrs. Beatty. The next thing is, my colleague asked you 
about the Rooney Rule. Dan Rooney started that in 2003-2004, 
because he was the Diversity Committee Chair. And African-
Americans were bringing all the monies in, and they didn't have 
any black coaches or black owners.
    So I knew by your faces, most of you didn't know what that 
was, so let me tell you something you will remember, the Beatty 
Rule. I am doing it with the Federal banks, and it is House 
Bill 281. I suggest you read it and you have your staff and 
your lobbyists read it.
    The last question I think I am going to ask you is, would 
you participate if I create--we do the same thing in 
government. We have the Office of Minority and Women Inclusion 
(OMWI), so I am going to have ``BOMWI,'' Banks Office of 
Minority and Women Inclusion. In your positions as CEO will you 
hire a director of diversity who reports to you? Yes or no?
    Mr. Corbat. My director does.
    Mrs. Beatty. It is a yes or no for my time. I'm sorry.
    Mr. Dimon. Yes. Kind of.
    Mr. Gorman. It reports to our head of H.R.
    Mrs. Beatty. No, this is a--no, I want the title to be 
director of the Office of Minority and Inclusion in Banks. So 
if you have somebody, you change the title or you hire 
somebody. Will you do it, yes or no?
    Mr. Gorman. We can look at changing the title if that is--
    Mrs. Beatty. Thank you.
    Mr. Gorman. We already have--
    Mrs. Beatty. Let's start with Mr. Solomon and go this way.
    Mr. Solomon. We can look at changing the tile of the role 
and consider it.
    Mr. Scharf. We would be glad to do the same.
    Mrs. Beatty. Will you authorize this person to then have a 
meeting with me so I can do a follow up that we can be more 
than aspirational?
    Mr. Scharf. Yes.
    Mrs. Beatty. And let me just say three of you who were 
smart enough to at least meet with me before I was chairman and 
then came back. While none of you are where you should be, I do 
want to say thank you for being aspirational.
    Mr. Solomon, I want to thank you for coming in and at least 
having people in the pipeline. Mr. Corbat, I want to thank you 
for coming in and telling the truth about what you had and 
hiring people. And Mr. Dimon, I want to thank you for also 
coming in and doing a program that included me. Thank you, and 
I yield back.
    Chairwoman Waters. The gentleman from Texas, Mr. Williams, 
is recognized for 5 minutes.
    Mr. Williams. Thank you, Madam Chairwoman. First of all, I 
want to say that I am a happy guy, not an angry guy. And I want 
to thank all of you for keeping the American Dream alive for 
the small-business owners and entrepreneurs all across this 
great country. I am glad you make money, because when you make 
money, it helps Main Street America invest.
    So if it weren't for the banks that all of you are here 
today representing, Main Street America would not exist as we 
know it today. Even though your banks are as well-capitalized 
as they have ever been, the economy is growing at the fastest 
pace in over a decade and unemployment is at near record lows, 
our country is having a serious debate about whether we need a 
transformative systematic change to our economic system.
    Yesterday, I asked Secretary Mnuchin what would happen to 
the economic growth and GDP if we turn away from free-market 
principles and adopted a more socialist approach towards 
private industries. His answer was clear and it was concise. 
Adopting socialist policies would be disastrous for the 
economy, and every single country that has pursued this 
economic goal has deteriorated significantly.
    We cannot let these false compromises or false promises 
that socialism would cure the ills of society become 
mainstream. We need to put socialism on trial and do it today.
    We need to decide if we are going to be a planned, one-
size-fits-all economy of guarantees for a land of 
opportunities. Are we going to incentivize entrepreneurs to 
take risk and innovate or embrace complacency and government 
dependence? So before we continue, I want to ask each one of 
you, starting with Mr. Corbat, a straightforward question. Are 
you a socialist or are you a capitalist?
    Mr. Corbat. Capitalist.
    Mr. Dimon. Capitalist.
    Mr. Gorman. I am a capitalist.
    Mr. Moynihan. Capitalist.
    Mr. O'Hanley. Capitalist.
    Mr. Scharf. I am a capitalist.
    Mr. Williams. Well, it is a shutout for the socialists 
today.
    Mr. Solomon. I am a capitalist.
    Mr. Williams. So Mr. Dimon, my question to you is, I saw 
the letter to your shareholders where you addressed this issue 
in more detail. They talked about it this morning, but can you 
please elaborate for everyone watching who may not have had the 
chance to read your letter?
    Mr. Dimon. I spoke in the letter about socialism--social 
Democrats. Social Democrats is a market economy which has a 
good safety net, which is a good objective for all of society, 
to have a good safety net. We have here, we can always improve 
it.
    I acknowledge that people get left behind and that we need 
a properly regulated free market capitalism system. But 
socialism--if you mean by socialism, the government owns the 
companies and controls them, that will inevitably lead to 
corruption. Okay? Those decisions will be made not what is 
efficient, not what people want, what gets produced, where it 
gets produced, who produces it, where people work, and how they 
work will all become driven by political actors for their own 
interests.
    And if you don't believe it, take a tour around the world 
and look at some of these true socialist countries.
    Mr. Williams. Well, thank you for that, and without 
objection, Madam Chairwoman, I would like to enter that portion 
of Mr. Dimon's letter to the shareholders into the record.
    Chairwoman Waters. Without objection, it is so ordered.
    Mr. Williams. Thank you. An idea was brought up during a 
hearing last month with the previous Wells Fargo CEO that the 
bank should be financially liable if there is an oil spill at a 
project they helped finance. I have been a car dealer for 
almost 50 years and I have helped countless people secure 
financing for vehicles.
    I think if the auto lenders were held financially liable 
for car accidents, for example, I would have a much harder time 
selling cars. So Mr. Moynihan, what would happen to the lending 
market if financial institutions were liable whenever something 
goes wrong, even if it is completely beyond their control, 
whether that be a car accident or an oil spill?
    Mr. Moynihan. Representative Williams, I think that the 
cost would go way up or the availability would go way down or 
both.
    Mr. Williams. It would be hard to do business.
    Mr. Moynihan. Yes.
    Mr. Williams. One of the beautiful things about capitalism 
is that all of us and all of you are competing for customers 
like me and others. The institutions represented here today are 
some of the largest banks in the United States, as we know.
    Mr. Gorman, I have a two-part question for you. How do the 
sizes of the institutions here today compare to some of your 
largest international competitors? And do you think 
international competition as we talked about and you--as we 
discussed a little bit, will fill the void if you were forced 
to downsize because you were deemed too big to manage by a 
future President or Congress?
    Mr. Gorman. Well, the U.S. financial system is very 
interesting because it has at the one-time very large financial 
institutions represented here. It needs those because it has 
very large corporations. Somebody has to finance Microsoft and 
Google and Exxon and IBM and GE, et cetera, and if the U.S. 
financial institutions aren't doing it, aren't the backbone, 
somebody else will from overseas.
    Secondly, it also has 5,000 smaller banks, which most 
countries don't have. This is actually the least concentrated 
banking sector, I believe, of any of the major developed 
markets in the world. I grew up in Australia, where the top 4 
banks account for 80 percent of deposits.
    Mr. Williams. Thank you. I yield my--
    Chairwoman Waters. The gentleman from Washington, Mr. Heck, 
is recognized for 5 minutes.
    Mr. Heck. Thank you, Madam Chairwoman. I would like to ask 
a question first of all to Mr. Corbat, Mr. Dimon, and Mr. 
Moynihan. As the heads of banks over $10 billion, you are 
obviously supervised by CFPB for consumer protection, and as 
you no doubt know, the last director of CFPB affirmed by the 
current one has announced that they are going to stop checking 
on compliance with the Military Lending Act. They have 
indicated they are no longer examining for compliance. I want 
to confirm here now for the public record that that is the 
case. Mr. Corbat?
    Mr. Corbat. I believe we continue to be checked by our 
regulators to be in compliance and we are in compliance.
    Mr. Heck. So you are saying that, notwithstanding what the 
Director of the CFPB has said, that they are no longer 
examining for compliance, they are in fact examining for 
compliance?
    Mr. Corbat. I should state that I believe--and we can 
follow up directly with your office, is that the OCC actually 
checks that, and we have been checked to be in compliance--
    Mr. Heck. That wasn't the question, though, sir. It was 
whether or not the CFPB was examining you for compliance with 
the Military Lending Act.
    Mr. Dimon?
    Mr. Dimon. I am not actually aware of whether they are or 
aren't, but we are going to continue doing it ourselves anyway.
    Mr. Heck. Mr. Moynihan?
    Mr. Moynihan. I am not aware of the concern of yours, but 
the OCC regulates us on that and does examine it.
    Mr. Heck. The CFPB does as well, or did.
    Mr. Moynihan. They work with the OCC. So we are examined on 
it routinely and we continue to comply with all laws.
    Mr. Heck. Did any of you object to the CFPB examining you 
for compliance with the Military Lending Act? Did any of you 
submit in writing or have any of your employees on your behalf 
indicated to them that you wanted them to stop examining you 
for compliance with the Military Lending Act?
    Mr. Corbat?
    Mr. Corbat. I did not.
    Mr. Dimon. Not that I am aware of.
    Mr. Gorman. Not that I am aware of, either.
    Mr. Heck. A painful reminder that the night before last, 
three young Marines lost their lives in Afghanistan. And it is 
on behalf of the young men and women who put on the uniform to 
defend this nation that that law was passed to protect them.
    Because as a matter of fact, as a point of fact, 80 percent 
of those who lose their security clearances do so because of 
financial distress. That was part of what led to the enactment 
of the Military Lending Act in 2006, I believe.
    The question really is vague as to who is it that looks out 
for military families. But what I have taken from you is that 
none of you would object to being examined by the CFPB for 
compliance with the Military Lending Act. Raise your hand, of 
the three of you, if you would object to that.
    You would object to that, sir?
    Mr. Moynihan. Too many negatives. No, I wouldn't object to 
that.
    Mr. Heck. Sorry about that. Okay.
    I have a second question I want to ask each of you in 
whatever little time we have left. I examined the recent 
history and the scrolling set of fines that have been levied. 
And I think especially about corporations that have made 
egregious mistakes like Wells, not represented here today, and 
Equifax, and the market doesn't seem to have punished them for 
their bad behavior, egregious behavior, didn't punish them on 
the stock side, didn't punish them on the revenue side.
    And it begs the question of, what deters bad behavior? If 
the market doesn't do it, and certainly the regulatory entities 
are not engaged in any kind of enforcement activity that seems 
to be having the effect of deterring bad behavior, what is it 
that can be done to deter bad behavior? What is it that can 
conceivably align your understandable objective of making money 
for your shareholders and being profitable and serving your 
customer base? What can we do to get rid of bad behavior?
    Because when I look at Wells and Equifax, you just have to 
ask, what in the world would work?
    Why don't we start with Mr. Solomon and go this way. Each 
of you have 6 seconds.
    Mr. Solomon. I think we are working to do the best we can 
in our organization. I think the market does hold you 
accountable over time--
    Mr. Heck. They didn't for Wells or Equifax, sir.
    Mr. Solomon. I can't really comment on Wells or Equifax.
    Mr. Heck. Mr. Scharf? Sure. Go ahead, Mr. Solomon.
    Mr. Scharf. I would just echo that. We continue to try and 
do the best job we can. I will say from our perspective, the 
regulators--
    Mr. Heck. Let me interrupt and close this way, because one 
of the most powerful means of enforcement of behavior is group 
affirmation or condemnation. And I realize that you all 
interact with the heads of these other organizations. But do 
you know what would help? Stand up and speak out, because what 
Wells did and continued to do is unacceptable and you ought to 
call it out publicly for what it is.
    With that, I yield back my time.
    Chairwoman Waters. The gentleman from Colorado, Mr. Tipton, 
is recognized for 5 minutes.
    Mr. Tipton. Thank you, Madam Chairwoman, and witnesses, I 
appreciate you being here today.
    I want to come at this from a little different angle. I 
represent a rural part of Colorado. And part of the big 
challenge that we have in those rural areas is that when the 
economy goes bad, we are typically one of the first areas to 
suffer. As the economy starts to recover, we are the last to be 
able to actually participate in that recovery.
    But what is the key to success in being able to create 
those jobs, being mindful that 7 out of 10 jobs in this country 
are created by small businesses, is access to capital. One of 
the challenges we are really facing now--pre-crisis, we had a 
little better than 6,500 banks in this country. We are now down 
to about 4,700 banks that are providing that access to capital, 
just given the geographic constraints of many of the people 
that I represent have to be able to deal with.
    Fortunately, we have seen a proliferation of online 
banking, advances in the financial services technology that 
does seem to have the potential to be able to make sure that 
these communities remain economically viable. And so, Mr. 
Moynihan, Mr. Dimon, maybe you would speak to what your 
institutions are doing to be able to respond to some of the 
unique challenges that we see, providing crucial banking 
services to rural customers, and especially using the advances 
in technology?
    Mr. Moynihan. Well, if you think about a couple of things, 
just to be clear, our loans to companies of under a million 
dollars as a loan to the company have grown every year since 
2011. And that is a big area of business for us. Generally, 
that business is done where we have branches in the catchment 
basin, so-called.
    We do have about 30 percent, 25 percent of our sales are 
done directly through--you know, technology through a digital 
presence. We continue to expand the capabilities there. We can 
do a small business loan directly that way. And we will 
continue to do it.
    I always challenge a team, to answer your question, having 
grown up in a rural part of the country, how do we extend our 
reach? And how do we extend our capabilities? And that is 
something I have them focused on, which is not only branch-less 
and not only automation, but also even how you can deploy 
branches, these technology-based branches we have that can 
provide services.
    Mr. Tipton. Thank you.
    Mr. Dimon?
    Mr. Dimon. Yes, sir. We are one of the largest banks to 
community banks. We support them with FX, derivatives, equity, 
debt, capital markets, lending, buying their mortgages, 
financing their mortgages, et cetera. So we are going to 
continue that.
    We also are one of the largest banks to small businesses, 
like Brian over here. We have special lending for entrepreneurs 
of color because we know that it is an underserved market, 
particularly when it comes to financing small businesses. And 
we are also expanding. So we are going from 23 States to 40 
States and a lot of your States are now going to get JPMorgan 
branches.
    I would love you to go to the one down here in Anacostia 
because every time we go to a town, we come in and start making 
small business loans. We do some philanthropy. We try to do 
some LMI lending. We try to add financial education. We try to 
do that pretty much wherever we do business.
    Mr. Tipton. I appreciate that, and the nexus between the 
big banks and the small banks to be able to provide that.
    And, Mr. Dimon, would you maybe follow up just a little 
bit? One of the critical areas for our economy also happens to 
be mortgages in our rural communities and to be able to get 
that lending. What is the state of the mortgage lending for 
large banks? And are large banks meeting some of the needs in 
our rural communities?
    Mr. Dimon. Obviously, most of the large banks here make 
mortgages. The issue with mortgages is highly constrained 
because there are 3,000 Federal and State servicing and 
origination requirements which make it more expensive. When the 
financial crisis happened, we put in much better standards, 
which is a very good thing. But we never finished the 
regulations for securitization.
    Because of those things and certain risks on the legal 
side, banking lending has been heavily constrained to lower-
income people, self-employed people, and people with prior 
defaults. And that could be fixed. It has to be fixed by the 
regulators and the legislators. They are aware of the issue.
    But that would open up the mortgage markets, and some of 
our economists think that one thing alone could add 0.2 percent 
a year to GDP growth in America. That one thing.
    Mr. Tipton. Okay. Thank you very much for that.
    I happen to Chair the Small Business Caucus, and we had a 
meeting just a month or so ago noting that business loans are 
down 13 percent, small business loans, since 2008. It's 
difficult for women-owned businesses, where they account for 
only 16 percent of the conventional small business loans and 3 
percent of the venture capital funding.
    Mr. Solomon, what initiatives has your firm taken to be 
able to right the discrepancy for women-owned investments in 
businesses?
    Mr. Solomon. In the last year, we launched a program called 
Launch with G.S., where we committed $500 million to basically 
back businesses started by women or asset managers that are 
started or run by women. We are now expanding that program to 
also include businesses started or founded by people of color.
    Mr. Tipton. Thank you.
    I yield back, Madam Chairwoman.
    Chairwoman Waters. The gentleman from California, Mr. 
Vargas, is recognized for 5 minutes.
    Mr. Vargas. Thank you very much, Madam Chairwoman.
    And thank you, Ranking Member McHenry, for being here. I 
appreciate it.
    And of course, I thank all of the witnesses here. Thank you 
for being here today. I do want to ask you about DACA 
recipients, Deferred Action for Childhood Arrivals. These are 
young people who arrived in our country before they were 16 
years old, brought here by their parents or other relatives, 
and really by no fault of their own. Unfortunately, they don't 
have documents.
    Because in 2012, President Obama signed an Executive Order 
that these young people and some children wouldn't be deported, 
they are allowed to work legally in our country.
    So I want to ask you first--and go down the line--one, if 
you hire them and two, if you help them in their renewals.
    Mr. Corbat, I will start with you, sir.
    Mr. Corbat. Yes, we do hire them.
    Mr. Vargas. And do you help them with their renewals? It is 
a $500 fee that most of them pay. Do you help them?
    Mr. Corbat. I don't know the answer to that.
    Mr. Vargas. Okay. Could you find out and tell me? I would 
appreciate that.
    Mr. Corbat. Certainly.
    Mr. Vargas. Mr. Dimon, sir?
    Mr. Dimon. We definitely hire them, and I believe we help 
with the fees. We could let you know. And we completely support 
DACA staying here.
    Mr. Vargas. Thank you very much.
    Mr. Dimon. A hundred percent.
    Mr. Vargas. I appreciate it.
    Mr. Gorman?
    Mr. Gorman. Yes, we hire them. They are also already 
employees. And I am not aware whether we help or not on--
    Mr. Vargas. Could you find out?
    Mr. Gorman. I certainly will.
    Mr. Vargas. It would certainly be a great thing if you did.
    Mr. Gorman. I will send it in to you.
    Mr. Vargas. Mr. Moynihan?
    Mr. Moynihan. We hire them. When the issues came up, we 
retained attorneys to represent them in the process at our 
cost. And like my colleagues here, they are working for us, 
sir. Let's keep them here.
    Mr. Vargas. A very hearty thank you for you. Thank you, 
sir.
    Mr. O'Hanley, sir?
    Mr. O'Hanley. We do hire them. I am not aware whether we 
help them financially.
    Mr. Vargas. I hope you do because they need to renew every 
2 years.
    Mr. O'Hanley. I will get back to you.
    Mr. Vargas. Sure, sir.
    Mr. Scharf. I don't know sitting here. We will look at it.
    Mr. Vargas. Could you find out and get back to me on that? 
I would appreciate it.
    Mr. Scharf. Yes, sir.
    Mr. Vargas. Mr. Solomon?
    Mr. Solomon. Yes, Congressman. I don't know the answer but 
I will look into it and get back to you.
    Mr. Vargas. I appreciate it. Thank you.
    I would like to go down the line and ask you a question. 
Would your institution continue to lend to an individual who 
repeatedly defaulted on his or her prior loans?
    Mr. Corbat, yes or no?
    Mr. Corbat. We would look at the circumstances, but likely 
not.
    Mr. Vargas. Likely not.
    Mr. Dimon?
    Mr. Dimon. We look at the circumstances. Likely not, but we 
do give second chances.
    Mr. Vargas. Okay.
    Mr. Gorman?
    Mr. Gorman. Exactly the same answer.
    Mr. Vargas. Okay.
    Mr. Moynihan?
    Mr. Moynihan. I agree. We would look at the circumstances 
but we are less than likely or not.
    Mr. Vargas. Okay.
    Mr. O'Hanley?
    Mr. O'Hanley. We don't do consumer commercial lending.
    Mr. Vargas. Okay.
    Mr. Scharf?
    Mr. Scharf. We don't do lending to private citizens.
    Mr. Vargas. Okay. Great.
    Mr. Solomon?
    Mr. Solomon. We would look at the circumstances, but most 
likely not.
    Mr. Vargas. Okay.
    Second question: Would your institution lend to an 
individual whom you knew had inflated the value of his or her 
assets in order to secure a loan from your institution?
    Mr. Corbat?
    Mr. Corbat. It would depend on the type of loan.
    Mr. Vargas. So you might lend to them, if you knew that 
they had inflated the value of their assets to secure a loan, 
you would do that?
    Mr. Corbat. Depending on the type of loan. If we were 
lending versus a personal guarantee or we were lending against 
a specific asset, in which case we would do our own 
underwriting.
    Mr. Vargas. Okay. All right.
    Mr. Dimon?
    Mr. Dimon. Unlikely.
    Mr. Vargas. Unlikely? Did you say unlikely?
    Mr. Dimon. Unlikely, yes.
    Mr. Vargas. Unlikely. Thank you.
