[House Hearing, 117 Congress]
[From the U.S. Government Publishing Office]
HOLDING MEGABANKS ACCOUNTABLE:
AN UPDATE ON BANKING PRACTICES,
PROGRAMS, AND POLICIES
=======================================================================
VIRTUAL HEARING
BEFORE THE
COMMITTEE ON FINANCIAL SERVICES
U.S. HOUSE OF REPRESENTATIVES
ONE HUNDRED SEVENTEENTH CONGRESS
FIRST SESSION
__________
MAY 27, 2021
__________
Printed for the use of the Committee on Financial Services
Serial No. 117-28
HOLDING MEGABANKS ACCOUNTABLE: AN UPDATE ON BANKING PRACTICES,
PROGRAMS, AND POLICIES
HOLDING MEGABANKS ACCOUNTABLE:
AN UPDATE ON BANKING PRACTICES,
PROGRAMS, AND POLICIES
=======================================================================
VIRTUAL HEARING
BEFORE THE
COMMITTEE ON FINANCIAL SERVICES
U.S. HOUSE OF REPRESENTATIVES
ONE HUNDRED SEVENTEENTH CONGRESS
FIRST SESSION
__________
MAY 27, 2021
__________
Printed for the use of the Committee on Financial Services
Serial No. 117-28
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
______
U.S. GOVERNMENT PUBLISHING OFFICE
45-252 PDF WASHINGTON : 2021
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 FRANK D. LUCAS, Oklahoma
GREGORY W. MEEKS, New York PETE SESSIONS, Texas
DAVID SCOTT, Georgia BILL POSEY, Florida
AL GREEN, Texas BLAINE LUETKEMEYER, Missouri
EMANUEL CLEAVER, Missouri BILL HUIZENGA, Michigan
ED PERLMUTTER, Colorado ANN WAGNER, Missouri
JIM A. HIMES, Connecticut ANDY BARR, Kentucky
BILL FOSTER, Illinois ROGER WILLIAMS, Texas
JOYCE BEATTY, Ohio FRENCH HILL, Arkansas
JUAN VARGAS, California TOM EMMER, Minnesota
JOSH GOTTHEIMER, New Jersey LEE M. ZELDIN, New York
VICENTE GONZALEZ, Texas BARRY LOUDERMILK, Georgia
AL LAWSON, Florida ALEXANDER X. MOONEY, West Virginia
MICHAEL SAN NICOLAS, Guam WARREN DAVIDSON, Ohio
CINDY AXNE, Iowa TED BUDD, North Carolina
SEAN CASTEN, Illinois DAVID KUSTOFF, Tennessee
AYANNA PRESSLEY, Massachusetts TREY HOLLINGSWORTH, Indiana
RITCHIE TORRES, New York ANTHONY GONZALEZ, Ohio
STEPHEN F. LYNCH, Massachusetts JOHN ROSE, Tennessee
ALMA ADAMS, North Carolina BRYAN STEIL, Wisconsin
RASHIDA TLAIB, Michigan LANCE GOODEN, Texas
MADELEINE DEAN, Pennsylvania WILLIAM TIMMONS, South Carolina
ALEXANDRIA OCASIO-CORTEZ, New York VAN TAYLOR, Texas
JESUS ``CHUY'' GARCIA, Illinois
SYLVIA GARCIA, Texas
NIKEMA WILLIAMS, Georgia
JAKE AUCHINCLOSS, Massachusetts
Charla Ouertatani, Staff Director
C O N T E N T S
----------
Page
Hearing held on:
May 27, 2021................................................. 1
Appendix:
May 27, 2021................................................. 89
WITNESSES
Thursday, May 27, 2021
Dimon, Jamie, Chairman and Chief Executive Officer, JPMorgan
Chase & Co..................................................... 7
Fraser, Jane, Chief Executive Officer, Citi...................... 9
Gorman, James P., Chairman and Chief Executive Officer, Morgan
Stanley........................................................ 10
Moynihan, Brian T., Chairman and Chief Executive Officer, Bank of
America........................................................ 12
Scharf, Charles W., Chief Executive Officer and President, Wells
Fargo & Company................................................ 14
Solomon, David M., Chairman and Chief Executive Officer, Goldman
Sachs.......................................................... 15
APPENDIX
Prepared statements:
Dimon, Jamie................................................. 90
Fraser, Jane................................................. 99
Gorman, James P.............................................. 110
Moynihan, Brian T............................................ 136
Scharf, Charles W............................................ 167
Solomon, David M............................................. 182
Additional Material Submitted for the Record
Huizenga, Hon. Bill:
Letter from State Treasurers to Hon. John F. Kerry........... 200
Dimon, Jamie:
Written responses to questions for the record from Chairwoman
Waters..................................................... 204
Written responses to questions for the record from
Representative Dean........................................ 228
Written responses to questions for the record from
Representative Chuy Garcia................................. 229
Written responses to questions for the record from
Representative Sylvia Garcia............................... 225
Written responses to questions for the record from
Representative Kustoff..................................... 227
Fraser, Jane:
Written responses to questions for the record from Chairwoman
Waters..................................................... 231
Written responses to questions for the record from
Representative Dean........................................ 262
Written responses to questions for the record from
Representative Kustoff..................................... 264
Gorman, James P.:
Written responses to questions for the record from Chairwoman
Waters..................................................... 266
Written responses to questions for the record from
Representative Dean........................................ 278
Written responses to questions for the record from
Representative Sylvia Garcia............................... 279
Written responses to questions for the record from
Representative Kustoff..................................... 280
Moynihan, Brian T.:
Written responses to questions for the record from Chairwoman
Waters..................................................... 283
Written responses to questions for the record from
Representative Dean........................................ 281
Written responses to questions for the record from
Representative Kustoff..................................... 282
Scharf, Charles W.:
Written responses to questions for the record from Chairwoman
Waters..................................................... 319
Written responses to questions for the record from
Representative Dean........................................ 347
Written responses to questions for the record from
Representative Kustoff..................................... 350
Solomon, David M.:
Written responses to questions for the record from Chairwoman
Waters..................................................... 352
Written responses to questions for the record from
Representative Dean........................................ 351
Written responses to questions for the record from
Representative Kustoff..................................... 351
HOLDING MEGABANKS ACCOUNTABLE:
AN UPDATE ON BANKING PRACTICES,
PROGRAMS, AND POLICIES
----------
Thursday, May 27, 2021
U.S. House of Representatives,
Committee on Financial Services
Washington, D.C.
The committee met, pursuant to notice, at 12:04 p.m., via
Webex, Hon. Maxine Waters [chairwoman of the committee]
presiding.
Members present: Representatives Waters, Maloney,
Velazquez, Sherman, Meeks, Scott, Green, Cleaver, Perlmutter,
Himes, Beatty, Vargas, Gottheimer, Gonzalez of Texas, Lawson,
San Nicolas, Axne, Casten, Pressley, Torres, Lynch, Adams,
Tlaib, Dean, Ocasio-Cortez, Garcia of Illinois, Garcia of
Texas, Williams of Georgia, Auchincloss; McHenry, Lucas,
Sessions, Posey, Luetkemeyer, Huizenga, Wagner, Barr, Williams
of Texas, Hill, Emmer, Zeldin, Loudermilk, Mooney, Davidson,
Budd, Kustoff, Hollingsworth, Gonzalez of Ohio, Rose, Steil,
Timmons, and Taylor.
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.
As a reminder, I ask all Members to keep themselves muted
when they are not being recognized by the Chair. The staff has
been instructed not to mute Members except where a Member is
not being recognized by the Chair and there is inadvertent
background noise. Members are also reminded that they may only
participate in one remote proceeding at a time. If you are
participating today, please keep your camera on, and if you
choose to attend a different remote proceeding, please turn
your camera off.
Additionally, I want to announce that for this hearing, it
is my intention to recess the committee for 5 minutes every 2
hours. Lastly, before we begin, I would like to take a moment
to recognize Congresswoman Alma Adams, who is celebrating her
75th birthday today. Happy birthday, Congresswoman Adams.
Ms. Adams. Thank you, Madam Chairwoman.
Voice. Happy Birthday.
Ms. Adams. Thank you so much.
[applause]
Chairwoman Waters. Thank you. I now recognize myself for 4
minutes to give an opening statement.