    Mr. Gorman?
    Mr. Gorman. We don't do many of those loans because we are 
not in that business. But if we did, I would say very unlikely.
    Mr. Vargas. Okay.
    Mr. Moynihan?
    Mr. Moynihan. We don't depend on--in a corporate setting, 
we value the assets. And so, it's unlikely.
    Mr. Vargas. Okay.
    Mr. O'Hanley?
    Mr. O'Hanley. We don't do that.
    Mr. Vargas. You don't do those.
    Mr. Scharf, I don't believe you do those either.
    Mr. Scharf. We do very little.
    Mr. Vargas. Mr. Solomon?
    Mr. Solomon. We are very small on that but it would be 
unlikely if they made a misrepresentation.
    Mr. Vargas. Okay. Would your institution continue to 
maintain a banking relationship with an individual who had 
committed loan fraud?
    Mr. Corbat?
    Mr. Corbat. No.
    Mr. Vargas. No.
    Mr. Dimon?
    Mr. Dimon. Unlikely.
    Mr. Vargas. Unlikely, but maybe? If they committed loan 
fraud, you think that might be a good idea?
    Mr. Dimon. Unlikely. We do our homework. Unlikely, and the 
definitions of what people mean and--
    Mr. Vargas. Loan fraud.
    Mr. Dimon. Unlikely.
    Mr. Vargas. Okay.
    Mr. Gorman?
    Mr. Gorman. No, I don't think so.
    Mr. Vargas. Mr. Moynihan?
    Mr. Moynihan. Is this the person who committed loan fraud 
and it was--oh, no.
    Mr. Vargas. Okay.
    Mr. O'Hanley. We are not in that business.
    Mr. Vargas. You are not in the business of loaning to 
people who commit fraud? Good for you. I am with you on that.
    Mr. Scharf, go ahead?
    Mr. Scharf. Again--
    Mr. Vargas. It sounds like some might be.
    Mr. Scharf. We are not in that business.
    Mr. Vargas. I am glad you are not.
    Mr. Solomon. No.
    Mr. Vargas. No? Thank you.
    Would your institution provide a loan to an individual in 
order for him or her to pay off a loan that had been extended 
by your bank? In other words, if one division of your bank 
provided a loan to an individual, would you approve the 
extension of a loan from a different division so that initial 
loan could be paid off?
    Mr. Corbat?
    Mr. Corbat. It would depend on the circumstances. As an 
example, somebody could have credit card debt and they could 
come in and ask for a personal loan--
    Mr. Vargas. Okay, thank you.
    Mr. Dimon, I am running out of time.
    Mr. Dimon. Based on the circumstances.
    Mr. Vargas. Okay.
    Mr. Gorman. The same answer. Based on the circumstances.
    Mr. Vargas. Okay.
    Mr. Moynihan?
    Mr. Moynihan. It is, again, based on the circumstances. 
What is the payoff from, where is the money from?
    Mr. Vargas. Okay.
    Mr. O'Hanley. We are not in the lending business.
    Mr. Vargas. Yes. And you don't loan to people who commit 
fraud. Good for you.
    Mr. Scharf. Same answer.
    Mr. Vargas. Same answer.
    Mr. Solomon. Based on circumstances.
    Mr. Vargas. Okay. My time has--I hope you continue to help 
especially the DACA recipients. And I appreciate your help with 
them. Thank you.
    Chairwoman Waters. The gentleman from Georgia, Mr. 
Loudermilk, is recognized for 5 minutes.
    Mr. Loudermilk. Thank you, Madam Chairwoman.
    I know it has been a long day and I appreciate you all 
being here. Our economy is strong. And we have heard that from 
various elements of government and the banking industry.
    The banking system is strong. That is not just my opinion. 
From what the previous Federal Reserve Chairs and other 
regulators are telling us, not only is it strong but it is 
deep. And that is very encouraging.
    I don't have to tell you guys that the economy is about 
momentum. It is about movement. There is always the same amount 
of money out there. It is just whether or not it is moving.
    During the recession, money was sitting stagnant. We are 
moving that money now. It is moving. People are trading their 
resources for money, and we are moving it.
    And so my interest is keeping that money moving, keeping 
the economy strong, keeping resources moving. And I want to 
look at what I think are real threats to our economy, not just 
perceived threats or some of the other politically driven 
questions you may have had today.
    I see, coming from an I.T. background, cyber is a serious 
threat not only to our banking system, to our economy, to 
individuals, to their personal security altogether, I see it as 
possibly the biggest threat to the U.S. financial system, and I 
think part of the problem is the patchwork of conflicting data 
security and breach notification laws, is one of the major 
issues that is exacerbating the problem we already have.
    And some of us--I am one of them who thinks that we need 
some type of uniformed national standard. Mr. Dimon, what are 
your thoughts on that?
    Mr. Dimon. You are absolutely correct, and I had mentioned 
in my opening comments early on that actually all of us--I 
think all of us are going to meet with Secretary Mnuchin, 
Homeland Security, with all of our security officers is 
absolutely essential to work closely with the Federal 
Government, that we share information faster--we already do it 
among ourselves--and that we have more common standards.
    We don't have 24 people ordering us and doing penetration 
tests, et cetera, will make it riskier, not safer.
    Mr. Loudermilk. Do you ever find yourself in a situation 
where if you are in compliance with one regulatory agency, you 
may be out of compliance with another?
    Mr. Dimon. Yes.
    Mr. Loudermilk. Quite more often than not?
    Mr. Dimon. All the time, yes.
    Mr. Loudermilk. All right, thank you. Mr. Moynihan, why is 
it important for the Federal financial regulators to coordinate 
cybersecurity standards and exams so they are consistent across 
the agencies?
    Mr. Moynihan. We are effectively in a war on cybersecurity, 
and any energy that is lost to people--to give information--the 
same information twice, mainly it slows down the process of 
getting the information, getting it to all institutions and we 
work together.
    The large institutions funded a group to get that 
information out faster. Anything that results in time spent 
trying to figure out something that may not be as important as 
something else, those are times taken away from actually 
defending--the two basic principles, defending the perimeter, 
and then secondly, finding out who is doing it, which is 
critically important to the security of the infrastructure of 
all America and the world, frankly.
    What we found out doesn't necessarily just help the banks, 
it helps all kinds of companies.
    Mr. Loudermilk. Right, and thank you. I am from Georgia and 
we are actually home to two-thirds of the nation's payment 
processing, and I am also co-Chair of the Fintech Payments 
Caucus with my good friend and colleague, Representative Scott 
from Georgia.
    Mr. Dimon, you said something recently that--you said you 
were both inspired and worried by China's strength in fintech. 
It was a very interesting comment. What should our policymakers 
be doing to make sure the United States remains competitive in 
this field and on a global scale?
    Mr. Dimon. Yes, so I want to just go back quickly to, we 
also protect our clients. So we do a lot of cyber protection 
for our clients, which include hospitals, governments, States, 
et cetera. And that is all for our backbone that does a lot of 
that work.
    We had a team of people go to China recently and they met 
with a lot of the large fintech companies there. They are very 
smart, they are probably ahead of us in AI, but I think the 
bottom line is the United States is not afraid of it, we are 
going to compete, we spend plenty of money on technology, too.
    I think the bottom line is we have one of the most 
innovative societies in the world and it is being hampered by a 
lot of stuff. We are not educating enough kids in innovation, 
we are not building infrastructure--and I am talking about 
waters and grids and networks and FAA--and we have to get that 
going.
    And allowing companies to compete more--fail a little bit, 
you are going to fail when you try new things, so it is a 
critical factor--is infrastructure.
    Mr. Loudermilk. Well, thank you, and I appreciate that. I 
think I see in this chamber today a lot of partners, with whom 
we can partner together to make America safe, secure, and 
strong, because we all benefit from it, and I look forward to 
continuing the partnership with all of you. I yield back.
    Chairwoman Waters. Thank you. We promised our witnesses 
here today that we would have a break about this time for 10 
minutes, so let us take a break and we will come back and 
complete the questioning for our witnesses this afternoon. 
Thank you, 10-minute break.
    [brief recess]
    Chairwoman Waters. The committee will come to order. Will 
the photographers please cease?
    The gentleman from New Jersey, Mr. Gottheimer, is 
recognized for 5 minutes.
    Mr. Gottheimer. Thank you, Madam Chairwoman. And thank you 
all for being here today and for your work and for what you do 
for New Jersey. I am very grateful. I wish we had also put up 
slides earlier today that looked more like this one, about how 
many jobs your firms have created, or slides showing how many 
entrepreneurs and small and minority-owned businesses have been 
supported by your institutions, or slides showing how many 
pensions and 401(k)s and homes and other finances you have 
helped people secure.
    [slide]
    Your firms currently employ more than a million people. You 
have doubled your small business loans in the last decade from 
$44 billion to $86 billion, including supporting small 
businesses in my district to the tune of $471 million. Making 
the dream of homeownership possible, your firms have originated 
$1.8 billion in home mortgages in my district alone, and I am 
grateful. But unfortunately, there is no slide up there about 
that, either.
    I really appreciate the opportunity to discuss the success 
America has seen as a result of the changes that have been made 
over the last decade, thanks to Dodd-Frank and other 
legislation, and investments in the last 10 years that you have 
made since the financial crisis, and changes you have also 
made. Obviously, there is always room for improvement, but I am 
grateful for the changes that have been made.
    Prior to serving in Congress, I worked at Microsoft, where 
I was lucky to work on the cutting edge of technology, the 
Cloud and e-commerce. I know you all devote a lot of resources 
to innovation and technology, and as one of the co-Chairs of 
the Congressional Fintech Caucus, I have a quick question, and 
maybe I will start with Mr. Moynihan. What do you think the 
future of banking and fintech looks like, and how will it 
affect your institution in this space?
    Mr. Moynihan. Well, I think the question isn't what it is 
going to look like in the future; it is how it is affecting it 
literally today. And so if you look at the percentage of 
activity that goes through the 27 million mobile banking 
customers or 37 million digital bank customers we have, it is 
increasing. And then the interactivity of clients, the way we 
can help people manage their finances better with the 
connectivity of the smartphone, and the alerts and warnings, 
and your balance is low, and here, you can avoid an overdraft--
these are terrific things just for the raw consumer. And then 
you take it across all the segments, whether it is more 
affluent consumers or companies.
    And so it has a tremendous impact. It is the ability that 
makes us more efficient, makes us more secure, takes risk out 
of the organization. But it is going to be driven by what our 
consumers do.
    Mr. Gottheimer. Thank you, sir.
    If I could turn to small business for a minute, your 
institutions all provide a tremendous amount of lending to 
consumers and businesses. I believe the number is about 40 
percent of the total lending done in the industry, which is 
crucially important to providing credit to small businesses and 
consumers in New Jersey and across my district.
    If I can start with Mr. Dimon, can you describe some of the 
work that your firm has done in the small-business-lending 
arena and how those loans are helping to facilitate small 
business growth? Thank you.
    Mr. Dimon. So a lot of the services, particularly fintech, 
a small business, you can get loans now in a day if you need 
it. You can have a home line of credit that you can access 
right away. You can move money very quickly, very cheaply, both 
P2P and B2C. It will be real-time payments at one point. You 
can manage your investments on the phone.
    So we are just adding more and more digital services, and a 
lot of these aren't going to need the same kind of branches and 
ATMs, so they actually can bank rural, small businesses, and 
they get almost all the services they need in their phone.
    Mr. Gottheimer. Mr. Solomon, you mentioned in your 
testimony that Goldman Sachs has a 10,000 Small Businesses 
initiative that is dedicated to helping entrepreneurs create 
jobs and economic opportunity, providing greater access to 
capital. Can you elaborate on the initiative's ongoing efforts 
and the results that you are seeing? Thank you.
    Mr. Solomon. Sure. We created the 10,000 Small Businesses 
Program over a decade ago to try to find--because we are not a 
big platform lender, as are a number of the other companies, 
ways that we can help and support small businesses. We have 
committed over $500 million to educating business owners 
throughout the country.
    They go through an intensive 6-month program, and we have 
seen real results in the context of them adding jobs in their 
businesses, growing their revenue, and expanding their 
platforms by providing basic business education, support for 
financial services, and broadening their educational 
capability.
    Mr. Gottheimer. Thank you, sir.
    And Mr. Gorman, if I can, on Dodd-Frank, what changes have 
you implemented since Dodd-Frank that you believe makes your 
firm safer than they were before the financial crisis? If you 
could just give me a thumbnail in 40 seconds of just your top 
hits.
    Mr. Gorman. Doubled the capital, tripled the liquidity, cut 
the leverage by 75 percent, put in place a living will, orderly 
resolution, passed the annual CCAR stress tests, and 
fundamentally changed the organization, where we now operate 
with 30,000 risk limits. Pre-crisis, we had risk limits in the 
low hundreds.
    Mr. Gottheimer. Excellent, thank you, and I am going to 
submit several charts for the record about how much has been 
invested in our country in loans to small businesses, and of 
course, businesses of all sizes, and many in my district, which 
I am grateful for, and have really led to a lot of growth. And 
I thank you very much for being here today. Thank you.
    I yield back.
    Chairwoman Waters. Thank you very much. The gentleman from 
Ohio, Mr. Davidson, is recognized for 5 minutes.
    Mr. Davidson. Thank you, Madam Chairwoman.
    Witnesses, thank you very much for your testimony here 
today, and for the quality work you have done to strengthen our 
financial systems.
    I want to focus on technology, particularly certain 
sectors. With the incredible power of modern computing and the 
Internet, we are entering into a new era of innovation. 
Currently, blockchain is transforming our financial systems, 
cyber security, and how entrepreneurs and startups are able to 
raise capital. As the rest of the world speeds ahead to take 
advantage of this new technology, the U.S. is now lagging 
behind, heavily due to regulatory certainty issues that the 
market needs to protect consumers, and empower innovators and 
entrepreneurs.
    My colleagues and I, including Josh Gottheimer, Tulsi 
Gabbard, Ted Budd, and others who aren't on the committee--
Darren Soto and Scott Perry--introduced a bill yesterday that 
would provide the regulatory certainty the U.S. needs in order 
to take advantage of this thriving sector.
    Mr. Solomon, I am going to read an excerpt from an article 
that recently caught my attention: ``Goldman Sachs plans to 
establish a crypto-focused unit by the end of 2018,'' as 
reported by Bloomberg in December of last year. However, on 
September 5th, Business Insider reported that unnamed sources 
said the firm is scrapping crypto trading desk plans due to an 
unclear regulatory environment in the crypto industry.
    Mr. Solomon, why did Goldman Sachs initially choose to open 
a crypto trading desk?
    Mr. Solomon. The first article wasn't correct. Like others, 
we are watching and exploring, and doing work in terms of 
trying to understand the cryptocurrency market as it develops. 
We have some clients that have certain functionality and we 
have engaged with them on clearing physical futures, but other 
than that, we never had plans to open a cryptocurrency trading 
desk.
    We might at some point in time, but there is no question, 
when you are dealing with cryptocurrency, it is a new area. 
There are a lot of issues. It is unclear from a regulatory 
perspective, and it is not clear whether or not, in the long 
run, as a currency, those technologies are going to work and be 
viable.
    Mr. Davidson. Clearly, and certainly, some of those tokens 
that are issued are awaiting definition as to what will be a 
security, what is not a security, what is the appropriate 
trading platform. There are a number of issues that our bill 
goes into, and frankly, even things that will need to be 
addressed afterward.
    Mr. Dimon, in 2017 you called cryptocurrencies, ``not a 
real thing.'' But this year, your firm unveiled JPM Coin and 
stated, ``We are supportive of cryptocurrencies as long as they 
are properly controlled and regulated.'' Why the shift?
    Mr. Dimon. Well, the blockchain is real. It is technology. 
A lot of people are using it and testing it today, and we think 
it will work over time. But the part that is not real is that 
cryptocurrency is not supported by anything. There is no value 
behind it other than what the next person will pay for it, and 
they have serious issues about that.
    The JPMorgan Coin is a token which is supported by a 
deposit at JPMorgan, so it can be shipped around the world 
real-time. It can go with a lot of data on it. You can split it 
into pieces and in seconds all in once, cash. We can move the 
cash, too.
    Mr. Davidson. So the settlements will happen almost 
instantaneously and there will be a blockchain distributed 
ledger. And how will that facilitate better payment systems if 
it works correctly?
    Mr. Dimon. It will--you know, the payment systems today, 
they do work and they are very cheap, but the fact is this 
might be a faster way. It could be faster, it comes with data, 
and everyone would have the same data at the same time.
    So instead of us having to call each other at banks--up and 
saying what happened to that shipment from Singapore, we just 
go to the same screen and see it right away.
    Mr. Davidson. Because of the nature of the blockchain, it 
is inherently more transparent?
    Mr. Dimon. Yes. It has to be secure and it has to be, in 
this case, permissioned. Not everyone will be able to access it 
because we need real security around things like moving the 
money.
    Mr. Davidson. Thank you very much. Now, we can't talk about 
this thriving new sector without discussing how to protect 
consumers. As your role as banks evolve, secure custody of 
digital assets is essential. However, there is no regulation or 
guideline on who can be a qualified custodian for digital 
assets.
    Mr. Scharf, in looking at your policy regarding 
cryptocurrency on your website, BNY Mellon cites lack of 
regulatory clarity as a barrier to providing custody for 
digital assets. Can you expand on this statement and highlight 
any other regulatory hurdles you are facing in this space?
    Mr. Scharf. Sure. I think just as the website says, there 
is a lack of clarity, and I think that is one thing that stands 
in the way. Quite honestly, it is something that--
cryptocurrencies are very early in their existence. They are 
not significant today to speak of in terms of being used as a 
real currency to move value.
    And so we are actively thinking about what we want to do. 
One of the biggest issues that we have relates to anti-money-
laundering and KYC.
    Mr. Davidson. Thank you. My time has expired, and I yield 
back.
    Chairwoman Waters. Thank you very much. The gentleman from 
Guam, Mr. San Nicolas, is recognized for 5 minutes.
    Mr. San Nicolas. Thank you, Madam Chairwoman. Good 
afternoon, gentlemen, thank you so much for making time to be 
here. I was very excited to hear that the entry-level wages at 
Bank of America are going to be going up to $20 an hour, but it 
was disheartening in the fact that none of your enterprises do 
business on Guam.
    None of your enterprises, in fact, really do business in 
any of our Territories in terms of business that actually 
employ people in our districts, and I kind of wanted to put 
that on the record because there is a serious disconnect in 
this country when it comes to job creation, and that disconnect 
is impacting not only my district and not only Territories, but 
a lot of rural America.
    If we reference the chart that is put up there, you will 
see that post-financial crisis, non-metropolitan areas have not 
recovered their job markets. They are still about 2 points 
below the norm, while metropolitan areas are 8 points above 
where we were in the recession.
    And a lot of this has to deal with the fact that the job 
creation is happening, whether it is just a lot of economic 
activity, but part of it also is a fact that the access to 
credit in these areas is just a lot more pronounced, a lot of 
your firms are more concentrated in metropolitan areas.
    In fact, 27 percent of the country has two or fewer banks. 
And so, this is not just a territorial issue and it is 
definitely not just a Democrat issue; it is a bipartisan issue. 
In fact, my friends in the Colorado 3rd, the North Carolina 
10th, the Oklahoma 3rd, the Tennessee 8th, the Texas 5th, and 
the Wisconsin 7th are mostly rural areas.
    And so, I wanted to preface my question to this panel by 
raising all of those points and by posing a question with 
respect to some fiscal policy considerations that I have been 
working on.
    When the Fed Chairman was here, I inquired as to whether or 
not he would be open to an evolving interest rate policy, which 
currently is blanketed across the board for all financial 
institutions, and whether or not he would consider bifurcating 
interest rate policy between metropolitan and non-metropolitan 
areas.
    And the reason why that would be a good thing is if we keep 
interest rates low in non-metropolitan areas, we would have 
cheaper credit, we would have more money in the pockets of 
consumers, and we would be able to grow jobs there, while in 
the metropolitan areas, if we had a different interest rate 
policy, we would be able to combat inflation because of 
population densities in those areas.
    So I wanted to ask the panel if you would be open to 
exploring the idea of an evolving interest rate policy to 
bifurcate between metropolitan and non-metropolitan areas? And 
if we can just go down the panel?
    Mr. Corbat. We're open to exploring.
    Mr. Dimon. I would explore. To be honest, it wouldn't work.
    Mr. Gorman. I think it creates all sorts of arbitrage of 
people moving businesses in and out of those communities. I 
think I would do it though, if you wanted to, tax and other 
reforms to rebalance.
    Mr. Moynihan. I would agree that I think we will always 
explore anything, any idea is a good idea, we just have to 
figure it out, but I think if you really want to do something 
quickly, I think through incentives and other things, which is 
what my colleagues spoke about, you can accomplish it faster 
without the worry about the--just off the top of my head, 
without the corresponding worry about how it would have 
impacts, as James said.