Good afternoon, everyone. Today, this committee convenes
for a hearing entitled, ``Holding Megabanks Accountable: An
Update on Banking Practices, Programs, and Policies.'' And of
course, as you know, testifying before the committee today, we
will have the CEOs of JPMorgan Chase, Citigroup, Morgan
Stanley, Bank of America, Wells Fargo, and Goldman Sachs, who
testified before the Senate yesterday, and today's testimony
concludes 2 historic days which are a true testament of the
accountability that comes from Democratic control of the House
and Senate.
As chairwoman of this committee, I have made it a priority
to ensure that we are conducting rigorous oversight over
megabanks and their activities. We last had all of the megabank
CEOs testify before the committee in 2019. Since then, there
have been many developments involving megabanks that this
committee will be examining today. I am eager to hear about the
megabanks' responses to the pandemic crisis, including their
provisions for mortgage forbearance, affordable loan
modifications, support for extending the foreclosure
moratorium, and Paycheck Protection Program (PPP) loans. I am
concerned that the institutions led by our witnesses raked in
billions of dollars in overdraft fees during the pandemic at a
time when so many individuals and families across the country
were struggling through no fault of their own.
Additionally, some of our banks prioritized wealthier
clients for PPP lending, while processing smaller loans at a
much slower rate, or, in some cases, turning small and
minority-owned businesses away altogether. We have heard so
much about this from all over the country. I have also asked
our witnesses to describe their institutions' efforts to reach
underserved communities and to address banking deserts, where
communities do not have access to a bank branch. The four
largest banks have closed thousands of bank branches over the
past decade, and I am concerned that this is exacerbating the
bank desert problem and harming communities that rely on
branches for basic banking services.
This week also marks the tragic anniversary of the murder
of George Floyd, a Black man, by White police officers, which
focused Americans' attention on racial injustice in this
country. The megabanks responded by making a number of large
commitments to support Minority Depository Institutions (MDIs)
and Community Development Financial Institutions (CDFIs) in
communities of color. Given that these banks have repeatedly
been found to discriminate against our communities, the CEOs
will be asked to explain if their banks are following through
on those commitments and to learn what additional actions they
will take this year to address the racial disparities that
remain pervasive in our banking system. I am also looking
forward to hearing from our witnesses about their progress in
improving the diversity and inclusion in their senior
leadership and on their boards, and their investment in
diverse-owned firms. Diverse representation at senior levels is
key to ensuring a fair and equitable recovery for all
communities.
There are many other topics of interest to this committee
that we will address today, including banks' wages for their
employees and compensation for their CEOs, their use of
emerging technology, such as artificial intelligence or
products like cryptocurrency, and the recent growth of
megabanks, and megabanks' actions to address climate risk. I
look forward to hearing testimony from all of our witnesses
today.
I will now recognize the ranking member of the committee,
the gentleman from North Carolina, Mr. McHenry, for 4 minutes.
Mr. McHenry. Thank you, Madam Chairwoman, and thank you all
for being here today. We are here today for the sequel that
nobody asked for; in 2019, Democrats held this exact hearing to
grill you CEOs on everything from firm size to your salaries.
Republicans in that hearing used the hearing to focus on
systemic risk issues to our current financial system.
Clearly, none of us could have predicted what would happen
just 1 year later. The pandemic presented us with a once-in-a-
generation challenge. Congress, the Federal Reserve, and
Treasury stood together and met this crisis head on. Your
institutions also played a critical role, as did the financial
system, generally speaking, banks of all sizes and credit
unions of all sizes, and FinTechs, making sure that support was
available to families and small businesses. You deserve some
credit for that.
So, where are we now? Nearly 50 percent of adult Americans
have been fully vaccinated, businesses are starting to reopen,
and we should be talking about the amazing recovery that has
taken place. But I also am very concerned about some of the
troubling data that is starting to emerge. The April data from
the Bureau of Labor Statistics showed that employment increased
by only 266,000 people. At the same time, we have more than 8
million jobs remaining unfilled. Businesses are struggling to
hire workers, and the cost of household goods is rising
sharply. Our economy is at a fragile moment right now.