    Mr. O'Hanley. Yes, of course, we would explore it, but I do 
think there are more direct ways to get at the issue.
    Mr. Scharf. I would absolutely explore it, and I would 
explore the other alternatives, as well.
    Mr. Solomon. I would absolutely explore it and I think it 
is great that you are raising it because it is a real issue and 
it is something that I think needs focus, but I agree with my 
colleagues that I think the suggestion is tough, and I would 
look at other means to try to address an issue that is real, 
that you are approaching.
    Mr. San Nicolas. I thank you all for your feedback. The Fed 
has two mandates, job creation and fighting inflation, and it 
uses interest rates as its primary tool to do that.
    And when we have the Fed raising interest rates 9 times 
since the financial crisis, while non-metropolitan areas 
continue to be in a position where they are not recovering 
their job markets, it just underscores the fact that we are 
underserving segments of our community and we are choking off 
their economic opportunities because we are not looking at them 
and we are not treating them the way we should be if we were 
taking everything into consideration.
    But I do appreciate everyone's feedback. I look forward to 
working with you in trying to flesh out this kind of a policy 
and maybe we can create different kinds of thresholds to be 
able to address the lack of job growth in non-metropolitan 
areas.
    Thank you, Madam Chairwoman. I yield back.
    Chairwoman Waters. Thank you. The gentleman from North 
Carolina, Mr. Budd, is recognized for 5 minutes.
    Mr. Budd. Thank you, Madam Chairwoman, for yielding, and I 
want to start by entering for the record, Madam Chairwoman, a 
document produced by the Financial Services Forum that cites 
publicly available data from the Federal Financial 
Institution's Examination Council.
    This document shows that the institutions represented here 
today account for nearly half of all consumer lending in our 
economy. They also have doubled their liquidity and hold 
roughly 40 percent more capital than they did 10 years ago.
    That is $750 billion in capital that these institutions 
hold right now, which significantly strengthens their 
resiliency. Is that okay with you, Madam Chairwoman?
    Chairwoman Waters. Are you submitting that for the record?
    Mr. Budd. I am, Madam Chairwoman.
    Chairwoman Waters. Without objection, it is so ordered.
    Mr. Budd. Thank you. To our witnesses, again, thank you for 
being here today. We have talked a lot today about the vast 
improvements that your institutions have made over the last 10 
years. Although strong capital requirements are a critical 
element of a resilient financial system, capital is not free.
    I am concerned that requiring banks to hold more capital 
than appropriate will unnecessarily increase costs for 
consumers and reduce bank investments in important areas such 
as cyber security.
    So I will open this up to any of you who would like to 
comment, but can a couple of you please describe how capital 
requirements affect your institution's decision-making, such as 
how you would more effectively allocate capital if these 
requirements that were on you were recalibrated.
    Mr. Corbat. In our institution, our capital, our binding 
constraint of our capital is risk-based capital, specifically, 
CCAR capital. I think we are obviously very mindful when we 
look at the allocation and optimization of our capital, we are 
mindful of those risks, and that the risk-reward benefits are 
appropriate and I think there is a natural skew in that--in the 
exercise in the data that probably leads you to take less risk 
than you otherwise might normally do. And so that would reflect 
itself in terms of lending, that would reflect itself in terms 
of new businesses or new business ventures. So, it could act as 
an inhibitor to growth.
    Mr. Budd. Thank you. Mr. Dimon?
    Mr. Dimon. I think there is excess capital and from 
operation was capital to CCAR capital, to G-SIB capital, and 
like Mike said, there is capital 20 different types of 
measuring of liquidity constraints. I think you can actually 
change the capital in a way that makes the system safer and 
gets more mortgages out there, small businesses. I think the 
Congressman from Guam--you can actually roll small-business 
loans in a lot of capital.
    There are a lot of things that could be changed that will 
not change systemic risk, it will free up some capital to do 
other productive things. I would say the exact same on the 
liquidity side. There is trillions of dollars locked up to hold 
in liquidity in perpetuity. And at some point, someone is going 
to ask, why do you all have all that cash sitting around doing 
nothing? And that is a legitimate question.
    Mr. Budd. We are certainly open to those ideas and to see 
what we can do to help on this end as well. Any others?
    Mr. Gorman. I would just add, it is a great question 
because it gets at the core issue of, at what point is stable 
enough and at what point do you need to grow? So you can retain 
more capital, you just retain more earnings, and by doing that 
you are not necessarily investing for growth. So that is the 
fundamental trade-off. Have we got the system stable enough 
where we need to be focused on investing for growth, which is--
that is what is going to create jobs.
    Mr. Budd. One more from North Carolina, Mr. Moynihan?
    Mr. Moynihan. Yes sir. We always struggle to explain this 
when you are in our position, but if you think about our 
company, each one hundred basis points capital, 1 percent. It 
is the difference between a 10 percent requirement and a 9 
percent requirement, would be $140 billion of lending we could 
do.
    And so the question is, all institutions of America at 7 
percent, the question is the difference between 9 and 10 for 
us. Is 9 good enough or is 10 good enough? And that is the 
debate. We actually have 11.5, so let's even forget about that.
    And that is $140 billion of loans we could do, as Jamie 
said, in terms of role of small business lending that we can't 
do today because the capital has to be held without risk. That 
is what the SIFI buffer means.
    Mr. Budd. Thank you. I want to shift gears a bit. So a 
personal interest of mine is looking at how we can use machine 
learning, artificial intelligence, to lower compliance costs 
and help banks better mitigate the risk and the financial 
system. Can one of all speak, and maybe even from this end over 
here, to the challenges or maybe even the opportunities that 
you have faced in deploying machine learning, and I also want 
to ask, how are regulators responding to A.I. and machine 
learning opportunities in implementations?
    Mr. Solomon. Well, you touched on compliance and the need 
to continue investing in compliance and surveillance and 
control, which is something we have obviously been very focused 
on. One of the benefits of A.I. and machines is ability from a 
surveillance perspective to do more and create more protection 
in an organization, than what can be done by individuals 
manually.
    Mr. Budd. My time has expired, I yield back. Thank you all.
    Chairwoman Waters. The gentleman from Illinois, Mr. Foster, 
is recognized for 5 minutes.
    Mr. Foster. Thank you, Madam Chairwoman, and thank you to 
our witnesses. I think you are going to sense a lot of 
difference in the nature of questions you get from Members here 
who were or were not present 10 years ago when Lehman fell and 
when your predecessors--I guess if I could get a quick show of 
hands, I think only one of you--how many of you were at the 
helm of your bank when Lehman fell and TARP came up? Mr. Dimon 
only, yes.
    So for those of you who are new since that, I would like to 
let you know what it was like being a Member of Congress when 
the TARP vote came up. You know, our phones were ringing off 
the hook with--ringing with sort of a 50-50 mixture of ``no'' 
and ``hell no,'' about whether or not we should vote to rescue 
the economy, we were faced with voting for $700 billion of 
taxpayer money, and at the time, the Congressional Budget 
Office estimated that half of that would be a dead loss.
    Okay, that is what we have the vote for. And on your trip 
back, you should have your staff dig up the roll call vote on 
who voted to save the economy and who did not. And then look 
over those names carefully and many of them are still in 
politics and it was one of those moments where I think a lot of 
Members' characters were revealed.
    You will see a lot of handwringing about the lack of heroes 
in government, but especially those Members who are holding 
down tough seats and voted to rescue the economy, knowing what 
it would cost them. The Melissa Beans, the Patrick Murphys of 
Pennsylvania who lost their seats--and me--lost our seats after 
taking a vote they knew would be politically very disruptive.
    It is only once or twice in your career when you are about 
to take a vote and your Chief of Staff comes in and says, ``You 
know, Bill, I know how you are going to vote on this and I am 
proud of how you are going to do it, but it is my job to tell 
you that you are putting your reelection at risk.'' And that is 
what happened as result of the collapse. And so those members 
who--I guess I am right at the watermark on our side of the 
aisle. Everyone--Ed was there, Ed Perlmutter and everyone 
behind me was present.
    The watermark is a little different in the nature of the 
questions from the other side, different from the side. So go 
look over the list of votes and think of what it would have 
been, if you did not have Members, particularly Democrats who 
carried the vote to rescue the economy in the House, who were 
willing to put their careers at risk.
    Now I would like to ask a little bit about the effects that 
you feel the most as a result of Dodd-Frank. I had a long 
discussion with the head of the risk counsel for one of you, 
and he described the first meeting when you had to come up with 
your orderly liquidation plan, your living will.
    And the first reaction of everyone was, I can't believe we 
have this many thousands of business units and that one of the 
main results was in fact that you have simplified your 
organizational chart significantly as result of that. And is 
that something that you agree was one of the effects of this, 
that you have looked hard at the complexity of your business 
model for things like well, stress tests, the orderly 
liquidation? Mr. Moynihan?
    Mr. Moynihan. Yes, I think for a whole host of reasons, 
whether it is liquidation, living will so-called, whether it 
is--you can get capital two ways. You can earn and retain it, 
or you can actually get rid of things that take capital that 
you don't need to do, that was another reason we did it. But 
all of that was good for the industry and good for our company. 
And I think I may have said that in our earlier testimony.
    So, I agree with you. The aftermath of the lessons learned 
in us attacking, one of them was to shrink the companies and 
make them more precise, and that is what we did.
    Mr. Foster. Mr. Solomon, I believe it was your institution 
that sort of became famous for the policy that had the risk 
officer having a 51 percent vote in any major decision. I think 
I have that correct. And how many of you just have that as a 
policy, that if the risk person in the room says no, that is 
it, it is not going to happen? How many of you currently have 
that as a policy? Mr. Moynihan is indicating yes. Any of--
    Mr. Gorman. It is not a formal policy, Congressman, but it 
would be a most unusual situation for the operating committee 
or the board to go against the risk committee's recommendation.
    Mr. Foster. Mr. Dimon?
    Mr. Dimon. Yes, we don't have a policy like that, but if 
two very senior people disagree, it would be bounced to me.
    Mr. Corbat. Same. If the chief risk officer said no, and 
there was a significant disagreement, the decision would come 
to me.
    Mr. Foster. Mr. Scharf?
    Mr. Scharf. That is why you have a risk officer, is to play 
that disinterested person and make that decision.
    Mr. Foster. Right. And I think the other thing that is 
significant is whether you pay those risk officers the same as 
the highest paid salaries. Is that also a general policy, that 
they are not sort of second-class citizens?
    Mr. Solomon. You are talking about empowerment of control-
side personnel in these organizations and that is something I 
think that is absolutely paramount, is that your people in 
positions of control have real power of authority and stature 
in the organization.
    Mr. Foster. Thank you.
    Chairwoman Waters. The gentleman from Indiana, Mr. 
Hollingsworth, is recognized for 5 minutes.
    Mr. Hollingsworth. Well, good afternoon. I thank each of 
you for being here, and I appreciate the testimony you have 
given thus far. I wanted to come back to something that 
Representative Himes asked about earlier. He is a good friend 
of mine and we talk a lot about systemic risk and our concerns 
about that.
    I believe each and every one of you, or perhaps just a 
majority of you mentioned shadow banking and some of the 
financial services activity that is now done in the unregulated 
market that perhaps used to be done in a regulated market.
    And I am not going to ask you to opine on all regulations, 
I am not going to ask you your opinion of the regulatory 
regime, but in a more thoughtful way, I would love it if you 
would point out for us as policymakers where specific 
regulations or perhaps specific legal liabilities have led to 
the unintended effect of financial services activity being 
moved and migrating from the regulated world to an unregulated 
space.
    Just particular items, if you might go down through the 
list, or anybody who wants to answer that. I just want to take 
note so that we begin to work on some of these aspects that 
could be done better.
    Mr. Corbat. I think there are two great examples. One would 
be auto lending. Today, over 85 percent of auto lending takes 
place outside of the regulated financial institutions. The 
second, going to Mr. Dimon's earlier comment, would be mortgage 
lending. Today, more than half of mortgage lending that occurs, 
occurs outside of the regulated financial system. That is very 
different from where those numbers were pre-crisis.
    Mr. Dimon. Yes, I will just talk mortgage lending in a 
little more detail because this is--and this is not 
complaining. I am not worried about shadow banks. JPMorgan 
Chase will be fine. But when you calibrate capital over here 
for banks, and there is much less over here in the real market, 
things just start to move. That is why this calibration issue 
is important for our system. It is not just--
    Mr. Hollingsworth. And it is not just concern for you guys, 
it is a concern for policymakers as well because the goal 
wasn't to grab one end of the balloon and have the balloon blow 
up elsewhere, right? The goal was to better understand--
    Mr. Dimon. Calibration.
    Mr. Hollingsworth. Yes.
    Mr. Dimon. Get it right because you will get the right 
things regulated and the right things unregulated. And that one 
is probably the biggest one. That is the one that blew up last 
time. You know, too much subprime lending, too many issues 
there. And so you can look at the exact same issue in other 
areas but that is the big one.
    Mr. Hollingsworth. Got it.
    Mr. Gorman. I think I would first say that I just wouldn't 
overstate my position on this. I think that the good news is 
that the vast majority of risk is contained within the 
regulated banking system. That is just a fact, it remains a 
fact, that is a good fact.
    But I think you have to start asking the question as the 
consumer finance sector grows and when you are looking at the 
liquidity capital leverage requirements on the regulated banks 
and very little on the nonregulated banks, you just have to ask 
yourself the question, is that an appropriate balance for what 
you are looking for?
    Mr. Moynihan. I would commend you to read the Federal 
Advisory Council reporting, which is a group of banks that some 
of us are on, but it includes all sizes who have given the Fed 
advice on this and it has largely to do with the types of areas 
of leveraged finance, mortgage lending--and again, the issue is 
these companies will be fine. We are competitive. It squeezes 
out smaller participants; they are actually more upset about 
it. And it also puts a--as a company who bought an unregulated 
company and had to clean it up, our company understands this 
better than anybody else, I think.
    Mr. O'Hanley. In addition to what everybody else has talked 
about, there is the whole payments area where there is just an 
uneven playing field between the banks and the non-banks.
    Mr. Scharf. Yes. I think for us, given our business in the 
payment space is the one place where there are unregulated 
players and it does create an unlevel playing field and you can 
clearly see businesses migrated and it leads to different 
business practices.
    Mr. Solomon. I don't have anything to add.
    Mr. Hollingsworth. It is tough to be last, isn't it? I was 
last on the committee last year, so I know what it is like 
trying to come up with ingenious responses right at the very 
end or new and novel ideas.
    The last thing I wanted to touch on comes back to this idea 
of the unlevel playing field. And everybody has talked about 
how in the absence of their institutions, large foreign banks 
would operate. Now, look, I don't want to cultivate this view 
that it is us versus them, right? And foreign banks versus 
domestic banks. But I do want to the cultivate view of, we want 
everybody to compete on a level playing field. Foreign banks 
have an opportunity to invest here in the United States, loan 
here in the United States.
    And I want to make sure I come back to something that Mr. 
Dimon spoke about. I had a gold plating legislation last 
Congress that in effect said we have too many regulations where 
we have stacked the regulatory burdens on top of each other in 
excess of what the global standard is without the data support 
of why we have that excess standard. And I wondered if you 
might talk for a brief moment about how that might put the U.S. 
financial system at a disadvantage compared to foreign 
counterparts?
    Mr. Dimon. The issue is over many years, not just--
    Mr. Hollingsworth. Yes.
    Mr. Dimon. So American banks are doing fine and people say 
it is not an issue today and they shouldn't complain. It is the 
calibration issue. The way they set up some of these things 
that American banks get a lot more capital than Chinese banks. 
The biggest Chinese banks already earn more money than us. They 
are not a direct competitor today, but I know they are coming.
    And not just them, the Japanese banks, you know, some of 
the other competitors are not in healthy enough shape. It just 
adds so much more capital that at one point it will be a huge 
disadvantage for whomever has my seat at this company. And so I 
just think over time, we should be considerate. We want the 
best banking system in the world.
    Mr. Hollingsworth. Amen to that. Thank you.
    Chairwoman Waters. The gentlewoman from Michigan--
    Mr. Hollingsworth. I yield back.
    Chairwoman Waters. --Ms. Tlaib, is recognized for 5 
minutes.
    Ms. Tlaib. Thank you, Madam Chairwoman. Thank you all so 
much for being here.
    Every day my residents in my district face environmental 
hazards that threaten their ability to thrive. For students at 
Munger Elementary Middle School in my district, this means 
increased absences because of asthma attacks caused by 
pollution in the air. And I want you all to just let that sink 
in. The air is too polluted for kids to be able to go to school 
and learn.
    Our country's overreliance on fossil fuels has a 
disproportionate burden on poor and vulnerable communities like 
mine, where the dirtiest polluters exist side-by-side with 
neighborhoods--neighborhoods I grew up in, where I thought that 
smell was normal, where children have asthma.
    So this question goes to all of you. Do you all believe 
actions matter? Do you believe, as the Federal Reserve Bank of 
San Francisco wrote recently, that climate change is a serious 
risk to the financial system, not to mention the planet?
    Mr. Corbat. Could you ask that again? I'm sorry.
    Ms. Tlaib. Do you believe that climate change is a serious 
risk to the financial system, not only the planet?
    Mr. Corbat. Yes.
    Mr. Dimon. I would say not directly to the financial 
system. I think climate change is real and we should be taking 
action immediately to do something about it. And most of that 
is going to have to be legislation.
    Mr. Gorman. If we don't have a planet, we are not going to 
have a very good financial system.
    Ms. Tlaib. That is right.
    Mr. Moynihan. I agree with my colleagues, and we believe, 
at Bank of America, that we must take action.
    Mr. O'Hanley. I do agree.
    Mr. Scharf. I do agree there are knock-on effects to the 
financial system.
    Mr. Solomon. I do agree.
    Ms. Tlaib. Would you be willing to restrict, limit, or 
change what your bank finances if you found out it is making 
the climate change worse in our country, in our world? Would 
you change some of your behavior?
    Mr. Corbat. I believe we already have started that.
    Ms. Tlaib. Yes. All of you?
    Mr. Dimon. We have already started that with great support. 
In the meantime, the United States does need energy to eat, 
drive, get here, heat, ventilate, hospitals, and there is a 
smart way to do this and a not smart way to do this.
    Mr. Gorman. Yes.
    Mr. Moynihan. We believe that we already have done--taken 
action.
    Mr. O'Hanley. We have taken action.
    Mr. Scharf. Yes.
    Mr. Solomon. We have taken and continue to take action.
    Ms. Tlaib. I am glad that you are all agreeing. But a 
report released 2 weeks ago shows that fossil fuel lending and 
underwriting is dominated by big U.S. banks, four of which are 
sitting right here in front of us: Chase: Wells Fargo; Citi; 
and Bank of America. Our top four banks in the world are 
financing the fossil fuel industry.
    Mr. Dimon, your bank alone has provided more than $195 
billion in fossil fuel lending and underwriting over the past 3 
years since signing of the Paris Climate Agreement, making your 
bank the number-one funder of fossil fuels in the world.
    Mr. Corbat, Citi has provided more than $129 billion fossil 
fuel funding over the past 3 years, number three in the world.
    Mr. Moynihan, Bank of America has provided more than $106 
billion in fossil fuel funding over the past 3 years, making it 
number four in the world. I want--folks, don't say that you are 
committed to clean and sustainable financing because your 
companies' words are not consistent with your actions. I would 
call this gaslighting. That is kind of what we call it in the 
neighborhood.
    But for the sake of this hearing, I will say that you are 
greenwashing your own track record and duping the American 
people into believing that you are helping to address climate 
change. On the record, will any of your banks make a commitment 
to phase out your investments in fossil fuels and dirty energy 
and align your investments with the goals of the Paris Climate 
Agreement to help protect our planet and communities I grew up 
in? That goes to all, if you guys can answer that. Mr. Corbat?
    Mr. Corbat. We are in the business of supporting fossil 
fuel companies, many of which are U.S.-based companies. We have 
put out significant programs--in fact, we have financed $150 
billion of clean projects in recent history. We keep raising 
the bar on ourselves and continuing to evolve with our 
companies towards better and cleaner practices.
    Ms. Tlaib. Mr. Dimon?
    Mr. Dimon. Well, for JPMorgan Chase alone, in 2020, we are 
going to be green. So, for our datacenters, our people, where 
we work, et cetera. We also finance something like $200 billion 
a year green. We have a thorough risk committees that makes 
sure every company we do business with does things right under 
the law and we are helping some of these companies make a 
transition to a greener future.
    But, if you want to fix this problem, you are going to have 
to do something like a carbon tax/carbon dividend.
    Mr. Gorman. We weren't one of the institutions you named 
but I am happy to answer the question. Obviously, the tradeoff 
is finding the balance between a viable economy and reducing 
fossil fuel at the same time, replacing with clean energy.