To be clear, I agree that things are looking up, and that
is great, but make no mistake, there are some very troubling
signs ahead, so our focus must be on jobs and getting people
back to work. That is what Republicans are doing. In fact,
according to the Bureau of Labor Statistics, 17 out of the 20
States led by Republicans are recovering jobs the fastest, but
Democrats seem to have other priorities. Their so-called
American Rescue Plan actively discouraged people from returning
to work, and now they are preparing to ram through trillions of
dollars more in spending and massive tax hikes, all under the
guise of, ``infrastructure.'' Americans are quite literally
being forced to pick up the tab for Democrats' progressive
agenda items.
And our witnesses might be wondering what this has to do
with them. I think this is a cautionary tale to be careful what
you wish for. My colleagues on the other side of the aisle want
you bank CEOs to focus on political activism instead of doing
what your institutions do best, which is to provide capital and
serve customers.
As we learned during COVID, when you mix science and
politics, you get politics, and as we are learning now, when
you mix business and politics, you get politics. Some may say,
come on in, the water is fine, but our political waters are
quite troubling, and we don't need the business world to become
the political world. I don't think we are better for that or
our economy is better for that. And shunning law-abiding
businesses to appease to the woke left as well won't help
employers, it won't help our economy recover, and it won't help
the average working person in America. Instead, we should be
working together on a shared goal of rebuilding the greatest
economy in the world that we had pre-COVID, and moving forward.
Speaking of moving forward, Madam Chairwoman, when will
this committee get back to normal? We want to urge normalcy for
the American economy and for the American people. For months
now, we have gone back and forth about returning to in-person
hearings, with the option for Members to join remotely. I think
that is a reasonable request again today. I also think the
American people we represent would be pretty ticked off if they
knew we weren't going back to work for them and not doing what
they have to do on a daily basis. I am encouraged by vaccines
being widely available and by us being able to follow available
safety protocols.
So, CEOs, I look forward to your testimony. I look forward
to the questions today, and I am looking forward to all of us
getting back to normal as soon as possible, especially Congress
getting back to the work of the American people. Thanks so
much, and I yield back.
Chairwoman Waters. Thank you very much. At this point in
time, I am going to call on Mr. Perlmutter for 1 minute for an
opening statement.
Mr. Perlmutter. Thanks, Madam Chairwoman, and I want to
thank our panel for their leadership during this pandemic. None
of us expected it, and I just thank you for your leadership.
The last 15 months have been challenging for our country, but
through the leadership of the Biden Administration, 50 percent
of Americans are fully or partially vaccinated, and the
American Rescue Plan has provided relief to many communities
through economic impact payments, help for small businesses,
and support for State and local governments. Unfortunately,
many Americans remain vulnerable, and there is still
uncertainty in our economy.
Financial institutions and their employees have been on the
frontlines of delivering PPP loans to small businesses and
working with consumers impacted by the pandemic. As chief
executive officers, I would like you to focus on two things:
first, keeping your institutions safe and sound; and second,
ensuring that everyone has access to banking services and all
are treated fairly and honestly without fear of abusive
practices. With that, I yield back.
Chairwoman Waters. I now recognize the gentleman from
Missouri, Mr. Luetkemeyer, for 1 minute.
Mr. Luetkemeyer. Thank you, Madam Chairwoman, and thank you
to the panel for testifying today. In the past decade, we have
seen a trend where the liberal left has tried to use financial
institutions to eliminate legally-operating industries they do
not like, from gun manufacturers to energy companies. This was
first attempted under Operation Choke Point, where financial
regulators in the Obama Administration forced banks to cut
services to certain industries. While the last Administration
largely stopped that, the left now has a new method of
accomplishing their goal: publicly naming and shaming financial
institutions and applying political pressure to drop companies.
In fact, some members of this committee publicly urged you to
unbank certain industries at this same hearing in 2019.
Unfortunately, a number of banks represented here today
have been all too eager to comply, making them willing
participants in the systemic unbanking of legally-operating
businesses in this country, in contrast to investments in
operations in other parts of the world. Today, I look forward
to hearing why. With that, Madam Chairwoman, I yield back.
Chairwoman Waters. Thank you very much. At this time, I ask
unanimous consent to respond to an issue, a very important
issue that was raised by Mr. McHenry, and to engage him in a
small, limited colloquy. I want to thank the ranking member for
his comments and his letter. As has been the case throughout
the pandemic, the health and safety of Members and staff is of
the highest importance. It is my intention to continue to
conduct this committee's proceedings in a manner that is safe
and in accordance with the most recent advice from medical
experts.