    Chairwoman Waters. The gentleman from Ohio, Mr. Gonzalez, 
is recognized for 5 minutes.
    Mr. Gonzalez of Ohio. Thank you, Madam Chairwoman. Thank 
you, everybody, for being here, and for your attention today. I 
think we have well-established that the companies you gentlemen 
work for play a tremendous role in the daily lives of 
constituents and the business operations for all the Members of 
Congress in this room today. Collectively, you are responsible 
for 42.5 percent of total lending by banks to businesses and 
households, and are responsible for more than $80 billion in 
small business loans, and $376 billion in lending to other 
financial institutions.
    In a sense, companies large and small rely upon you for the 
day-to-day financing required to operate a business. In 
addition, I think you have well-established that you are 
better-capitalized than you were during the financial crisis. 
And I think our banking sector, our financial sector in 
general, has been--and hopefully, will continue to be--a 
tremendous asset to this country. And I think that this hearing 
is important to establish that and I thank you for being here.
    I want to turn my questions first to BSA/AML reform. I am 
hopeful that this is something that this committee might 
actually be able to tackle in a bipartisan way. We are actually 
not that far apart on this, I don't think. Mr. Dimon, we spoke 
a little bit yesterday about some of your ideas around this and 
I want to piggyback off of Congressman Stivers' question.
    We know that you all are submitting these SARs reports and 
getting very little to no feedback. The system is in need of 
reform. What would you advise--what do you think is a way that 
we could do this better as a Congress?
    Mr. Dimon. I think you already said it, which is, we all 
send our reports in--
    Mr. Gonzalez of Ohio. Right.
    Mr. Dimon. Of course, these bad folks, if we kick them out 
and they go to one of these folks we don't know and we can't 
share information. So, the sharing of information among banks, 
AI, regulators are looking at this but allowing us to use AI 
and machine learning to do some of this stuff would be far more 
efficient but it creates other risks we have to be careful 
about. And the third one is, the government should have one big 
database that we all put all of our information in there and 
they can see all of it at the same time using AI.
    I guarantee you that would be 10 times more efficient than 
what we do today.
    Mr. Gonzalez of Ohio. Thank you. And then briefly, do you 
know how the size of your AML staff has grown in the past 
decade, roughly? Do you have a percent, a ballpark? No idea? 
Double? Okay. Because when I talk to our smaller banks, our 
community banks, those that are struggling, in some respects, 
with some of the regulation, this is honestly the number one 
issue that they say is, ``Hey, look. We are not a big bank. We 
don't have thousands of employees. And we are shooting these 
SARs off and it is crippling us.'' So I appreciate your 
comments on that.
    Shifting gears to China a little bit, without the largest 
U.S. financial institutions, where would major corporations 
turn to conduct their business? Because my sense is, hopefully 
not China, but it could be China. And then also the European 
banks. Same question, Mr. Dimon.
    Mr. Dimon. I think you would have large banks around the 
world step in. There would be Japanese banks, Chinese banks, 
and other healthier banks in Europe.
    Mr. Gonzalez of Ohio. And what risk do you think that 
presents to the U.S. financial sector?
    Mr. Dimon. I think it presents risk to the United States 
economy over time and I would just--all things being equal, our 
economy would be much worse than it otherwise would have been.
    Mr. Gonzalez of Ohio. Thank you. With that, I will yield 
back the balance of my time.
    Chairwoman Waters. The gentlewoman from California, Ms. 
Porter, is recognized for 5 minutes.
    Ms. Porter. Thank you, Madam Chairwoman. Mr. Dimon, you are 
an expert on financial statements and you run a $2.6 trillion 
bank. I know you are good at numbers and you have shared lots 
of opinions recently about how the U.S. should budget its 
resources, how families should budget their resources.
    I have a 150-page shareholder letter and I would like to 
ask for your help on a problem. I went to Monster.com and I 
found a job in my hometown of Irvine at JPMorgan Chase. It pays 
$16.50, and so I wondered if I could--if you would indulge me--
when you do the math on this and you do the $16.50 out of 40 
hours a week for 52 weeks a year, it comes out to an income of 
$35,070.
    Now this bank teller, her name is Patricia, has one child 
who is 6 years old, she claims the one dependent, and after tax 
she has $29,100. We divide that by 12 and she has a monthly 
budget--
    Mr. McHenry. Madam Chairwoman, parliamentary inquiry.
    Chairwoman Waters. The gentleman is recognized for a 
parliamentary inquiry.
    Mr. McHenry. I just want to understand the committee 
practice as it relates to signs and sharing this information 
ahead of time.
    Voice. We can't see it.
    Mr. McHenry. No. I just want to understand, because I have 
been on the committee for 15 years, and this is not something I 
have seen. So I just want to understand the practice as we go 
on.
    Chairwoman Waters. The gentleman has stated his 
parliamentary inquiry.
    Yes. The sign should have been presented to you, and copies 
provided so that all Members can see it. We have an 
alternative, if we could break and put them up for everyone to 
see, would that be acceptable?
    Mr. McHenry. Well, it is a white board that I have noticed 
and I haven't seen that in committee. Actually, I have seen it 
for a long time on TV. So I just want to understand the 
committee practice as it relates to that. What we have on the 
screens has been vetted by both sides and given ahead of time 
and that has been the committee practice but I just want to 
understand that.
    Chairwoman Waters. The gentleman is correct.
    Ms. Porter. May I respond? I do not intend to enter this 
into the committee record.
    Chairwoman Waters. The gentlelady is in violation of the 
practice of making sure that all Members can see what it is you 
are showing to the witnesses. So again, if it can be put up on 
the screen, then everybody can see it, and we can proceed. Can 
that be put up on the screen?
    Ms. Porter. Ma'am, I am happy to proceed--
    Chairwoman Waters. One moment, please. What we will do is 
we will move past your questioning while we try and get that up 
on the screen for all the Members.
    Ms. Porter. If the Chair would indulge me, I would prefer 
to proceed without the white board if it presents a violation 
of a rule.
    Chairwoman Waters. Thank you. And in the future, we will 
work with you to make sure that the practices are understood so 
you won't have an inconvenience.
    Ms. Porter. Thank you.
    Mr. McHenry. And I would offer the same likewise, so we can 
understand committee practice on this. I thank the Chair.
    Chairwoman Waters. Thank you very much. We will proceed. 
Ms. Porter, you may continue with your 5-minute questioning.
    Ms. Porter. Thank you. So where we left off was this woman 
had--and I apologize that you are going to need to follow this 
orally. She had $2,425 a month. She rents a one-bedroom 
apartment. She and her daughter sleep together in the same 
room. In Irvine, California, that average one-bedroom apartment 
is going to be $1,600.
    She spends $100 on utilities. Take away the $1,700 and she 
has net $725. She is like me. She drives a 2008 minivan and has 
gas, $400 for car expenses and gas. Net $325. The Department of 
Agriculture says a low-cost food budget, that is ramen noodles, 
a low food budget is $400. That leaves her $77 in the red.
    She has a Cricket cell phone, the cheapest cell phone she 
can get for $40. She is in the red $117 a month. She has 
afterschool childcare because the bank is open during normal 
business hours. That is $450 a month. That takes her down to 
negative $567 per month. My question for you, Mr. Dimon, is how 
should she manage this budget shortfall while she is working 
full time at your bank?
    Mr. Dimon. I don't know that all of your numbers are 
accurate. That number is generally a starter job.
    Ms. Porter. She is a starting employee. She has a 6-year-
old child. This is her first job.
    Mr. Dimon. Okay. And you can get those jobs out of high 
school and she may have my job one day.
    Ms. Porter. She may, but Mr. Dimon she doesn't have the 
ability right now to spend your $31 million.
    Mr. Dimon. And I am fully sympathetic.
    Ms. Porter. She is short $567. What would you suggest she 
do?
    Mr. Dimon. I don't know. I would have to think about that.
    Ms. Porter. Would you recommend that she take out a 
JPMorgan Chase credit card and run a deficit?
    Mr. Dimon. I don't know; I would have to think about it.
    Ms. Porter. Would you recommend that she overdraft at your 
bank and be charged overdraft fees?
    Mr. Dimon. I don't know; I would have to think about it.
    Ms. Porter. So I know you have a lot of--
    Mr. Dimon. I would love to call up and have a conversation 
about her financial affairs and see if we can be helpful.
    Ms. Porter. See if you can find a way for her to live on 
less than the minimum that I have described.
    Mr. Dimon. It would be helpful.
    Ms. Porter. Well, I appreciate your desire to be helpful, 
but what I would like you to do is provide a way for families 
to make ends meet so that little kids who are 6-years-old 
living in a one-bedroom apartment with their mother aren't 
going hungry at night because they are $567 short from feeding 
themselves, clothing--we allow no money for clothing.
    We allow no money for school lunches. We allow no money for 
field trips. No money for medical. No money for prescription 
drugs. Nothing. And she is short $567 already. Mr. Dimon, you 
know how to spend $31 million a year in salary and you can't 
figure out how to make up a $567-a-month shortfall. This is a 
budget problem you cannot solve.
    Mr. Dimon. With us, she does get full medical. We pay 90 
percent of it. And we also give people--
    Ms. Porter. No deductible?
    Mr. Dimon. There is a deductible but for people doing their 
wellness programs--okay, we give the people making under 
$60,000 a year a $750 account and effectively they have no 
deductible.
    Ms. Porter. That is why I didn't put any medical in, Mr. 
Dimon, I read that in your shareholder reporter. That is why I 
didn't include any medical expenses but she is still short 
$567, as are all of your employees in Irvine, California. Any 
ideas?
    Okay. Moving on, I have a question for Mr. Solomon. I know 
Goldman Sachs launched this 10,000 Women initiative and I have 
read about it. Do you know about how many people there are in 
the world?
    Mr. Solomon. Sorry? Yes, I do, a little less than 7 
billion.
    Ms. Porter. How many people are there in the world?
    Mr. Solomon. I said a little less than 7 billion.
    Ms. Porter. Okay. So let's assume half of those are women, 
to take your figure as right, 3.5 billion women and Goldman 
Sachs' big initiative is to help 10,000 of them. Is this 
initiative missing a few zeros?
    Mr. Solomon. It is an initiative that we started over 10 
years ago to try to help women in developing economies where 
they didn't have access to resources, try to help them provide 
these in these communities. They had small businesses where 
they hired people locally. It has been very successful.
    We have now expanded it. We have put the program up online 
and we continue to invest in it. We will certainly consider 
whether or not we can broaden it, but I think it is an 
excellent program and we will use our resources to expand it.
    Chairwoman Waters. The gentlelady's time has expired. The 
gentleman from Tennessee, Mr. Rose, is recognized for 5 
minutes.
    Mr. Rose. Thank you, Madam Chairwoman.
    And thank you to our panelists today for taking time from 
what I know are busy schedules and busy businesses that you 
have.
    I am a small businessman and new to the Congress. And I 
have found my business availing itself of the services that 
your entities provide and I appreciate the important role that 
you play in providing financial services to our small 
businesses across the country. So thank you for the good work 
that you do.
    I would like to direct a few comments to you, Mr. Dimon. 
You stated in your shareholder letter this year that the 
country desperately needs mortgage reform. And to quote, ``It 
would add to America's economic growth, reducing onerous and 
unnecessary origination and servicing requirements, and opening 
up the securitization markets for safe loans would dramatically 
improve the cost and availability of mortgages to consumers, 
particularly the young, the self-employed, and those with prior 
defaults. And these would not be subprime mortgages, but 
mortgages that we should be making. By taking this step, our 
economists believe that home ownership and economic growth 
would increase by as much as 0.2 percent a year.''
    I understand that you probably--I don't want you to get too 
far into the weeds. But can you tell me more about your views 
at a high level, on what housing finance reform should look 
like?
    Mr. Dimon. We required housing finance reform because we 
had a huge housing finance problem. And it was both government 
policy and bad underwriting by a series of banks.
    But the reform so far that I have mentioned, there were 
3,000 servicing and origination requirements, sometimes 
different by State. So it was very expensive. Securitization 
was supposed to have been done by now, so they would reduce the 
cost of the mortgage. Those two things alone reduce cost of 
mortgages to consumers by 20 or 30 basis points.
    In addition to that, the lack of legal safe harbors is that 
a lot of banks stay away from doing things for self-employed, 
prior defaults because of the legal risk. The reform of those 
things would dramatically improve the markets for everybody. 
And I think it would make it a healthier financial system, not 
a weaker financial system.
    In that letter, I do point out that if we did 
infrastructure right, 0.2 percent growth. Immigration reform, 
0.2 percent growth. And you go on and on and on. And so I am 
making the point that a lot of the policies that held us back 
were our own policies. And if we fix them, we would be in far 
better shape. And growth would drive wages, jobs and everything 
that everyone in this room wants for Americans.
    Mr. Rose. Would you agree that the GSE conservatorships are 
unsustainable and that they need to end during this 
Administration?
    Mr. Dimon. In general, yes.
    Mr. Rose. And would you agree that any government guarantee 
should be limited to the security, not the entire balance 
sheet? Paid for and come behind significant private capital in 
the first lost possession, kicking in only in the most 
catastrophic of economic crises?
    Mr. Dimon. I think that would work. Look at mortgages. You 
have to get all the pieces right so you can have that. It has 
implications in other parts.
    But leaving the government guarantee to a certain amount, 
very risk-less relatively, that the mortgage origination pay 
for the losses first. So the government and the taxpayer never 
has to pay for it. I think you can have a very healthy 30-year 
mortgage and let the private sector do the other 50 percent.
    Mr. Rose. Do you agree that that reform should 
significantly--I think you just answered this, but should 
significantly increase the role of private capital in bearing 
the risk?
    Mr. Dimon. It would increase it. Yes.
    Mr. Rose. And do you believe that these reforms should 
forever end the too-big-to-fail mortgage companies?
    Mr. Dimon. I think that would probably end it. Yes.
    Mr. Rose. Additionally, you mentioned the innumerable 
regulations regarding mortgages, and you just reiterated that. 
Can you elaborate on why it is important to address housing 
finance reform now, while the economy is strong?
    Mr. Dimon. Well, the examples you wanted, you fix your roof 
when you can and not wait and create additional problems down 
the road. And this reform would do all of that.
    Mr. Rose. And I think it has been referenced earlier, but 
much FHA lending has moved to the non-bank sector, which does 
not have the same high capital standards as the institutions 
arrayed here today. Is there a risk to the taxpayer here?
    Mr. Dimon. Yes, almost all of that is being done by the 
non-bank sector. And almost all of it is being guaranteed by 
the Federal Government. And when we look at it, yes, there is 
increasing risk in FHA-guaranteed loans.
    Mr. Rose. Thank you.
    I yield back the balance of my time.
    Chairwoman Waters. The gentleman from Utah, Mr. McAdams, is 
recognized for 5 minutes.
    Mr. McAdams. Thank you, Madam Chairwoman.
    And thank you all for being here today. In your various 
testimonies, most of you spoke favorably of the changes in the 
financial system since the financial crisis, and post-enactment 
of Dodd-Frank. And for me, that is good to hear.
    I do believe that the financial system has made a number of 
important changes since 2008. Your institutions hold more 
capital. Dodd-Frank required important stress testing and 
resolution planning processes for our largest financial 
institutions.
    And importantly, Dodd-Frank created the Consumer Financial 
Protection Bureau, which was designed to be the cop on the beat 
looking out for the consumers.
    Many of your institutions have also raised concerns about 
various regulations implemented post-financial crisis. And I 
understand that. Lawmakers and regulators will never get 
everything perfect the first time around. And I certainly 
support making our sure that our legislative and regulatory 
frameworks are working as designed, while ensuring that we also 
protect the financial system and protect our consumers.
    So my question to the panel is--and everyone should feel 
free to respond, maybe I'll start with Mr. Corbat and Mr. 
Dimon, but my question for you is, where is our current 
legislative and regulatory framework lacking? What improvements 
could we make to ensure against additional risks to the system?
    Mr. Corbat. Sure thing. Thank you for the question. I would 
say the main area of focus, my suggestion would be on 
harmonization of regulation. We all deal with multiple 
regulators. And on occasion, our regulators are not in 
agreement in terms of actually what a regulation says and how 
it should be implemented. And that is not just domestically, 
but internationally, as well.
    Mr. Dimon. I think Dodd-Frank created capital liquidity and 
resolution, things which are very good. After that, there were 
tens of thousands of rules and regulations that came out from 
regulators around the world, some of which are just bureaucracy 
and checking the `t' and dotting the `i,' which costs money and 
get passed on to customers.
    So I would just say--and we don't want to change 
everything. Just calibration, harmonization, and we should drop 
the mindset, it is either more or less. Some of these things, 
if you fix them, will be better for Americans. And I am talking 
about the Americans you are trying to help, not the people 
sitting at this table today.
    Mr. Gorman. I agree. The multiple regulatory agencies in 
this country reflect the complexity of the country, the size of 
the economy. But it also does create enormous inefficiencies.
    The international lack of harmonization means that you have 
arbitrage with companies operating outside the United States, 
which is not in the United States' interests.
    And thirdly, the level of just bureaucratic complexity 
around the regulations. We should be focused on finding the 
real problems and obsessing as management about the real 
problems. Our CCAR plan this year was over 71,000 pages. There 
is a general belief that the regulatory environment has changed 
dramatically in the other direction, last year it was 56,000 
pages. So it is just--there are some simple changes that I 
think would make the system work much more efficiently and find 
the real problems.
    Mr. Moynihan. I think if you go back and think about some 
of the principles that were trying to be embedded in Dodd-
Frank--
    Chairwoman Waters. Please speak up, Mr. Moynihan.
    Mr. Moynihan. If you go back and think about some of the 
principles that were embedded in Dodd Frank at least lead up 
to--one of them was if--if it is an activity that should be 
regulated by all. And we have lost a bit of that. A second was, 
as my colleagues have said, to try to get the calibration 
fairly balanced between growth and safety and soundness, and 
that is a second question.
    And the third regime, less about Dodd Frank, more about 
around the globe, was to have harmonization around the world so 
there wouldn't be arbitrage between jurisdictions. That has not 
come close yet and now is that a bigger deal for America? No, 
because we are the tightest already so therefore our--the FDIC 
insurance fund which we all basically back and at the end of 
the day have to contribute to. It is a government guarantee and 
we all have to fill it up when it is not there.
    It will be fine. The institutions are strong. America will 
be better. But the reality is that there will be issues around 
the world that haven't been dealt with yet, and if you made 
that more level, it would be workable.
    Mr. O'Hanley. I would agree with the harmonization theme 
and I in particular would look at activities particularly 
around payments where you have this very different regime being 
imposed on banks versus nonbanks. Consumers aren't being 
protected at the same level as they are so I would really look 
at this point on activities and how activities are being 
regulated.
    Mr. Scharf. The only thing I would add is I would pick up 
on what one of my colleagues referenced, was just the logistics 
and the amount of material it takes to actually fulfill all of 
the obligations. Refer to the CCAR submissions. The same thing 
is true of the living wills and the expectation that management 
teams, boards, and whatnot, really view all that information is 
just a little.
    Chairwoman Waters. The gentleman's time has expired. The 
gentleman from Wisconsin, Mr. Steil, is recognized for 5 
minutes.
    Mr. Steil. Thank you. I want to thank the committee for 
calling today's hearing. This hearing is a great opportunity, I 
think. For the first time in a decade, we have the CEOs of our 
country's largest banks testifying before this committee. You 
are the leaders of major financial institutions that employ 
hundreds of Americans and play a central role in supporting our 
economy. Companies in Wisconsin rely on financial services that 
you provide to export products made in Wisconsin, to ship them 
around the globe.
    You would think members of this committee would take the 
opportunity to ask the witnesses questions of substance. But 
instead, at times today's committee hearing is drifting from 
that and we are focusing in on climate change and other pet 
issues.
    We have serious questions that I don't think have gotten 
the attention that this committee deserves. One of our closest 
allies in a major economy and financial center is facing the 
possibility of a hard Brexit in a few days. China is slowing 
and the Eurozone banks are struggling. Our country faces 
sustained cyber attacks, sometimes state-backed entities are at 
the back of that. Regulations continue to drive small banks to 
close and consolidate across the country. Financial technology 
continues to transform the way America consumes financial 
services. We are spending hours today, I feel looking back 10 
years, where we should be looking to what we can expect over 
the decade to come.
    I want to look, with the witnesses' judgment here, in 
particular what I view as the IPO drought. We have seen the 
total number of public companies in the United States has been 
declining in particular over the last 10 years. Companies are 
going public later, if they choose to go public at all, and 
this doesn't impact just businesses and their growth 
strategies, I think it hurts average Americans who are relying 
on what were publicly traded companies to save for their 
retirement.
    I am hoping you can comment on what you view as some of the 
factors are that have contributed to this current situation, 
things like Dodd-Frank, conflict mineral regulations, inside 
the SEC. I would look for your comments and thoughts as to what 
we can transform to address this IPO drought. Maybe, Mr. Dimon, 
you have a thought?
    Mr. Dimon. So first of all, we have gone from 8,000 to 
4,000 and private equity has gone from something like 1,000 to 
8,000. I am not saying they are bad, and there are some good 
attributes. It is good that you can raise capital in the 
private markets because you can stay private for longer and 
there are things which are driving it out, the cost of much 
higher risk of litigation for public company shareholder 
meetings which pretty much become a waste of time, certain 
corporate governance things that are dotting the `t' and 
crossing the `i.'
    And if you speak to any person who ran as a CEO or a board 
member of a public company and are now in a private company, 
they will tell you they spend all their time in better 
products, better services, strategy, risk, forward looking and 
very little of the time on check-the-box presentations. So the 
cost of litigation in this country is much higher and again we 
have one of the best legal systems in the world. If you travel 
the world, our rule of law is exceptional. That doesn't mean we 
can't reduce the cost a little bit and there is a whole other 
litany of things which are driving the companies private.
    You know, JPMorgan Chase is owned by 100,000 million 
Americans indirectly one way or another through pension plans 
with State pension plans, municipalities, veterans, et cetera, 
and we feel a huge obligation. I would love to be private, but 
I can't.
    Mr. Steil. Thank you. Mr. Solomon, do you have a--
    Mr. Solomon. You know, I think Mr. Dimon talked about the 
growing cost of being a public company. If you look over the 
last 20 years, the cost of being a public company and the 
friction that is associated with being a public company has 
only grown. At the same time, the availability of capital 
privately has expanded very, very significantly, so one of the 
primary reasons that a company goes to the public markets is 
for access to capital.
    If that capital is available privately, then you can 
operate your business privately and the cost and the burdens of 
being a public company continue to rise, the incentives to be a 
public company are very, very low. And so that is one of the 
reasons why you see companies waiting longer and longer and 
longer and longer to go public.
    So if you wanted to do something that would change that 
over time, we have to find ways to lessen the burden of being a 
public company. These I think--the availability of private 
capital is something that is here to stay. I don't think that 
is something that can be reversed. I actually think that is, as 
Mr. Dimon pointed out, good for the system.
    Mr. Steil. Thank you. Anyone else? Mr. Gorman?
    Mr. Gorman. There are many changes, good ones suggested 
here. Just take the quarterly reporting of public companies. We 
are all about to the end of our earnings season. We are all 
working on our earnings reports. The problem is quotas come 
around with alarming frequency every 13 weeks. And it is just--
it doesn't make sense. Your investors, the public regulators, 
legislators did not learn a lot by having that kind of burden 
on companies. But that is just an example. It is seeking 
perfection in the place of what is practical.
    Mr. Steil. Thank you for your time today. I yield back.
    Chairwoman Waters. The gentlewoman from Virginia, Ms. 
Wexton, is recognized for 5 minutes.
    Ms. Wexton. Thank you, Madam Chairwoman, and thank you to 
the witnesses for coming today. I know it has been a very long 
day. I think we are starting to see some light at the end of 
the tunnel here.
    I want to switch gears and talk for a minute about the Fed. 
As you all are probably aware, Stephen Moore is under 
consideration for appointment to the Board of Governors of the 
Federal Reserve and I want to talk about that for a little bit.
    Mr. Moore has taken a series of controversial stances about 
the Fed despite acknowledging that he still needs to learn more 
about how the regulator works. He previously said that the Fed 
should be scrapped in favor of the gold standard. He called on 
the Fed to hike rates during the Great Recession, because he 
believed it was necessary to get less dollars out in the 
economy, that that was a good way to deal with it, and those 
are his words, not mine.
    And he recently said that Fed Chairman Jerome Powell should 
be fired for rate hikes or rate increases last year that, in 
his opinion, diluted the gains from Trump's tax cuts. So this 
is just a yes-or-no question, if we could go down the panel, 
starting with Mr. Corbat, do you think the Fed should be 
scrapped in favor of the gold standard?
    Mr. Corbat. No.
    Mr. Dimon. No.
    Mr. Gorman. Absolutely not.
    Mr. Moynihan. No.
    Mr. O'Hanley. No.
    Mr. Scharf. No.
    Mr. Solomon. No.
    Ms. Wexton. Thank you. Now I know that all of you were 
working in the financial services sector during the Great 
Recession. Even knowing what you know today and knowing what 
you knew then, do you think that a better way to deal with the 
Great Recession at the onset would have been to hike rates and 
constrict dollars in the economy? Mr. Corbat?
    Mr. Corbat. I do not.
    Mr. Dimon. No.
    Mr. Gorman. No, not in the time of the Great Recession. No, 
I think that would have been terrible.
    Mr. Moynihan. No.
    Mr. O'Hanley. No.
    Mr. Scharf. No.
    Mr. Solomon. No.
    Ms. Wexton. And my final question on the Fed issue. Does it 
cause you concern that someone who holds these beliefs is being 
considered for appointment to the Federal Reserve?
    Mr. Corbat. I don't know the candidate.
    Ms. Wexton. No, I'm sorry, the question was, are you 
concerned that someone who has these beliefs is under 
consideration for appointment? Would it concern you to know 
that?
    Mr. Corbat. I would have to see all of the beliefs of the 
candidate.
    Mr. Dimon. I want to start by saying I have enormous faith 
in Jay Powell and a lot of Fed Governors. This is not a 
traditional choice. I don't personally know them, I see them on 
TV and I don't personally know what they think, so I think that 
is why the Senate has confirmation, to dig into what they 
really think and how they would act under certain 
circumstances.
    Ms. Wexton. But it would give you pause if someone believed 
that we should return to--
    Mr. Dimon. If they believe that, yes.
    Ms. Wexton. Okay, thank you.
    Mr. Dimon. I am not sure they believe that.
    Mr. Gorman. I believe in the independence and integrity of 
the Fed, it has held us in good standing for many decades, and 
I also believe in the role of this legislative body to properly 
vet candidates for it.
    Ms. Wexton. Okay. Mr. Moynihan?
    Mr. Moynihan. I agree with Mr. Gorman.
    Mr. O'Hanley. We have the best central bank system in the 
world, and I think it is up to the confirmation process to vet 
this candidate.
    Mr. Scharf. I agree with Mr. Gorman.
    Mr. Solomon. I have faith in the confirmation process.
    Ms. Wexton. So based on that, I do have one more question 
about this issue. Is one of the things that has really made the 
Board of Governors and the Fed function so well is that it is, 
for the most part devoid of politics, that politics don't 
factor into that at all?
    Would you agree with that statement and would you be 
concerned if politics were injected into the office?
    Mr. Corbat. The independence of the central bank is 
integral to its credibility.
    Mr. Dimon. Absolutely, they have a tough enough job to do 
as it is. It should be cleared of politics, but I would not say 
that that has always been true.
    Ms. Wexton. Thank you.
    Mr. Gorman. Politics does impact it one way or another, 
just because you have fiscal policy through the Executive and 
Legislative Branches and you have monetary policy through the 
Federal Reserve, so there is some interaction, but generally 
aiming for maximum independence is obviously the gold standard.
    Mr. Moynihan. An independent Fed is critical to the success 
of this country and you can observe countries around the world 
without an independent central bank and what happens and it is 
generally not a good outcome at some point.
    Ms. Wexton. Okay, thank you.
    Mr. O'Hanley. The independence of the Fed is a relatively 
recent phenomenon and I think the Fed has been better because 
of it.
    Mr. Scharf. I do believe that an independent Fed is best 
for this country.
    Mr. Solomon. I strongly support a very independent Fed. I 
agree with Mr. Dimon's comment that at times, politics have an 
influence but we should make it as independent as possible.
    Ms. Wexton. Thank you very much. I yield back.
    Chairwoman Waters. Thank you. The gentleman from Virginia, 
Mr. Riggleman, is recognized for 5 minutes.
    Mr. Riggleman. Thank you, Madam Chairwoman, and you have 
another Virginian, so I apologize about that. Two Virginians in 
a row is very tough for people to take, especially me. And I 
want to say this right now, is that--I want to do a quick 
background.
    First of all, thank you for being here. I am very happy to 
be on the Financial Services Committee because tof three 
things. I really wanted to do legislation as a brand-new Member 
of Congress. You know, create jobs and economic growth in the 
United States, protect the national security of the U.S. 
financial system, and help banks of all sizes lend money to 
American consumers and legal businesses.
    I was a little bit concerned today when they were asking 
you about the businesses that you would lend to, because I 
distill ethanol, then I breathe a sigh of relief because it is 
whiskey and people can drink it, so I am very excited right now 
that you guys would still fund me as a whiskey maker because 
that is the American Dream and I do appreciate it.
    And as I go forward in this in the questions that I ask, I 
have another background portion of my life I want to talk to 
you about in that I build fusion centers, data fusion centers 
for counter-terrorism and counter-intelligence, and also did 
big data aggregation for critical infrastructure attack and 
also did some cyber stuff, too.
    And the reason that I wanted to talk to you guys right now 
about policy is I wanted to ask some questions on policy and 
things that actually concern me as you go forward and also 
about you being the tip of the spear for sanctions support.
    I have been listening to a lot of the questions today and I 
haven't heard a lot of questions on sanctions support. So I 
went to the Department of the Treasury and saw there are over 
2,400 sanctions in place for countries and all of those for 
certain types of things.
    And my question to you--and I actually wanted to start with 
Mr. Solomon, because I read everything you were talking about 
with cyber and I was very intrigued by it--is that as you go 
forward, and when you are doing sanctions support, you guys are 
the tip of the spear for that.
    And I don't know if you can answer this question 
specifically, but do you see that there are more attacks on a 
cyber basis once you do start sanctions support? And do you 
also see that you get hit a little bit harder on, say, your 
attack vectors or your risk management frameworks or things of 
that nature as you guys go forward?
    Because I see that you guys are so involved in sanctions 
support and I wonder, with me, working on risk management 
frameworks on the defense and offensive side, if you see an--
actually increase--when you guys go forward on sanctions 
support, do you see an increase on attacks into your area on 
the cyber side?
    Mr. Solomon. I appreciate the question and it is an 
interesting question. I can't personally give you a specific 
answer, but I know that there are people at Goldman Sachs who 
could give you a very detailed analysis on what we see and I 
would be happy to get back to you on that.
    Mr. Riggleman. That is fantastic, because I think one of 
the banks up here is a member of a fusion center, which bank is 
that? Is it the Pittsburgh Fusion Center?
    Mr. Gorman. We have--I don't know if the four are 
completed. We had one in downtown New York, we have one in 
Baltimore, we are building one in Singapore, and we are 
building one in Glasgow, I believe.
    Mr. Riggleman. Right, and this is actually a curiosity 
question, because I could not find it and I wanted to ask you, 
do you share information sort of on a risk matrix or do you 
share information on best practices for cyber defense amongst 
the banks?
    And I know there is the fusion center that you discussed. 
Do you share information amongst yourselves at some level based 
on what you see as far as predictive analysis and based on sort 
of, when you talk about systemic risk, right, looking at the 
predictive analysis portion of what you might see?
    Mr. Gorman. There is certainly a sharing of attacks that 
occur with the government bodies and then they distribute it 
through the industry to prepare everybody, give maximum 
defense. On actual risk algorithms and so on, I am not sure--
    Mr. Riggleman. Yes.
    Mr. Gorman. If I could get back to you, Congressman.
    Mr. Riggleman. Thank you so much. Mr. Dimon--and the reason 
I am asking you specific questions, again, this is out of 
curiosity, as you go forward on this, and you can answer this 
the way you would like, would it help if you could actually, 
with foreign subsidiaries--actually share information with 
foreign subsidiaries based on the risk management frameworks 
that you have?
    Mr. Dimon. Yes, sir. The companies here do a tremendous 
amount of work together. Openly, we call each other. We see a 
problem because it is coming their way, it is going to come my 
way and we do share it. And there are a lot of things we do to 
make this work far better.
    And, in fact, I have mentioned that we are all meeting 
later with Secretary Mnuchin, Department of Homeland Security, 
all of our chief risk officers and all of the chief risk 
officers from all of the agencies, and regulators, so we can 
try to make this work more efficiently and better to protect 
the United States of America.
    Mr. Riggleman. The thing that is--I think when you look at 
sanction support and what you are doing in the cyber defense 
field, the thing that I would--you know, looking at 314(b), I 
actually read a lot of this policy, and I read all of your--
sort of the portions of the cyber defense posture that you 
have.
    That is why I was so particular. You said once you wrote, 
Mr. Solomon, on cyber defense, because I saw that you guys were 
using machine learning and AI, because you were looking at like 
future bug bounces as far as looking at RMF, if I use that 
correctly.
    And I think as we go forward and I think what I would like 
to do as we are doing this is that I would hope there are 
alternative approaches under 314(b) where all of you can work 
together in fusion centers to make sure if we are doing 
sanction support that we actually have risk managements 
frameworks in place that you can sort of work across.
    And I would hope at some point, because I think right now, 
and I am going to ask if somebody wants to ask this question, I 
have 20 seconds, is it right now illegal, or do you have the 
title authorities to share information with foreign 
subsidiaries when you see a problem set?
    Mr. Moynihan. It is a very complex answer.
    Mr. Riggleman. It is. And thank you for that. And that is 
what I wanted to talk to you about, but I ran out of time. So 
thank you all very much for your time. I yield back.
    Chairwoman Waters. The gentlewoman from Iowa, Ms. Axne, is 
recognized for 5 minutes.
    Mrs. Axne. Thank you, Madam Chairwoman. And thank you to 
everyone for being here today on the panel. I appreciate the 
time that you are taking to do this.
    I think we all know that you profited tremendously from the 
tax cuts. But I just want to run through a few of them: Morgan 
Stanley, $1.1 billion; Citigroup, $1.7 billion; Goldman Sachs, 
$1 billion; Bank of America, $3.5 billion; and JPMorgan, $3.7 
billion. Meanwhile, each of you makes at least 150 times what 
your median worker is being paid. And 3 of you on this panel 
make over 350 times what that median worker makes.
    Given that the Administration's rationale for those tax 
cuts was so that companies could reinvest the money, Mr. Dimon, 
can you explain how you are investing that $3.7 billion in 
growing your company? And are you using it to increase pay for 
your workers and reduce the pay ratio?
    Mr. Dimon. A lot of companies, not just JPMorgan, 
immediately announced pay increases or investments, for us, $20 
billion in LMI lending, billions more in small business 
lending. And, because we got regulatory approval to expand our 
network into another 17 States, opening branches, which every 
time we do, we do LMI lending, small business, charitable 
giving, et cetera.
    What we have said is that Americans have competitive tax 
system is the cumulative long-term effect of capital retained 
and reinvested in the United States, which will drive wages and 
growth forever. That is the benefit. It was never meant to be 
this week or this month or even this year.
    And we also make the point that a lot of that benefit will 
be competed away. It will eventually end up in wages or cheaper 
prices to consumers or something like that as we all compete. 
And that is already starting to happen.
    Mrs. Axne. Thank you. But I just wanted to go back and say 
I did the math on those efforts that you are talking about in 
expanding pay for people, increasing their take-home pay. Those 
efforts that you are talking about totaled roughly $100 
million. What I would like to know is, where did the rest of 
the $3.5 billion go?
    Mr. Dimon. It is $100 million, and we also did another $150 
million in philanthropy. And some of the numbers as far as the 
capital has to be deployed to support all of the loans. And 
building the branches costs a million dollars a branch. And so 
it is far more than $100 million.
    Mrs. Axne. Okay. We are still really quite short of $3.5 
billion. Can you tell me specifically where a couple of billion 
went then?
    Mr. Dimon. It was never intended to go immediately out. 
Some of it went back to our shareholders, where it belongs, if 
we can't responsibly use it. Remember, the shareholders 
redeploy it, it doesn't disappear. So, those shareholders, a 
lot of constituents of yours who get that money back and then 
hopefully they make other investments who are--decisions they 
think are in the better interest than me keeping capital that I 
can't use that year.
    Mrs. Axne. I appreciate that. So let's talk about a little 
bit of that buyback. In total, I think JPMorgan bought back 
roughly $20 billion of stock last year, and you have said that 
is because you had excess capital that you couldn't invest in 
growing your business, correct?
    Mr. Dimon. At the time, yes.
    Mrs. Axne. Further, you have said in your annual letter 
that your biggest issue is with G-SIB capital requirements, I 
am assuming you would like those to be lower, correct?
    Mr. Dimon. They should be properly done, whatever they are.
    Mrs. Axne. So are you--
    Mr. Dimon. They are not properly done.
    Mrs. Axne. You think the level is too high or too low? What 
are you saying?
    Mr. Dimon. The level is too high because America just gold-
plated it and changed a bunch of rules that make it hard to--
    Mrs. Axne. So that would mean you would want it to be 
lower. So if those were lower, what would you use that capital 
for?
    Mr. Dimon. I agree that companies should invest to grow 
their businesses and their people, customers, products or--that 
is the number one purpose of a company. I don't like buying 
back stock, I would prefer to invest. When you can't use 
capital in the short run--
    Mrs. Axne. Excuse me, just to mention, though, you said in 
your letter to shareholders that you had excess capital--
    Mr. Dimon. This is--
    Mrs. Axne. Reclaiming my time.
    Mr. Dimon. --forever, not for next year.
    Mrs. Axne. You said in your letter to shareholders that you 
had excess capital and that is why you are doing buybacks, 
because you had excess capital.
    Mr. Dimon. Which we do.
    Mrs. Axne. So you explained to them that you were using 
that excess capital to put more money in the pockets of 
shareholders.
    Mr. Dimon. In the short run, but as we are growing and 
expanding, the 400 branches are probably coming to Iowa. We are 
expanding small business lending. We are expanding just about 
every business we have. We are starting to use that capital. 
And over time, I am hoping we don't have any excess capital.
    Mrs. Axne. Well, reclaiming my time, it just doesn't sound 
like you will be investing that capital in making more loans or 
investing in your firm. It sounds to me like you are asking for 
lower capital requirements, which would increase the risk to 
the economy, and, of course, to our taxpayers, just so you can 
buy back more stock.
    So I briefly would just like to say that we have heard a 
lot from banks like yours that we can just relax this 
regulation, or adjust that capital requirement because we are 
all in better shape right now. But we are not talking just 
about one regulation here. We have talked about capital levels 
today, but I didn't even mention now that banks have to prepare 
their full resolution plans just once every 4 years or the way 
our stress tests have been weakened.
    So it is not just one area, and I would like to remind 
everybody the purpose of this hearing is to look back on the 
past 10 years and I hope that we don't see that happen again. I 
am looking out for Iowans. Thank you.
    Chairwoman Waters. Thank you. The gentleman from Arkansas, 
Mr. Hill, is recognized for 5 minutes.
    Mr. Hill. I thank the Chair, and I thank the Ranking Member 
for holding this hearing. You have had a long day. Thank you 
all for your forbearance and for being with us today, and for 
demonstrating your accountability to your shareholders and to 
the public trust.
    I want to start with a comment that Tim Sloan made, and a 
question that I had when he appeared before the committee a few 
weeks ago, and it is in regards to something I learned over 35 
years of my banking career, which is how to achieve the best 
platform customer service, but also know and have a daily 
handle on how your compliance is operating at the retail 
platform.
    And that is through mystery shopping. So in an answer to a 
question, Mr. Sloan reported to me that Wells Fargo did not 
have a practice of retail platform mystery shopping prior to 
getting into a world of regulatory trouble over their sales 
practices. And for just a country banker from Arkansas, I found 
that surprising, because that has been a general practice among 
compliance professionals for years.
    So I just would love some comments. If we could just go 
down and you tell me if you use mystery shopping for both 
purposes, achieving the kind of platform, professional customer 
service you want with your retail client base, and that you use 
it to determine that you are doing a good job on fair lending 
and other compliance matters. Mr. Corbat?
    Mr. Corbat. We do use various forms of mystery shopping, as 
well as net promoter scores, after engagement contact with 
clients. So it is one of many things--
    Mr. Hill. Sir?
    Mr. Corbat. Yes?
    Mr. Hill. You have a pre-and a post-review process. Mr. 
Dimon?
    Mr. Dimon. Yes. We periodically do mystery shopping in, 
like, a city. We also periodically question our customers. Did 
they like the product? Did they like the service? Also, we have 
hotlines for employees who think we are making a mistake, for 
customers who think we are making a mistake, and obviously 
respond to every regulatory issue that comes our way to make 
sure we are trying to do the right thing every day.
    Mr. Hill. Right. Good. Thank you. Mr. Gorman?
    Mr. Gorman. We have a different business model. We don't 
really do mystery shopping because you have to open a 
relationship with a financial adviser, but we use technology, 
various algorithms to track the activity in those accounts to 
ensure that it is being done properly.