Now that we have updated guidance from both the CDC and the
Office of the Attending Physician, I am working with staff to
think through how we can adjust committee protocols to allow
for hybrid committee meetings. I will note that the latest
guidance from the Office of the Attending Physician and the
corresponding flexibilities around social distancing and mask
wearing are specific to those who have been fully vaccinated.
Those who have not yet been fully vaccinated or who are vaccine
indeterminate are still strongly advised to wear masks and
social distance. Further, the updated guidance specifies that
there should be continued mask wearing and social distancing in
committee meetings due, in part, to the substantial number of
people who are not yet fully vaccinated or who are vaccine
indeterminate.
Therefore, I look forward to working with the ranking
member to ensure that we are verifying the vaccination status
of all individuals who are attending in person at committee
meetings, including Members and staff. I welcome further
conversation with the ranking member on how we can move to
hybrid proceedings safely without creating unintended issues,
such as additional technical issues or concerns regarding
uneven participation, considering we cannot accommodate all
Members and persons at this time.
Mr. McHenry. Madam Chairwoman?
Chairwoman Waters. And I will yield to the ranking member
for a limited time for this colloquy.
Mr. McHenry. Thank you, Madam Chairwoman, for responding in
some context to my letter. What I raised in my letter was that
this committee operated in person and in a hybrid format before
vaccines were distributed to the public, and I am asking the
Chair to return to her standard, which was then the case. That
was a standard well beyond what the Attending Physician
recommended then, and is again the case now. We need to show
the American people that we can safely re-emerge. Everyone who
wants a vaccine has had the option to get it. In fact, Congress
was one of the first branches, the first group of people in the
country and in the world who had vaccines available, so all of
the Members who want vaccines have had ample time to do this.
And what I am asking is for us to return safely to work as
a sign to the American people that we can do our business and
get it done. The digital format, as Members and as the public
will see today, is a fairly miserable one, given the nature of
this technology and with the load on this technology. We were
better off with in-person hearings, just how we operate when we
have committee markups where we have been hybrid. And the
Minority has been quite willing to work with you in the
Majority on doing this safely, as we did in the midst of the
pandemic before vaccines were available.
So the answers right now, I think, are way too limited, far
more limited than what the science indicates, number one. And
number two, there is no provision under House Rules by which a
Committee Chair or the Speaker of the House can verify
somebody's health records, and, in fact, important seminal
health privacy laws in this country also guard against that. I
am vaccinated, and I am proudly vaccinated, and I think it is
the safest vaccine brought to market in global history, and my
family has benefited from this.
Let's show that we can actually get back to work and be an
example for the American people rather than having this
absurdity that we can't be back together safely. And with that,
I yield back, and I certainly understand that we can continue
this dialogue in the coming days.
Chairwoman Waters. Absolutely.
Mr. McHenry. I thank you, Madam Chairwoman, for raising it,
and I yield back.
Chairwoman Waters. Thank you. I thank you so very much.
Yes, we must continue this dialogue. I am very proud to
announce that the entire Democratic Caucus has been vaccinated,
and I will leave it up to you to deal with your Caucus on how
you are going to deal with that.
Mr. McHenry. Madam Chairwoman?
Chairwoman Waters. Yes.
Mr. McHenry. On those records, as a Member of Congress, I
have expressed that I am vaccinated. I am going to leave it up
to Members to talk about their own health status under their
own regard. But, Madam Chairwoman, as you and I know, you have
one of the best health records in Congress, and you fear no
person, so I am confident sitting next to you that I am well-
fortified and protected. And with that, I yield back.
Chairwoman Waters. I am so proud of the Democratic Caucus,
and I would hope that you would do everything that you can to
encourage the Members of your Caucus to be in the safety mode
for all of us, and encourage them to be vaccinated.
Mr. McHenry. I have, and I will.
Chairwoman Waters. I am going to move on to our witnesses
now: Mr. Jamie Dimon, the chairman and chief executive officer
of JPMorgan Chase and Company; Ms. Jane Fraser, the chief
executive officer of Citigroup; Mr. James P. Gorman, the
chairman and chief executive officer of Morgan Stanley; Mr.