    Mr. Hill. Good. Thank you for that. Mr. Moynihan?
    Mr. Moynihan. We have mystery shopping that is done 
routinely and has been for many years. And it is done in our 
compliance function, in our enterprise test function, both in 
our risk management organization.
    Mr. Hill. Good. Gentlemen?
    Mr. O'Hanley. We study our clients and our competitors very 
closely, both directly and through the use of technology.
    Mr. Scharf. We don't have branches so we don't mystery 
shop.
    Mr. Hill. Right. Mr. Solomon?
    Mr. Solomon. We have a different business model. Our 
consumer business is very small, and it is digital, just 
starting as a digital platform.
    Mr. Hill. Right.
    Mr. Solomon. We use a variety of surveillance and data 
techniques.
    Mr. Hill. Thanks. I appreciate that. Mr. Gorman, with your 
big international footprint, and I know how complex, when you 
think about Venezuela, Iran, North Korea, Cuba, all the 
financial and economic and trade sanctions that we have 
imposed, both at the United Nations and the U.S., it is a lot 
to be keeping up with.
    So can you give us some feel for the design of Treasury's 
financial sanctions? Are they hard to manage inside your 
organization? And what could we be doing differently? And I 
would invite all of you to write to me on this subject. We want 
financial sanctions that are strong, but we want to have it 
done the right way. Would you address that?
    Mr. Gorman. Well, firstly, we do everything possible to 
ensure we are in total compliance with the sanctions, 
obviously. We work hand in glove with the government on that. 
We try not to do a lot of business in many of those 
jurisdictions you just mentioned, for the obvious reasons.
    Listen. We--as efficient as they could be, I would have to 
have the team get back to you on that. But we have thousands of 
employees in our risk management, compliance, all the functions 
doing it.
    Mr. Hill. Thank you. Please respond to that, if you would. 
If you your experts could write the committee about how to 
better target financial sanctions for compliance. I want to end 
in the few seconds remaining and just address this issue of 
buybacks. And I want to thank Mr. Solomon for a very good 
research report from Goldman Sachs on this issue.
    I have heard my colleagues on both sides of the aisle 
condemn stock buybacks, and I would like to say that capital 
allocation is a fundamental responsibility of boards of 
directors. And I looked at the statistics, and, again, this is 
a public document and I invite people to look at it. R&D 
spending and growth spending among the Fortune 500, it is up, 
and it is on par with where it has been for 30 years. So that 
is point one.
    Point two, we talk about shareholders like they are some 
unknown group of people. This money is American citizens, labor 
unions, pension plans and 401K plans--and your report shows no 
correlation with CEOs manipulating their compensation using 
stock buybacks. I yield back.
    Chairwoman Waters. Thank you. The gentleman from 
Massachusetts, Mr. Lynch, is recognized for 5 minutes.
    Mr. Lynch. Thank you, Madam Chairwoman. I want to follow up 
on a question that was asked probably several hours ago by the 
gentleman from Indiana. You each responded to his question 
about systemic risk and the things that keep you up at night. 
You all mentioned that shadow banking in some form was a source 
of risk, although a number of you said it is not systemic yet.
    And I recently was appointed--thank you, Madam Chairwoman--
to be the Chair of the Task Force on Fintech. And I serve with 
my friend from Arkansas, Mr. Hill, who just spoke. We do see 
the trends in that area, in that space going much more to 
mobile. And I know that JPMorgan and Bank of America are 
probably further down the road than some of the other banks.
    But it is about $71 trillion worth of economic activity 
that is in the shadow banking space right now. And you know, we 
are always trying to--especially on this Task Force, trying to 
balance the need for innovation and creating conditions that 
will allow innovation to occur, yet also protecting the 
consumer. You know, we have seen some disasters with Mt. Gox 
where $350 million worth of Bitcoin disappeared, no FDIC 
insurance, those people just lost out, $72 million on Bitfinex, 
same deal, unregulated area.
    So if you were us, and you were going to focus your 
energies on shadow banking and how we might diminish or 
mitigate the threat of systemic risk presented by shadow 
banking, because it is widespread, where would you focus? Where 
would you put your energies?
    What do you think would best serve the consumer, while, as 
I said before, you are trying to balance this need for 
innovation as well? So I am not sure. Mr. Moynihan, would you 
like to take a crack at that?
    Mr. Moynihan. Sure. I think, and some of my colleagues have 
mentioned earlier, I think of two things. One, when we talk 
about shadow banking, the risk from the lending perspective, it 
is over-lending, people over-borrowing, and the damage it 
creates when that happens. So that is one side. And then the 
second thing is the payment system, because at the end of the 
day, as you said, $71 trillion, or some big number, moves 
through electronic transfer of value.
    And if we lose the integrity of that, if everybody could 
stop doing it, it just would change dramatically how we would 
have to rebuild the system of receiving cash and moving cash 
and merchants taking cash and everything, if anybody lost in 
faith in it. So I think I would look at payments and I would 
look at types of loans where you are worried about leverage by 
consumers and companies, and we mentioned those types earlier.
    Mr. Lynch. Yes. Mr. O'Hanley, on the payment system side, 
is there something that we could be looking at?
    Mr. O'Hanley. I think you need to recognize that probably 
some of the best innovators in the world are the institutions 
sitting right here.
    Mr. Lynch. Right.
    Mr. O'Hanley. But right now, they are often held to a very 
different standard than some of the fintech firms. I think you 
want to be encouraging fintech, not discouraging it, and 
encouraging it here, not just in the private equity space or in 
places where that is outside the system. So in my mind, on 
payments, it is an activity. You ought to be looking at the 
activity, irrespective of whether a bank is doing it or whether 
a non-bank is doing it.
    Mr. Lynch. All right. Mr. Dimon?
    Mr. Dimon. Well, we have spoken before about calibration, 
about how you set rules so you know where the things are. 
People define shadow banking differently. So $70 billion, I 
think that includes money market funds and leveraged loans and 
maybe even ETFs, et cetera.
    They all need--in the financial system world, you need to 
be analyzing all of them all the time. There will be things you 
don't know how they develop over time that you have to be 
prepared for. There are interconnections that you probably 
don't put in that category, exchanges in clearing houses and--
you know, which pose other types of things. There are Federal 
Government services that pose a lot of risk to banks.
    Mr. Lynch. Right.
    Mr. Dimon. So we look at all of those things. But if you 
are talking about specifically shadow banking, student lending, 
which is government. It is a 100 percent government since 
2010--mortgages, leveraged loans and maybe certain types of 
leveraged vehicles that do cause an issue if something goes 
wrong.
    Mr. Lynch. Okay. Thank you.
    No one mentioned risk of clearinghouses when you were asked 
about what keeps you up at night--what keeps you up late. Is 
there any concern that--so the risk that--that you used to be 
presented with has now shifted to clearinghouses? Is there a 
concern out there that, you know, the failure of a major 
counterparty or a clearing member could cause a major disaster?
    Mr. Dimon. Just quickly, yes. We concentrated the risk in 
clearinghouse.
    Mr. Lynch. Right.
    Mr. Dimon. And we all monitor that, track it, have people 
there and check. I think we are okay but it has to be 
constantly monitored, too.
    Mr. Lynch. Okay.
    Thank you, Madam Chairwoman. I yield back.
    Chairwoman Waters. Thank you very much.
    The gentleman from West Virginia, Mr. Mooney, is recognized 
for 5 minutes.
    Mr. Mooney. I appreciate you all being here. I know there 
has been a debate in this country of what is the best way to 
run the economy in America. There are some who promote various 
levels of government regulation. There are some who want to go 
all the way to socialism, and some who believe in free markets 
and capitalism, which is where I line up.
    And I think some of my friends on the other side of the 
aisle have criticized--well, I know they have criticized 
buybacks, dividends, and other ways that banks allocate their 
capital. In my view, that criticism misunderstands both the 
reason for and the effect of this type of capital allocation.
    So my question is going to be--it is a long question and 
anybody can answer. I know companies allocate capital in 
several ways, including by expanding business lines, investing 
in research and development, and returning money to 
shareholders via stock buybacks and dividends. Companies tend 
to return capital to shareholders when they do not have a more 
optimal or immediate business need.
    So can you describe how your institution approaches 
decisions regarding capital allocation and why, in cases where 
you have returned capital to your shareholders, you opted to do 
so?
    Mr. Gorman. I'll be happy to start that, Congressman. You 
know, we set a budget every year. We determine what we are 
trying to do with the business. That business drives certain 
capital needs, whether it is the growth of the balance sheet, 
various investments.
    And then to the extent we have excess capital, you have 
some choices. Are there new businesses you want to enter into? 
Are there businesses you would like to acquire? And are 
shareholders properly paid for their ownership of the company?
    And they can be rewarded through dividend increases, which 
is reflective of growth of the company, or through retiring 
shares, which is what the buybacks do.
    I'll just give you one number. Pre-crisis, we had a billion 
shares outstanding. Post-crisis, we had 2 billion shares 
outstanding through various share issuance over a period of 
time.
    We have now bought back 300 million shares. So we still 
have 70 percent more shares outstanding than we had pre-crisis. 
So the buyback is something that the owners of the company are 
expecting at different points.
    Mr. Mooney. Anyone else? Mr. Solomon?
    Mr. Solomon. I think capital allocation is a complicated 
process. And one of the things that Mr. Gorman was 
highlighting, that you highlight in your comments is that you 
have to plan. And the timing of that plan is different.
    You have timing around your regulatory process, around the 
capital you have to hold. You have to make investments. 
Investments are made over numbers of years. You have market 
changes that change what opportunity sets are.
    And so one of the things that you are trying to do is, you 
are trying to balance all these things. It would be easier to 
balance them all if there was more clarity on the capital that 
you were going to need going forward. But one of the things 
that we as an industry wrestle with is having to leave buffers 
or cushions and then, obviously, deal in the aftermath with how 
we want to choose to return capital.
    We have been making significant investments in a new 
consumer platform. Last year, we invested $600 to $700 million 
in building that consumer platform. Last year, we actually 
bought back less stock than we did the year before.
    And we would all rather--and Mr. Dimon said this earlier--
have lots of opportunities to continue to invest as opposed to 
return capital. But it is our job to balance because it is our 
shareholders' capital.
    Dividends, stock buyback, investments, and the capital that 
we have to hold as a regulated business. And that is a complex 
matrix.
    Mr. Mooney. Okay. Well, thank you for the answer.
    Before I run out of time, Mr. Gorman, when you spoke I 
heard your accent. And I am chairman of the Congressional Rugby 
Caucus. So maybe at a different time, you and I can talk some 
rugby. I really enjoyed that sport. I played it at Dartmouth 
College very competitively. Thank you for your time.
    I guess I will go ahead to the second question. When a 
company buys back shares or pays higher dividends, those 
resources do not disappear. Instead, shareholders deploy that 
capital in the economy, including through investments in other 
companies, which may in turn hire additional workers or produce 
additional goods or services.
    This type of capital allocation is a critical source of 
funding for entrepreneurs, small businesses, and other emerging 
companies. Would anyone like to elaborate, in the last 45 
seconds here, on how buybacks and dividends benefit the 
economy?
    Mr. Moynihan. At the end of the day, I think all of us 
would agree. If we have any use of capital we can deploy it 
above our cost to capital, our shareholders, we are going to do 
it because that is our job.
    The minute we don't have it, we will give it to someone 
else who will deploy it to put it together, to put it to use at 
their cost to capital. It is the way the system has worked. It 
is worked like that forever. This is not a new concept.
    Mr. Mooney. It is probably what has made us the greatest 
economy the world has ever seen. Thank you, gentlemen.
    Chairwoman Waters. Thank you.
    The gentlewoman from Pennsylvania, Ms. Dean, is recognized 
for 5 minutes.
    Ms. Dean. Thank you, Madam Chairwoman.
    And I want to start by saying thank you for being here. 
Thank you for your time and your thoughtful answers. And I want 
to commend those of you whose enterprises have chosen to make a 
difference in terms of gun violence in this country and who 
have chosen to reduce, if not eliminate, lending.
    You have an important role to play. Your voice, what you do 
has an important role to play, to make this a safer world. So I 
would ask the rest of you to also reduce--until you find gun 
manufacturers far more responsible than they are today, that 
you would reduce or eliminate your lending in that area.
    There are two things that concern me. The analysis of--the 
title of this was to look back on the global systemically 
important banks 10 years after the financial crisis.
    I would like to look at the other side of the table. So I 
am happy that each of you came in. And each of you, I think, is 
reflecting that your enterprises are healthy, that you are 
profitable. But let's look back and take a look at the other 
side, the consumer.
    So one area that I am concerned about is credit card 
transparency and fees and how a lack of transparency hurts 
consumers, hurts customers.
    Last year, Citibank entered into a $335 million settlement 
around credit cards. Could you tell me what were the bad 
practices that resulted--and specific, so it is real to me, a 
credit card holder. What were the bad practices that you 
recognized that you had undergone in winding up settling for 
$335 million only last year?
    Mr. Corbat. So we look at where that came from, 
Congresswoman. It came from the implementation of the CARD Act 
back in 2010 and 2011. And in there, there were formulas to 
give rate reductions to customers over time, based on certain 
criteria.
    It is a fairly complicated set of applications, and, 
candidly, we got it wrong. We self-discovered it, we self-
reported it, and we went back to our consumers and made 
reparations for it. To put that in context, we got it 90 
percent right, but 90 percent right doesn't work. We should 
have reduced and lowered by $3.3 billion and we did it by $3 
billion.
    Ms. Dean. So, to the individual cardholder, what did that 
mean?
    Mr. Corbat. That meant that we charged them more than they 
should have been charged, in the form of rates. And we went and 
gave them all of that back.
    Ms. Dean. So an enterprise as large as yours allowed that 
to go on for how long?
    Mr. Corbat. It went--the CARD Act was implemented in 2010, 
2011, it was discovered in 2015, 2016, reported and then 
remediated.
    Ms. Dean. So, overcharging for 4 or 5 years, $335 million? 
I am also very interested in--and I have a personal experience 
with this--the home modification program. I don't know if any 
of you have had this experience, but I have actually sat with 
family members and constituents--I was a State rep before I got 
here, in Pennsylvania. And I have sat with constituents and 
family members as they are struggling for mortgage modification 
or facing foreclosure. And I wanted to ask you, Mr. Moynihan, 
have you ever had that experience?
    Mr. Moynihan. I have not sat with someone who is going 
through the modification process. We built centers so that we 
could engage with people--
    Ms. Dean. I traveled to one of your centers in 
Pennsylvania. And my family member, before getting to the 
center, faxed in their materials, if I am correct, 11 times. 
And each time was told, ``Oh, we lost a page.'' Or, ``We didn't 
get it.'' My family member also went because you had 
convention-like meetings, went to Baltimore to no avail, until 
I got on the phone with your company. And it took dozens and 
dozens and dozens of hours to get any satisfaction.
    I don't know how people actually would endure that. Because 
you also know the shame and the fear that comes over a family 
when they are losing their home.
    Mr. Moynihan. We did a lot of them. And so I apologize if 
your constituent at the time wasn't treated right.
    Ms. Dean. You saw in the--you have lawsuits against you for 
this same practice?
    Mr. Moynihan. Right.
    Ms. Dean. Over and over again. It was not just one person.
    Mr. Moynihan. We had a settlement, like all of us did. We 
did everything in that settlement. An independent monitor 
looked at it and said we were in full compliance--
    Ms. Dean. How many people lost their homes?
    Mr. Moynihan. The precise number of people who lost their 
homes in America was around--
    Ms. Dean. Your borrowers. How many of your borrowers lost 
their homes?
    Mr. Moynihan. Total foreclosures done since 2006 when 
housing costs quit going up on pieces of property were probably 
around a million.
    Ms. Dean. A million of your customers lost their homes.
    Mr. Moynihan. And 2 million were modified.
    Ms. Dean. And 2 million modified. Did you ever take the 
time to meet with some of those folks who lost their homes?
    Mr. Moynihan. I received e-mails from them. I assured--when 
I met with Senator Reed and we--he asked us if we could open up 
centers, we opened up 26 centers. We put on 50,000--
    Ms. Dean. Can you explain to us what the HAMP program did? 
What monies did you get to modify mortgages, and yet a million 
went into foreclosure and lost their homes?
    Mr. Moynihan. I know there was great discussion about that. 
The amount of money that we got to do HAMP modifications was 
incentives to do them. It was nothing compared to how much it 
cost.
    Ms. Dean. I want to make one final point, if I may.
    Chairwoman Waters. I am sorry, you are way over your time--
    Mr. Dean. I am over. Okay. Thank you, Madam Chairwoman.
    Chairwoman Waters. I am sorry. Yes, thank you. Mr. Garcia 
from Illinois is recognized for 5 minutes.
    Mr. Garcia of Illinois. Thank you, Madam Chairwoman, and 
thank you all for being here, the largest financial 
institutions of our country. Let's talk about a very small 
island in the Caribbean in some of your business practices.
    Mr. Gorman, I will begin with you. The Public 
Accountability Initiative issued a report earlier this year, 
which noted how in January of this year the financial oversight 
and management board and the unsecured creditors committee 
argued in Federal court that $6 billion of Puerto Rico's 
general obligation debt was issued illegally in violation of 
Puerto Rico's constitution debt limit.
    The report found that, ``the underwriters on the deals 
included a who's who of big banks including Barclays, UBS, 
Santander, and Morgan Stanley.'' Bank of America, Merrill Lynch 
is also cited in the report as an underwriter.
    Furthermore, the oversight board for Puerto Rico issued a 
report by Kobre & Kim that stated that Banco Popular, Popular 
Securities underwrote the 2014 general obligation bond even 
though they did not think Puerto Rico could repay it.
    Mr. Gorman, did Morgan Stanley know at the time that Puerto 
Rico could not pay back its debt?
    Mr. Gorman. Congressman, unfortunately, I am not familiar 
with the exact facts around the underwriting. I would certainly 
be happy to get the details to you rather than guess at it. We 
have a global underwriting business. We are typically one of 
the top--one, two, three, four underwriters in the world and 
we--
    Mr. Garcia of Illinois. Okay. You don't know. Thank you. 
Did you know that Puerto Rico's constitution does not allow the 
use of bonds to balance its budget?
    Mr. Gorman. I am not familiar with Puerto Rico's 
constitution detail, Mr. Garcia.
    Mr. Garcia of Illinois. Yet, your colleague from Citigroup 
here, did know that and refrained from participating in that 
endeavor. It makes me really, really think. Why did you go 
ahead and underwrite the 2014 general obligation bond offering?
    Mr. Gorman. Well, I believe we have done a bunch of 
underwritings across all of the municipalities and States and 
Territories of the United States for many, many decades, 
including Puerto Rico. I am just not familiar, unfortunately, 
Mr. Garcia, with this particular underwriting.
    Mr. Garcia of Illinois. Mr. Gorman, when you sold the 2014 
GO bonds, Puerto Rico already had about $65 billion in debt 
outstanding. Were you aware of that?
    Mr. Gorman. Again, I am not familiar with the details of 
the Puerto Rico economy at the point in time. I am happy to 
submit what information we have for your benefit, Mr. Garcia.
    Mr. Garcia of Illinois. Isn't this type of information for 
potential investors, institutions like yours who want to do 
business in a particular place available to all like a credit 
report would be?
    Mr. Gorman. It certainly is, and the information would be 
available within Morgan Stanley. As the chief executive, I 
can't be responsible for understanding all the details of--
    Mr. Garcia of Illinois. Let me ask Mr. Moynihan, then. Mr. 
Moynihan, would you commit to returning the $13.1 million or 
more that your firm collected in fees from illegally issued 
debt to the government of Puerto Rico as underwritten by Bank 
of America Merrill Lynch?
    Mr. Moynihan. Sir, I am not familiar with the transaction 
you are talking about. And I would be happy to get back with 
you in your office and--and we could take you through it but I 
am not familiar with it.
    Mr. Garcia of Illinois. Did you disclose that Banco Popular 
who joined you in the underwriting, the offering and 
Citigroup's action or refusal participate though Puerto Rico in 
2014 couldn't pay back those bonds?
    Mr. Moynihan. Again, I can get the teammates who worked on 
it to work with your office. I don't know the facts.
    Mr. Garcia of Illinois. Did you underwrite these bonds 
because the market wanted triple tax exempt bonds even if the 
government of Puerto Rico couldn't pay them back?
    Mr. Moynihan. Sir, we can get somebody who understands the 
details as underwriting if we in fact participated in it--
    Mr. Garcia of Illinois. I am trying to help the American 
public look back 4 or 5 years ago and understand some of the 
actions of our biggest institutions and financial institutions 
in this country. I think the American people should know about 
this. This isn't that difficult to know. It didn't happen that 
long ago.
    Mr. Moynihan. I am happy to give you the answers. I just 
don't know them off the top of my head.
    Mr. Garcia of Illinois. This is very disappointing and I 
would expect that that information isn't that difficult. It has 
been written about significantly lately and the American people 
deserve better. Thank you. I yield back.
    Chairwoman Waters. The gentlewoman from Texas, Ms. Garcia, 
is recognized for 5 minutes.
    Ms. Garcia of Texas. Thank you, Madam Chairwoman, and, 
first, let me thank you for calling this hearing on this very 
important topic. Gentlemen, thank you for your patience and 
your endurance. I know that all of us came in not expecting 
such a long hearing, but that is part of the process in giving 
the taxpayers and the public their right to know.
    I know it might seem like we have brought you here today to 
be grilled on a whim or as someone suggested from the other 
side of the aisle to make headlines. But know you are here 
because you run banks that are so large that their failure 
represents a potentially systematic threat in the global 
banking system.
    People remain angry that institutions you represent 
endangered the national and global economic stability a decade 
ago. They remain angry that you received tax payer-funded 
bailouts while they were left owning mortgages worth more than 
their houses and got no relief from Washington.
    And frankly, they have a right to be angry. Because you 
know what? I am angry too and I know many of my colleagues here 
in this hearing room and in Congress are also angry. We are 
angry about that and we know how your institutions seem to have 
fully recovered, boasting record profits while many people in 
my district are just now feeling like they have gotten back to 
where they started.
    And then, of course, Harvey hit and other emergencies 
arose. So like my colleague, Ms. Dean, mentioned, I want to 
talk about the other side. We know you all are doing well. We 
can see that. We have seen a lot of reports that suggest that.
    So I want to talk about the consumer, and one thing that I 
always get really concerned about is the fees. And, Mr. 
Moynihan, I was particularly concerned that of all the 
complaints that I got during the unforgivable Government 
shutdown, some of my TSA workers in my district had the biggest 
problems with your bank, Bank of America.
    In fact, one worker relayed to me that not only did she 
have past due notices and extra charges for both her car loan 
and her mortgage which, both were run by Bank of America, and 
she could not get anyone to listen to her about either 
suspending collection, forgiving the fees, or altogether 
helping her out.
    And it took me having to call someone locally after trying 
to get through to someone here in Washington through one of 
your lobbyists--I must say, they never did return my call. But 
because I am a former State senator, I did visit with my State 
governmental folks and they quickly helped us resolved that 
issue.
    So why is that for some consumers much like--she had to 
work with her family as a State rep, why do they need a Member 
of Congress to help them talk to a bank? Can't you all be just 
a little bit friendlier?
    Mr. Moynihan. So, first off, if you--I apologize that 
anybody went through something. We helped--we had 24,000 calls. 
We had 14,000 people we gave relief to. We treated it as a 
national disaster. The relief lines were opened up until the 
end of March, so there were 24,000 people we stepped up and 
helped through mortgage forgiveness, auto payment forgiveness, 
zand ero interest credit card loans for 6 months that they 
could pay back.
    Ms. Garcia of Texas. Do you do that for all natural 
emergencies?
    Mr. Moynihan. We do that for all national emergencies. We 
did it for the hurricanes; we have done it for many things.
    Ms. Garcia of Texas. Well, that is great. I just want to 
hear from the other retail bankers. Does Chase do the same 
thing?
    Mr. Dimon. Absolutely. We actually can identify who a lot 
of these folks are--government shutdowns, national emergencies, 
we forego fees, we forego certain types of payments, we put 
payments at the end.
    Ms. Garcia of Texas. Just a yes or no because my time is 
running out, what about Citibank?
    Mr. Corbat. Yes, government workers and government contract 
workers.
    Ms. Garcia of Texas. All right, there are always a lot of 
fees, so I just want each of you--and I am going to start with 
you, sir, because you always get the tail end, we are going to 
do a reverse. What percent of your revenues are fees?
    Mr. Solomon. Our consumer business is tiny in the scope 
of--
    Ms. Garcia of Texas. Well, what about custodial fees, 
safekeeping fees?
    Mr. Solomon. Tiny. They are not business--
    Ms. Garcia of Texas. Well, how tiny is tiny? Because tiny 
for you may be millions and that is not tiny to the average 
consumer.
    Mr. Solomon. The kinds of fees you are talking about I 
believe less than 1 percent of our revenue.
    Ms. Garcia of Texas. Less than 1 percent.
    Mr. Scharf. Well, I think total fees are something like 
two-thirds of our total revenues, but we don't have a consumer 
business.
    Mr. Solomon. You were talking about consumer fees, correct?
    Ms. Garcia of Texas. Right, consumer fees.
    Mr. Solomon. Less than 1 percent of our business.
    Ms. Garcia of Texas. All right.
    Mr. Scharf. We don't have a consumer business.
    Ms. Garcia of Texas. All right. Mr. O'Hanley?
    Mr. O'Hanley. We have no consumer business.
    Ms. Garcia of Texas. Mr. Moynihan?
    Mr. Moynihan. Consumer fees and the consumer overall 
revenues are probably I would say less than 5 percent of our 
total revenue of the company.
    Ms. Garcia of Texas. Five percent. Mr. Gorman?
    Mr. Gorman. I don't know but I would estimate approximately 
2 percent.
    Ms. Garcia of Texas. Okay. Mr. Dimon?
    Mr. Dimon. I just don't know the number offhand.
    Ms. Garcia of Texas. I'm sorry?
    Mr. Dimon. I don't know the number offhand.
    Ms. Garcia of Texas. You don't know the number. Mr. Corbat?
    Mr. Dimon. I would be happy to give it to you. It is in our 
fully disclosed document, but I don't--
    Ms. Garcia of Texas. Mr. Corbat?
    Mr. Corbat. A de minimus amount, very low single digits.
    Ms. Garcia of Texas. All right. Thank you. I yield back.
    Chairwoman Waters. The gentleman from Minnesota, Mr. 
Phillips, is recognized for 5 minutes.
    Mr. Phillips. Thank you, Madam Chairwoman, and thanks to 
each of you for providing jobs to over half a million 
Americans, and credit to millions of enterprises large and 
small both in our country and abroad that create millions more 
jobs.
    And I want to take our few minutes together to seek your 
advice and counsel if I might, starting with the fact that in 
our nation almost 50 percent of our wealth is concentrated in 
the hands of just 1 percent of our population. Twenty percent 
of annual income accrues to just the top 1 percent of earners. 
Most of the CEOs of the S&P 500 companies, including each of 
you, earn anywhere between 100 and 500 times more than the 
median earners at the respective businesses.
    And every one of these indicators is moving in the wrong 
direction in my estimation. So I have two questions and I want 
each of you if you would just take about 30 seconds to answer. 
The first is, do you believe that our growing wealth and income 
disparities pose an economic and social risk to our country? 
And if so, what can you each do and what can we do, here in 
Congress, to address it. Starting with you, Mr. Solomon.
    Mr. Solomon. I do think that income disparity is a real 
issue. It is something that both the public sector, you in 
Congress, and we, as private companies, have to work to try to 
contribute to. With respect to our organization and our 
employees, we are a little bit different and some of the 
discussion that has happened, we don't have one institutional 
business and so we don't have minimum wage employees.
    The average compensation for our employees across our 
36,000 employees is much, much, much higher.
    Mr. Phillips. Now, we don't have much time. How about one 
thing that we can do, one policy.
    Mr. Solomon. I think we have to continue to make 
investments to create more opportunities. One of the things we 
are doing is we are going into underserved communities and we 
are making investments in housing and community infrastructure 
and other programs that support underserved communities.
    Mr. Phillips. Thank you. Mr. Scharf?
    Mr. Scharf. As I said before, we don't have a consumer 
business, but we, as a company, do everything that we can 
through our community lending programs, where we have 
employees, and I think we feel we do that because we have an 
obligation to do that.
    I think, just from a policy perspective, looking at the 
under-served and looking at things like access to credit and 
housing are important topics to take a look at.
    Mr. Phillips. Thank you. Mr. O'Hanley?
    Mr. O'Hanley. I believe there is an income and wealth 
inequality problem in the U.S. that it is getting better. I 
think that what you, Congress, can do is take a look at the 
retirement system. Access to the retirement system is very 
limited today. Congress hasn't really looked at this in a 
comprehensive way since 2006.
    Mr. Phillips. Thank you. Mr. Moynihan?
    Mr. Moynihan. We continue to work hard on the issues you 
raised. First, we have a responsibility through the banking 
system to serve LMI communities. We have about 31 percent of 
our branches in LMI communities. We had pledged we would hire 
10,000 new teammates from those communities. We are probably 
halfway through that, moving through the pace for 5 years.
    The way we structure fees and products and services, 
affordable housing, $4.7 billion of lending in affordable 
housing and community development at the local communities last 
year. Business formation, as we spoke about.
    And then I think on how to manage your money, we have 
something called Better Money Habits. It has had multiple 
billions of dollars of customer views. We have helped almost 
900,000 people. Those people save more. Those clients save 
more. They handle their finances better. That is a major 
program of Khan Academy and so--
    Mr. Phillips. I hate to cut you off but I want everybody to 
get a word in. Do you think it is a problem?
    Mr. Moynihan. I think it is a problem we can solve if we 
work on it. I think what I would ask you to do is we look at 
this with CEOs and the business community. It is 
transportation, housing, and educational alignment. Those three 
things just have to be--
    Mr. Phillips. Thank you. Mr. Gorman?
    Mr. Gorman. It is absolutely a problem, not just here but 
in most developed countries in the world, and it is not going 
to be solved easily. You have three weapons effectively. You 
have tax policy. We have a great tax policy. We have 
subsidization of lifestyle through education, health care, 
transportation, and housing. But most importantly, you have 
opportunity for economic growth. So what you can do is help 
businesses thrive and grow in the U.S., and help the U.S. 
economy keep being the strongest economy in the world.
    Mr. Phillips. Thank you. Mr. Dimon?
    Mr. Dimon. Absolutely, it is a problem, and it is a global 
problem today and we need to study it and have the right 
policies. If I could name one or two--infrastructure and 
education. Education is CTE training, community college, 
apprenticeships, it works. It works. There are a lot of good-
paying jobs going unfilled.
    Mr. Phillips. Thank you. Mr. Corbat?
    Mr. Corbat. Absolutely, Congressman. It is a problem. I 
would say financial inclusion and financial literacy in today's 
age in our economy in this country, the fact that we have 25 
percent of our population who live somewhere between unbanked 
and under-banked. With the technology resources that are out 
there, it is a fixable problem.
    Mr. Phillips. Thank you. I will close by extending an 
invitation, that is to ask each of you to help us be part of 
the solution. We need you. Thank you.
    Chairwoman Waters. The gentlewoman from Massachusetts, Ms. 
Pressley, is recognized for 5 minutes.
    Ms. Pressley. Thank you, Chairwoman Waters. I appreciate 
your continued leadership.
    More than a decade later, we are still grappling with the 
consequences of a crisis created by greed and complete and 
utter disregard for the welfare of everyday Americans. And yet, 
the narrative has shifted from a focus on Main Street suffering 
to a celebration of Wall Street's recovery.
    In the district that I represent, the Massachusetts 7th, a 
study by the Pew Research Center shows that from 2005 to 2009, 
median wealth among Hispanic households fell by 66 percent, by 
53 percent among black households, 31 percent among Asian 
households, and by 16 percent among white households. These 
families were often the target of subprime lending, yet have 
never been repaid.
    Your bank shareholders are reaping record profits while 
there is little evidence these lower-income individuals and 
communities of color are anywhere near close to recovering. In 
fact, just yesterday we were discussing the ongoing prevalence 
of redlining and other discriminatory practices despite the 
fact that 98 percent of banks are passing CRA examinations. 
This is exacerbating the wealth gap in Massachusetts and across 
the country.
    Today, I want to dig a bit deeper and resurface a report 
from 2016 which addresses pink-lining. Are any of you familiar 
with the phrase ``pink-lining?''
    Well, women were 30 percent to 46 percent more likely to 
receive subprime mortgage loans during the financial crisis 
than men, and black women were 256 percent more likely to 
receive subprime loans than white men, 256 percent.
    Mr. Dimon, you co-wrote a piece recently entitled, 
``Advancing Black Pathways,'' and spoke about how you wanted to 
address the racial wealth gap. That is wonderful. But what is 
even better than an op-ed is action. So for the purposes of the 
record, could you clarify, in 2017 JPMorgan agreed to a $53 
million settlement with the DOJ pertaining to allegations of 
what?
    Mr. Dimon. I don't recall.
    Ms. Pressley. Okay, discriminatory mortgage lending 
practices. In the time since, what tangible changes have you 
made to your bank's lending practices?
    Mr. Dimon. We don't redline. We do a lot of work to make 
sure we don't. In the auto business, in fact, we do reverse 
redlining, we try to make sure that we reduce people's rates 
based upon that base calculation that gets done. If you ever 
have a problem or think we did, let us know. And we also want 
to use A.I.--not only--A.I. can be biased but you can also use 
A.I. to try to do more lending mortgages to the black 
community.
    Ms. Pressley. You spoke earlier of a number of community 
lending initiatives--AdvancingCities? Is that what your 
testimony--
    Mr. Dimon. Yes.
    Ms. Pressley. Correct? Okay. And I am glad you mentioned 
that initiative. I think--correct me--was the amount $500 
million?
    Mr. Dimon. AdvancingCities is $350 million over 5 years.
    Ms. Pressley. One more time?
    Mr. Dimon. $350 million over 5 years.
    Ms. Pressley. $350 million over 5 years. It sounds like a 
lot of money for community groups that are eager for funding. 
However, comparatively it doesn't sound as generous when you 
think about the fact that over $43 billion have been paid by 
your bank in fines in just this decade since the financial 
crisis. So, Mr. Dimon, is it possible you have just decided 
these fines are the cost of doing business the way you want and 
not the way that protects consumers?
    Mr. Dimon. Absolutely, positively not. And I just want to 
point out that a large bulk of the mortgage-related stuff was 
Bear Stearns and WaMu, which we bought at the request of the 
United States Congress.
    Ms. Pressley. Reclaiming my time. Moving on, I want to 
quickly touch on another issue hurting our communities. While 
many banks have chosen to forego overdraft fees, Bank of 
America, Chase, and Citigroup still cling to these practices. 
Mr. Corbat, would you say that overdraft fees are a core 
function of your banking business?
    Mr. Corbat. No, they are not.
    Ms. Pressley. Mr. Moynihan, are you aware of what 
percentage your total revenue in 2018 came from these fees?
    Mr. Moynihan. Overdraft fees?
    Ms. Pressley. Yes.
    Mr. Moynihan. Probably less than a percent.
    Ms. Pressley. Okay, so if the answer is less than a percent 
or 2 percent but for a family in my district hit with a series 
of overdraft fees, that is the difference between a tailspin 
and getting by. So your banks pay billions in fines 
dismissively and you have convinced yourselves that overdraft 
fees that make up less than 2 percent of your revenue are 
essential to bank operations. If you can write off billions of 
fines as the cost of simply doing business, how are overdraft 
fees anything other than an ideological tool to simply further 
punish the poor?
    I am appreciative of what you have shared here today 
relative to your community programs and development funds, but 
this does not shield you from criticism about discriminatory 
lending or the fact that many of you continue to put into 
practice overdraft fees further punishing the poor.
    Chairwoman Waters. The gentlewoman from New York, Ms. 
Ocasio-Cortez, is recognized for 5 minutes.
    Ms. Ocasio-Cortez. Thank you, Chairwoman Waters, and thank 
you all for joining us here today. I know it has been a really 
long day.
    The purpose of this hearing is to review globally systemic 
banks 10 years after the 2008 financial crisis. So just know 
that while I am tough, it is not personal, okay? I was really 
going back and reviewing these last 10 years and I have 
concerns about how much things have really changed.
    I did an assessment and year by year--let's go back to 
2013. In 2013, Chase had to pay out $720 million in fines to 
the Fed, the SEC, and the U.K. Financial Conduct Authority for 
failing to oversee its trading practices, including what is 
known at the London Whale.
    In 2014, Bank of America agreed to a $16.5 billion 
settlement to the DOJ and others for misconduct related to 
mortgage-backed securities, and a $20 million penalty with 
another $727 million in consumer relief. In 2015, Bank of New 
York Mellon, $714 million to settle claims that it defrauded 
customers when it promised to exchange at best rates for 
customers but instead used the worst rates and pocketed the 
difference. In 2016, Wells Fargo entered in consent orders for 
fraudulently opening millions of accounts in customers' names 
without their consent or knowledge.
    In 2017, State Street, 7 months after installing the 
Fearless Girl statue, paid $5 million in back pay and interest 
after a Department of Labor audit found that State Street was 
systematically paying females employees less than their male 
counterparts and black executives less than similarly situated 
white executives.
    My colleague from Illinois highlighted some troubling 
connections between Morgan Stanley and Puerto Rico's illegal 
debt load. In 2018, Goldman Sachs began facing lawsuits from 
DOJ, the Fed, and foreign governments in relation to funding 
bribes and kickbacks to foreign officials relating to raising 
funds from Malaysia's sovereign wealth fund.
    Timothy Leissner, the Goldman Southeast Asia executive, 
pled guilty to various charges and forfeited $43 million. And 
just last month, March of 2019, Citibank was fined $25 million 
for violating the Fair Housing Act for failing to offer 
benefits to all eligible customers, namely on the basis of 
race, national origin, and sex.
    And so I am concerned here about the potentiality of fines 
related to misconduct just being incorporated as the cost of 
doing business. Mr. Corbat, is a cost-benefit analysis that 
weighs the cost of government fines versus the potential 
financial upside of potentially breaking the law, does that 
factor into controversial decision-making around misconduct at 
your bank?
    Mr. Corbat. Absolutely not.
    Ms. Ocasio-Cortez. Okay. In my district, I represent Rikers 
Island. I represent kids who go to jail for jumping a turnstile 
because they can't afford a Metro card. Do you think that more 
folks should have gone to jail for their role in a financial 
crisis that led to 7.8 million foreclosures in the 10 years 
between 2007 and 2016, Mr. Dimon?
    Mr. Dimon. I don't think people should go to jail for 
jumping a subway turnstile. I think we put too many people in 
jail. And I think if people broke the law, they shouldn't go to 
jail.
    Ms. Ocasio-Cortez. Okay. Do you think that the failure to 
hold more people accountable for the 2008 crisis is a failure 
of our legal system?
    Mr. Dimon. Look, you have to talk to a lot of legal experts 
about why more people didn't--whether they deserve to, whether 
they broke the law, what is intent, what is not intent. But you 
have to talk to legal experts about that.
    Ms. Ocasio-Cortez. On that note, Mr. Dimon, I do want to 
commend you for your decision, and Chase's decision to pull out 
of financing for private prisons. I think that that has led to 
some changes, particularly with Wells Fargo as well, in making 
sure that we begin to divest from some of the troubling things 
that we are seeing, particularly when it comes to the caging of 
children at our border.
    I have one last question with respect--that is more future 
looking. Recently, the Federal Reserve Board decided not to 
activate the counter cyclical capital buffer this year, but 
banks are very profitable, making a record $237 billion in 
profits last year. Mr. Corbat, is this not the best time for 
banks--is this not the best time for the Fed to build more 
capital so that they can be in a better position to weather a 
future downturn?
    Mr. Corbat. As I stated earlier today, by the Fed's own 
measurement, they are measuring 23 or 24 different types of 
capital. What we have said is we are welcome to a holistic 
approach, of which the countercyclical buffer is one. But 
rather than pick individuals, let's look holistically at what 
the right solution is.
    Chairwoman Waters. The gentleman from New York, Mr. Zeldin, 
is recognized for 5 minutes.
    Mr. Zeldin. Thank you, Madam Chairwoman, Ranking Member 
McHenry, and all of our witnesses who are here. I represent a 
district on the east end of Long Island, the 1st Congressional 
district of New York. There is a lot of strong representation 
on both sides of the aisle from our home State of New York and 
I see that a majority of the witnesses who are here are from 
companies that are headquartered in our home State.
    Being the nation's financial capital and a global hub for 
banking and investment, however, it could be slipping away 
because of bad policies and hostile rhetoric that has 
consequences.
    Over the course of the hearing today there was some 
discussion with regards to the pending Brexit. Many of your 
firms have already moved operations out of London. We are 
seeing a massive loss of jobs in investment in New York, most 
recently as Amazon and its potential 25,000 jobs were chased 
away from our area.
    There are consequences to bad policies, and there are 
serious ramifications for global competitiveness when local, 
State, and national lawmakers continue to take such hostile and 
anti-business postures.
    I think the consequence with regards to Amazon leaving is 
not just the 25,000 jobs but all the other jobs that would have 
been supported. The infrastructure to create the headquarters, 
but also other businesses in the financial industry have said 
that the back and forth that took place has impacted their 
decision to come here.