Brian T. Moynihan, the chairman and chief executive officer of
Bank of America; Mr. Charles W. Scharf, the chief executive
officer and president of Wells Fargo and Company; and Mr. David
M. Solomon, the chairman and chief executive officer of Goldman
Sachs.
Each of you will have 5 minutes to summarize your
testimony. You should be able to see a timer on your screen
that will indicate how much time you have left, and a chime
will go off at the end of your time. I would ask you to be
mindful of the timer and quickly wrap up your testimony if you
hear the chime. And without objection, your written statements
will be made a part of the record.
Before we began with your oral testimonies, I would like to
swear the witnesses in. I will call each of your names
individually to respond. Would all of you please raise your
right hands? Thank you.
Do you solemnly swear and 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? Mr. Dimon?
Mr. Dimon. Yes.
Chairwoman Waters. Ms. Fraser?
Ms. Fraser. Yes.
Chairwoman Waters. Mr. Gorman?
Mr. Gorman. Yes.
Chairwoman Waters. Mr. Moynihan?
Mr. Moynihan. Yes.
Chairwoman Waters. Mr. Scharf?
Mr. Scharf. Yes.
Chairwoman Waters. Mr. Solomon?
Mr. Solomon. Yes.
Chairwoman Waters. Let the record show that all of the
witnesses answered in the affirmative. We will now begin with
their oral testimony.
Mr. Dimon, you are now recognized for 5 minutes to present
your oral testimony.
TESTIMONY OF JAMIE DIMON, CHAIRMAN AND CHIEF EXECUTIVE OFFICER,
JPMORGAN CHASE & CO.
Mr. Dimon. Chairwoman Waters, Ranking Member McHenry, and
distinguished members of the committee, I, the proud grandson
of Greek immigrants, appreciate the invitation to appear before
you to talk about JPMorgan Chase, including the people,
businesses, and communities we serve.
We are living through unprecedented times in which history
will judge the leaders of government and industry by actions we
take to address the health and economic crises and longstanding
structural inequities. At JPMorgan Chase, we entered this
crisis from a position of strength and leveraged our size and
scale to contribute to the stability in our country and ongoing
support for the real economy to our customers, employees, and
communities impacted by the global crisis.
In 2020, we extended credit and raised capital totaling
$2.3 trillion for customers and businesses of all sizes,
helping them meet payroll, avoid layoffs, and support
operations. We waived fees and delayed payments on about 3
million accounts for customers who said they were affected by
COVID, with no questions asked. We waived over $600 million in
fees for COVID and non-COVID reasons, including over $400
million in overdraft fees. We funded over 400,000 PPP loans to
small businesses, supporting over 3 million jobs for more than
$40 billion in total funding. About 90 percent went to
businesses with fewer than 20 employees, and around one-third
went to businesses in communities of color. Outside of PPP, we
provided $18 billion in renewed credit for small businesses.
We committed $250 million in business and philanthropic
initiatives with a focus on helping and encouraging small
businesses and not-for-profits, and we support our employees,
especially our frontline workers, when approximately 75,000
went to work every day, including me, for the most part, and
who continue to show up to their jobs in branches, call
centers, lock boxes, and other roles that could not be done at
home. We gave special payments and additional paid time off,
and we continue to pay for regularly-scheduled hours, even when
hours were reduced.
There is no doubt that the bold and swift action taken by
Congress--you all--the Federal Reserve, and the Administrations
over the past 15 months were instrumental in reversing
financial panic and avoiding a deep and lasting economic
crisis. But the last year exacerbated longstanding inequality,
particularly among Black and Latinx families, increasing
barriers to wealth creation and holding us back as a country.
This is why JPMorgan Chase recently committed an additional $30
billion over 5 years to address racial and economic inequality,
focused on expanding affordable housing, growing Black- and
Latinx-owned businesses, and improving access to banking. These
are new business commitments that will help to drive real
change. We have already made solid progress and are on track
for our 5-year commitment.
We have refinanced over $2 billion in mortgages for Black
and Latinx households, and funded investments and loans for an
additional 5,500 multifamily affordable housing units. We have
funded over $60 million in investments in nine MDIs. We also
opened community center branches in areas like Harlem, Chicago,
Minneapolis, and Crenshaw, with many more coming in the next
year.
At JPMorgan Chase, we consider our people to be our
greatest strength. Our 160,000 U.S. employees are located in 38
States, and soon we will be in 48 contiguous States this
summer. Thirty percent of the new branches are opening or
located in low- to moderate-income areas, and nearly one-third
of all branches are minority census tracts. For the 3rd time in
5 years, this year we increased entry-level wages to $16 to $20
an hour, and we provide annual benefit packages worth about
$13,000. Nearly 70 percent of our employees who started before
2017 with a salary of less than $40,000 are still at the
company and have experienced an average increase of 40 percent
in compensation.
We have also made progress in recruiting, retaining, and
promoting ethnically-diverse employees. Over the past 5 years,
for example, we have increased the number of Black senior
leaders by more than 50 percent and established a new program
that holds managers accountable for the diversity priorities
through compensation and performance evaluations.
Our country is poised for a strong economic rebound, but we
must ensure the economic recovery benefits all and that we
address longstanding inequities that threaten the promise of
America. Access to affordable healthcare, an education system
that is failing too many of our children, crumbling
infrastructure, climate change, and racial inequality are just
some of the problems challenging our great nation. All of us--
government, business, and civic society--must work with a
common purpose to address these challenges.
I want to close by thanking our employees for their
tireless work and relentless focus on doing what is right for
our customers. They have performed their jobs with integrity
and commitment to serve our customers and our country. I look
forward to working with you all as we shape the future of our
country for generations to come. We all share a collective
American interest to ensure that we are a country of unlimited
opportunity for all. Thank you.
[The prepared statement of Mr. Dimon can be found on page
90 of the appendix.]
Chairwoman Waters. Thank you very much, Mr. Dimon. We will
now go to Ms. Fraser.
TESTIMONY OF JANE FRASER, CHIEF EXECUTIVE OFFICER, CITI
Ms. Fraser. Thank you, Chairwoman Waters, Ranking Member
McHenry, and members of the committee, and thank you very much
for the opportunity to represent Citi today. By way of
introduction, my name is Jane Fraser. I joined the bank 17
years ago, and I became CEO in March. I grew up in a small
village in Scotland, but I first came to the U.S. in 1987, and
I very proudly became a citizen in 2001. My husband emigrated
to the U.S. from Cuba when he was a young boy, and he is also a
proud citizen of our country. So, we both feel very fortunate
about the opportunities this country has created for our
family, and we believe we have an obligation to make sure
everyone can participate in the American Dream.
At Citi, we recognize that this has been an incredibly
challenging time for Americans, millions of whom we are very
proud to call our customers. The origins of this global crisis
are very unlike the last one. This is a public health crisis
with severe economic consequences for many. Throughout the
pandemic, Citi has shown that we are a very different bank than
the one that entered the financial crisis more than a decade
ago. We are smaller, but we are safer, we are stronger, and we
are far less complex. We have had the financial resources to
support our clients and communities through COVID, and we are
laser-focused on driving a sustainable and an equitable
recovery.
I will always be proud that we were the first bank to
provide relief programs for retail and small business customers
in the United States. We are also proud to be a reliable
conduit for the extraordinary consumer and business aid that
Congress and the Federal Reserve have provided. We helped
deliver this aid across many government-sponsored programs,
including the Paycheck Protection Program. As a result of the
tremendous need from small businesses, we went from being a
relatively small, Small Business Administration (SBA) lender,
to so far funding over $5 billion in PPP loans to the hardest-
hit small businesses, and nearly 80 percent of these loans have
gone to businesses with 10 or fewer employees. And we are
donating all of the net profits from the program to provide
further support to vulnerable small businesses and communities
in the U.S.
And at the same time, we made our own people a priority. We
provided special compensation awards and benefits to many of
our colleagues to help them ease their personal financial
burdens and worries through the crisis.
As the world's most global bank, we will continue
supporting many of the most iconic American businesses as they
navigate the uncertainty of markets abroad, and working in
concert with Federal assistance programs, we are going to
continue to serve as a source of strength for our customers and
our communities here at home as a very high priority. While we
have a smaller branch footprint than our peers, we will harness
the full power of our bank's capabilities to extend our reach
and to help make sure the recovery leaves no one behind.