    I wanted to touch on one thing that Ms. Porter had 
discussed, and I actually wanted to say thank you to Mr. Dimon 
with that exchange, because in that example in California, that 
woman was given an opportunity by JPMorgan Chase that no other 
business in that community was going to give an opportunity to 
at all.
    So this woman who has bills to pay, and has a young kid, 
now has an opportunity to enter the workforce and work her way 
up the workforce and have a job where no other company there in 
that community would have given that opportunity. And if that 
person wants to achieve the American Dream and they need to get 
a car to do that, you will help finance it.
    If that person wants to be able to own a home to achieve 
the American Dream, they are going to come to you to be able to 
afford to finance that home to have the American Dream. Maybe 
they want to start a business and they need capital in order to 
start an idea that can grow in to something bigger, they will 
come to you and that is how they will achieve their financing 
in order to hopefully achieve the American dream.
    It is important to be able to provide the best possible 
opportunities for people to get out of their tough situation. 
They are going to have to fight hard and work hard. But what we 
don't want to do is see those jobs get replaced by automation.
    And where I am from on Long Island, as we have seen the 
minimum wage in New York go up, there are a lot of different 
entry-level positions that have gotten replaced by kiosks. 
Think of fast food restaurants; there are certain restaurants 
where you used to have a busboy, used to have a server, and now 
they are getting into the Panera Bread model.
    And I remember being at a recent State of the Union 
address, one of the last ones that President Obama gave and he 
was talking about the minimum wage, and he was saying you can't 
work full time and make--I forgot the number he said, it was 
$30,000 or $40,000. I remember thinking to myself, gosh, where 
I am from, if you are making $50,000, $60,000, $70,000 a year, 
you are struggling to make ends meet.
    And I think what we have to be careful with regards to 
setting a minimum wage, in that different regions of our 
country, if you are going to be responsible when you hire that 
person to be able to take care of all their bills in an entry-
level position maybe that job won't be available to them at 
all.
    During the break, while Ms. Porter was speaking, I took a 
couple of minutes to look through some of the benefits of 
working at JPMorgan, and I was looking at health insurance, 
dental, vision, 401Ks, and life insurance.
    There were childcare benefits, there were pre-tax benefits 
to take care of expenses and the list goes on. And I think it 
is unfair to come here and to be grilled like that when you are 
the only one in her hometown providing an opportunity to that 
woman.
    One last quick piece about overdraft fees, it is worth 
noting, that if you don't have overdraft fees, what is going to 
stop people from over drafting their account? Just saying. I 
understand the concern that is out there with regards to 
overdraft fees, but it is also very important to note that if 
there are no fees at all, people are just going to take as much 
money without penalty out of their accounts.
    But I thank you all for being here and helping my 
constituents achieve the American Dream. I yield back.
    Chairwoman Waters. The gentleman from Colorado, Mr. 
Perlmutter, is recognized for 5 minutes.
    Mr. Perlmutter. Gentlemen, thank you for being here. I 
promise never to be late to a committee meeting again because 
you are put at the end of the line. Anyway, thank you for your 
stamina, and thank you for your testimony today.
    And I want to pick up where Ms. Ocasio-Cortez left off, 
with you, Mr. Corbat. And I will start with you, Mr. Dimon, 
because you and I have had this conversation a little bit about 
capital. And I agree with your analogy when you talked about--
you know, when you got the money, repair the roof. And I am 
going to say, when you got the money, build the capital.
    So I do want to give you a chance to talk to me about 
capital. But I am going to be a hard sell, because I have been 
through the REITs, I have been through the savings and loans. I 
have been through the oil and gas banks failing, and I have 
been through what we went through in 2008. And Mr. Foster 
described it perfectly, what we were contending with and what 
you were contending with.
    So talk to me about capital for a second and then I have 
some questions about cryptocurrencies, gap insurance, and maybe 
marijuana and banking.
    Mr. Dimon. As mentioned, there are many capital measures 
now. So we are constrained by this whole set. But you have to 
understand that CCAR, which constrains a lot of the banks, has 
a capital buffer in it. That is what the stress test is. It 
shows how much capital you retain after that stress.
    And I have mentioned that in the system, today, all those 
stress tests would--I think would cost a hundred billion 
dollars. It would never happen that way. It would never cost 
like that.
    But the system has almost--well over a trillion dollars of 
capital, $2 trillion of capital. And so there is a lot of 
capital and we double and triple count it. That is all it is. 
No one is against the concept--
    Mr. Perlmutter. I think all of us would be willing to sit 
down and talk to you about where you think it is double or 
triple counted. But, again, as kind of a Depression baby, I am 
going to be a very hard sell to chip away at that capital in 
these good times.
    Because we know if we have another cycle, we are going to 
have bad times and it is going to get gobbled up if you 
continue to do the business you have been doing, in extending 
loans and things like that. So we know that.
    I do want to talk about 10 years after. And Mr. Solomon, I 
feel bad. You always are sort of left out, you guys at the end 
of the table. You know, we did TARP as kind of an emergency--
    Mr. Dimon. We want Lloyd back.
    Mr. Perlmutter. Okay. We did TARP as kind of an emergency 
measure. We did the Recovery Act on March 9th, and there is a 
whole story behind that, 2009, the stock market turned. And 
then we did Dodd-Frank.
    Now, my question to you--if Mr. Casten would move--it is 
his--you come late, you get in trouble here. My question to you 
with respect to Dodd-Frank is, would you say that the system, 
the overall system--and Goldman Sachs became part of this 
system during that period of time--is safer and more sound than 
it was before 2008?
    Mr. Solomon. Yes. I agree that the system is safer and is 
more safe and more sound than it was in 2008 and Dodd-Frank has 
made a meaningful contribution to that.
    Mr. Perlmutter. Mr. Scharf?
    Mr. Scharf. Yes. Absolutely.
    Mr. Perlmutter. Mr. O'Hanley?
    Mr. O'Hanley. Yes. It is safer and sounder.
    Mr. Perlmutter. Mr. Moynihan? And you and I can have a 
conversation about capital some other time. But yes? Unless you 
want to jump in now.
    Mr. Moynihan. The system is more safe and more sound. And 
the key point that you pointed out is, everybody at this table 
is in it. And in 2007, everybody at this table was not in it, 
right? That was one of the major problems we faced.
    Mr. Perlmutter. Mr. Gorman?
    Mr. Gorman. Yes. It is dramatically safer and sounder.
    Mr. Perlmutter. Mr. Dimon?
    Mr. Dimon. It is not even close. It is multiples.
    Mr. Perlmutter. Mr. Corbat?
    Mr. Corbat. Without a doubt.
    Mr. Perlmutter. One thing--and Mr. Dimon, when you and I--
and I met with several of you over the last few weeks. And 
hopefully, this isn't proprietary information, or I will just 
ask it and you can say it.
    But how much money actually is processed and intermediated 
through Chase on a daily basis? Worldwide.
    Mr. Dimon. About $8 trillion.
    Mr. Perlmutter. And Mr. Corbat?
    Mr. Corbat. Probably somewhere about $4 trillion.
    Mr. Perlmutter. Mr. Gorman, you are not really in quite the 
intermediation business.
    Mr. Gorman. We are not in that business.
    Mr. Perlmutter. Mr. Moynihan?
    Mr. Moynihan. I think it is around $3 trillion or $4 
trillion.
    Mr. Perlmutter. Mr. O'Hanley?
    Mr. O'Hanley. In the administration business, about a 
trillion a day.
    Mr. Perlmutter. Mr. Scharf?
    Mr. Scharf. I think it is about a trillion and a half.
    Mr. Perlmutter. Mr. Solomon?
    Mr. Solomon. We are not really in that business.
    Mr. Perlmutter. I just want to thank you all for your 
stamina today, for being here. Obviously, we went through some 
very difficult times. We don't want to go through them again. 
But I appreciate your testimony today.
    And I yield back.
    Chairwoman Waters. Thank you.
    The gentlewoman from North Carolina, Ms. Adams, is 
recognized for 5 minutes.
    Ms. Adams. Thank you, Madam Chairwoman.
    And thank you, gentlemen, for being here and for your 
patience. I want to note, for example, yesterday, I noticed 
that Bank of America had plans to raise the minimum wage to 
$20. I think that is a great step in helping Americans earn a 
living wage.
    And, Mr. Moynihan, I applaud you, and I hope your other 
colleagues here will follow suit on that.
    But there is still a lot more that we need to do. Mr. Dimon 
noted that, ``America should and can afford to provide a proper 
safety net to our elderly, our sick, and our poor.'' And when I 
think about the 12th District in Charlotte, in North Carolina, 
that I represent, we are really having some serious issues in 
terms of the affordable housing crisis. I am sure you are aware 
of that.
    Now, someone mentioned earlier that Microsoft had pledged 
to invest $500 million in workforce housing in Seattle. And, I 
do support efforts to grow and expand. But I want to know 
specifically what the bank is doing to address the displacement 
of longstanding residents and what you are doing, what the bank 
is doing to address the housing crisis in Charlotte.
    Mr. Moynihan. Sure. If you--globally, we did $4.7 billion 
last year and we will do a bigger amount in low- and moderate-
income housing. We have also created a catalytic fund to help 
drive housing. Charlotte is one of the first deployments of 
that.
    So it wasn't just us. I run the CEOC, as you may be aware, 
of the CEO group in Charlotte. I am honored to be Chair of it. 
And we had--three of us announced $70 million of equity-level 
money, which ought to be multiplied by tens for $700 million. 
It is the first major investment. Our portion of that was $20-
odd million.
    Since that, a couple of other bank colleagues have put in 
another, I think, $30 million to $35 million. So we are 
building a fund. We have brought expertise, a thing called LISC 
to Charlotte, and underwrote--Wells Fargo and ourselves paid 
all the costs of that.
    That group is helping do the kind of financing structures 
they are experts at and was a team led by our team and teams in 
the city we are trying to drive. And we believe that we can 
make a meaningful impact in the near term.
    Ms. Adams. Okay. We can have some further discussions about 
that.
    Let me ask--many of you have praised the Trump tax cuts. 
And I am curious about the percentage of the tax benefit 
savings that your bank spent on affordable housing. And if 
everyone can just--we will just go down the row, and if you can 
give me an amount?
    Mr. Corbat. At Citi, we financed $6 billion of affordable 
housing, 36,000 units, and from 2017 to 2018, that was a 20 
percent increase.
    Ms. Adams. Mr. Dimon?
    Mr. Dimon. I think the number of affordable housing--direct 
affordable housing is something like $2.5 billion. And 
obviously, we finance a lot of other housing and mortgages.
    Ms. Adams. Mr. Gorman?
    Mr. Gorman. We aren't really in the housing business, per 
se. But through our CRA activities, we invest in multipurpose--
    Ms. Adams. All right. Mr. Moynihan, I am going to skip you, 
since you have already answered that question.
    Mr. O'Hanley. We are not in that business, either, but 
through our CRA activities over the last 2 years, we have put 
$280 million in affordable housing.
    Ms. Adams. All right. The last two gentlemen?
    Mr. Scharf. We are also not in that business, but through 
our CRA activities, I believe, over the past couple of years, 
we have financed probably $300 million.
    Ms. Adams. Okay. Yes, sir?
    Mr. Solomon. We are also not in that business, but through 
our CRA activities and our urban investment group, we have 
invested multiple billions of dollars into affordable housing.
    Ms. Adams. Let me move on and ask a question about our 
HBCUs, our historically black colleges and universities, and 
the fact that we know that these schools pay a higher 
underwriting fee to issue tax-exempt bonds, compared to non-
HBCUs. My question to each of you is, have your banks 
underwritten HBCU bonds? Yes or no?
    Mr. Corbat. I am not certain.
    Ms. Adams. Mr. Dimon?
    Mr. Dimon. I am not certain, but we do hire a lot of people 
from Howard and some other HBCUs.
    Ms. Adams. Yes, sir?
    Mr. Gorman. Exactly the same response.
    Mr. Moynihan. I am not certain, but I agree. We hire a lot 
and we do a lot of business with them, so we will get the 
information to you.
    Mr. O'Hanley. We are not in that business, though we do 
hire from the HBCUs.
    Mr. Scharf. We are not in that business.
    Ms. Adams. Well, I just want to suggest that will be a good 
business to get into, particularly if you are interested in 
diversity and inclusion. That is where the talent is; that is 
where the diversity is. And we really want to make some 
contributions and some commitments to these schools.
    I am just about out of time, so Madam Chairwoman, I am 
going to yield back.
    Chairwoman Waters. Thank you very much. I have a unanimous 
request for closing. I would like to make a unanimous request 
for 5 minutes for closing, both for myself and for you, too, if 
you desire, Mr. McHenry.
    Mr. McHenry. Yes. I would agree.
    Chairwoman Waters. Thank you very much. Allow me to take a 
moment to thank all of our witnesses who have persevered today 
over these long hours to hear from the Members of Congress. If 
you can recall, it was maybe 10 years ago when you appeared 
that I dubbed you the captains of the universe. And so I want 
you to understand that we understand that you have a lot of 
power and you have a lot of influence.
    And you have historically have been able to wield that 
influence here in the Congress of the United States, and you 
have been trusted. And many of our Members never even question 
when you come with a request for some type of deregulation. And 
things are changing, things are changing a lot.
    You did well with deregulation in the last Congress. And 
so, what I have said to many of you who have come into the 
office is, please do not overwhelm us with requests for 
deregulation that you really don't need. And please don't go 
around us to our agencies, having them deal with putting forth 
initiatives for a deregulation.
    I hear what you are saying. You talked about the need for 
harmonization. I know there are some discussions about reducing 
the capital requirement, a lot of concerns about Volcker, and 
stress testing, and on and on and on. But I also heard that 
Dodd-Frank had not created any really serious problems in terms 
of your bottom line.
    Your bottom line has been mentioned a lot today, in 
relationship to the tax break and some other kinds of business 
that many of you have been involved in.
    I also was happy to hear today that there was an admission 
that some lines of business that you have perhaps you do not 
need to have. And with the reduction of some lines of business, 
it has made management of big, big banks maybe a little bit 
easier.
    And so, having said all of that, we are worried, of course, 
about redlining that is creeping back in, that has been 
identified. We are still concerned about servicing. Whether it 
is in-house or whether or not you are contracting, we still 
feel that there needs to be more training, that you may need to 
develop fraud divisions, that many of our seniors who were 
victims of fraud during the meltdown were not dealt with by the 
banks because we have not seen any real efforts by the bank to 
deal with fraud, where people call and they are trying to get a 
loan modification and they say to you, I did not sign that. 
That was forged. Well, nobody was able to take care of that for 
them.
    And so, you have your concerns. We have our concerns. We 
have talked today about making sure that there is diversity and 
inclusion. And you have been asked to submit your plans or your 
description of what you do on this issue and who that person or 
persons report to, on and on and on. And so, we have had a good 
exchange today.
    I hope that you feel that we have been tough on you, 
because we have. And I started out this hearing with the amount 
of fines that have been levied on you. We would like to see 
that absolutely eliminated, reduced, because every time there 
is a fine, it means that you have broken a law, you have done 
something that you should not have done, somebody has been 
harmed.
    And so, having said all of that, I am going to ask you, in 
all that you do, to think about all of that student debt. I 
know that you sold the debt and you are not involved with 
student loans anymore, but we have a whole population of 
millennials who are out there, who are still the victims of the 
debt that was incurred because they were trying to get an 
education.
    I am asking you if you can come up with a creative product 
of some kind to deal with this population of millennials who 
can't buy a home, who can't get married, who can't buy an 
automobile, who don't have insurance, and on and on and on.
    I think you, the captains of the universe, are smart 
enough, creative enough, and understand this business enough, 
despite the fact you have sold off that debt--it is not your 
responsibility--to see what you can do about these citizens, 
these young people whose lives will not be--well, the potential 
will never be realized unless they can get out from under this 
debt.
    I don't know what it is. I don't know how you are going to 
do it, but I would like you to think about it. And next year, 
when you come, I hope that you can give us some answers. And I 
promise you, next year, when you come, I will not have all of 
you come at one time. I am going to divide it up because it has 
been long for all of you and for all of us. And I think we can 
do better with the timing.
    With that, I yield to Mr. McHenry.
    Mr. McHenry. Well, I thank you and I appreciate the 
opportunity to close off what has been a rather lengthy day. 
Thank you all for testifying.
    The only thing that unites you as a panel is the fact that 
you are G-SIBs, you are large financial institutions. Three of 
you compete directly as sort of, really, a full bank in the 
regard that the American people would think, two of you are 
legacy broker-dealers, two of you simply are custodial banks 
and are very important, but little understood by the American 
public institution.
    So there isn't really a unifier other than size. Now, this 
question of size I think is something that is important. As a 
result of Dodd-Frank 10 years ago, we have doubled the number 
of regulatory filings by financial regulators.
    Each one of you have grown your regulatory footprint of 
employees, of technology, of expense to comply with those 
regulators, massively. If you didn't, well, you would probably 
have your own separate special hearing because you failed to 
comply with regulations. You haven't; you are here as a group. 
You are complying, there is a massive expense to your 
shareholders, and thereby the American public, and thereby the 
American economy for those regulations.
    Dodd-Frank was passed by a Democrat House, Democrat Senate, 
and signed by a Democrat President. I am not going to re-
litigate that. That is done.
    Nine years later, we were able to have the first 
fundamental change in Dodd-Frank, Senate Bill 2155. Nine years 
later. Now in the 1930s, the same Congress created the first 
Securities Act and the Securities Exchange Act. The same 
Congress didn't think they got it right, came back a year 
later, and did it better. It took us 9 years to have modest 
changes to Dodd-Frank.
    That is not deregulation. That is not massive deregulation. 
It is looking dumb regulation, ineffective regulation, and 
saying, perhaps we didn't get it right with the first draft. 
S.2155 passed the Senate with 67 votes. It was a bipartisan 
vote in the Senate, and here in the House with 33 Democrats 
voting with both Republicans, a bipartisan vote here in the 
House.
    Bipartisanship fixed what are the most egregious parts of 
Dodd-Frank. That is not deregulation. And in fact, your 
institutions weren't here begging for deregulation. You were 
here presenting facts on stuff that was misunderstood, drafting 
errors in the legislation, inappropriate regulations that cost 
way too much and didn't actually have the impact.
    So I think that is something to be noted. As I raised, the 
systemic risk questions are still very real for us. Thank you 
all as a panel of experts for answering those questions of 
import to the global economy, but most especially to our 
American economy.
    The question of student lending--let me just address this. 
As a group of institutions, many of you were in the student 
lending business before that business line was nationalized. 
And when the government takes over a whole line of business and 
prices it in a way that the private sector is not pricing it, 
it has an impact.
    So you can see this with student lending, you can also see 
this with Fannie Mae and Freddie Mac and the GSEs. You are not 
in that business because you can't compete with a government 
monopoly. You are not in the student loan business because you 
cannot compete with a government monopoly.
    Which comes back to the larger issue that we are having 
politically. And you all have to live within this debate, and 
the American people have to live within this debate, and that 
is a fundamental debate about the nature of our markets and the 
nature of how we allocate capital in the United States of 
America. We don't get it perfectly right but we get it mostly 
right.
    And now we have a whole group of folks saying the market 
does not work. The allocation of capital does not work. Free 
markets don't work. Capitalism does not work. And therefore we 
need to nationalize other pieces of the economy. I think it is 
wrongheaded. I think we need to make sure that you are 
allocating capital in the appropriate risk setting and that is 
what we should do.
    That is what we have done legislatively, and that is also 
what we have done in terms of regulation. That is why we have 
the regulatory footprint that we do have. So thank you for your 
willingness to testify. I appreciate the role that you play in 
our economy and the role you ensure that Americans play 
internationally in the global economy.
    And I thank Chairwoman Waters for the nature of how this 
hearing went. We have disagreements. Those disagreements should 
be about policy, they should be about substance, and that is 
the type of hearing that you chaired today, and I think that is 
important and good for Congress, even amidst the sort of 
circus-like atmosphere in which we have to legislate and 
operate.
    So thank you, Chairwoman Waters, and I yield back.
    Chairwoman Waters. I would like to thank Ranking Member Mr. 
McHenry for those comments, and I would like to thank our 
witnesses for their testimony today.
    The Chair notes that some Members may have additional 
questions for this panel, which they may wish to submit in 
writing. Without objection, the hearing record will remain open 
for 5 legislative days for Members to submit written questions 
to these witnesses and to place their responses in the record. 
Also, without objection, Members will have 5 legislative days 
to submit extraneous materials to the Chair for inclusion in 
the record.
    I ask the witnesses to please respond as promptly as you 
are able to.
    With that, thank you. And this hearing is adjourned.
    [Whereupon, at 3:39 p.m., the hearing was adjourned.]

                            A P P E N D I X



                             April 10, 2019
                             
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