We are proud of our record of enabling opportunity in
communities. For 11 straight years, we have been the number-one
lender of affordable housing in the U.S., and in 2020 alone, we
worked with the State and local governments to finance over $27
billion in vital capital projects such as roads, schools,
hospitals, and utilities. And through low-cost and no-fee
products, we continue expanding financial services in
underbanked neighborhoods.
Almost exactly a year ago, as calls for social justice rang
out in the wake of George Floyd's murder, Citi answered those
calls with action. We launched a firm-wide effort, including a
billion dollars in strategic initiatives, to help close the
racial wealth gap, and just this morning, we announced a new
$200 million program to invest in affordable housing and
workforce projects with Black investment managers.
We are not alone in our commitment to equity, but what
distinguishes us is how we hold ourselves accountable for
results, and where we have more work to do, we are very upfront
about it. This is the transparency that has defined our
representation goals and our efforts to close our gender pay
gap. It is also part of our sustainability agenda and our
commitment to net zero emissions by 2050, which I announced on
my first day as CEO, because helping our clients transition to
a low-carbon economy is going to be central to this work.
I am determined that Citi will continue leading on these
issues. They are central to our mission of enabling growth and
progress, and I thank you again for the opportunity to talk
about Citi's efforts to be part of the solution in the recovery
to this pandemic. Thank you very much.
[The prepared statement of Ms. Fraser can be found on page
99 of the appendix.]
Chairwoman Waters. Thank you, Ms. Fraser. Next, we will go
to Mr. Gorman. You are now recognized for 5 minutes to present
your oral testimony.
TESTIMONY OF JAMES P. GORMAN, CHAIRMAN AND CHIEF EXECUTIVE
OFFICER, MORGAN STANLEY
Mr. Gorman. Chairwoman Waters, Ranking Member McHenry, and
members of the committee, thank you for having me here again
today. I am also an immigrant, coming from Australia, and let
me tell you, it is a long journey from Melbourne to New York,
and I am very proud that I made it and I am now a citizen of
this great country.
When we were last here in 2019, none of us could have
predicted the extraordinary public health crisis that would
unfold around the world. We remain in the midst of the crisis
that has caused serious humanitarian and economic issues,
leaving an indelible mark on many of us. Our hearts go out to
all of those directly and indirectly impacted by this crisis.
In response to these extraordinary and challenging times, we
were focused on serving our clients and our communities and
taking care of our employees.
We helped our corporate and institutional clients raise
additional liquidity and obtain financing. We raised over $50
billion of capital for the industry sectors most affected by
COVID--the airlines, the cruise ships, the travel industry. Our
teams also helped raise healthcare capital for both Moderna and
Pfizer, including a sustainable bond issuance by Pfizer, to
support patient access to medicines and vaccines, especially
among underserved populations. For our retail clients, we
guided them to manage their investment portfolios amidst midst
extreme volatility.
Today's Morgan Stanley, through its three businesses,
provides a stable foundation of support in any market
environment. In our institutional business, we are a financial
advisor to companies. We help them raise debt and equity
capital, from taking companies public to helping them issue
bonds, so they can grow and create jobs. We help public sector
entities raise municipal financing. We help pension funds,
mutual funds, and other financial institutions trade and manage
assets. In our other two businesses--wealth and asset
management--we manage over $5.6 trillion of assets for
households and institutions, including endowments and pension
funds that manage the retirements of our teachers,
firefighters, and other public service employees. For millions
of U.S. households, our services help families save money,
whether that be for college payments, retirement, or to put a
down payment on their mortgages.
Beyond a day-to-day core businesses, we also support the
most vulnerable in our communities through philanthropic and
employee engagement. A number of well-publicized events last
year led to a heightened and necessary focus on racial and
social justice, and a recognition that explicit support and
purposeful collective action will be required.
Some of our efforts in the last year included providing
grants to minority depository institutions to help them bolster
their loan loss reserves in the wake of the pandemic, and to
assist minority- and women-owned businesses to ensure an
equitable recovery. We also started a program to provide 60
students with full 4-year scholarships to Howard University,
Morehouse College, and Spelman College, three of America's
leading Historically Black Colleges and Universities (HBCUs).
In addition, we are concerned, like everyone, with how to
deal with climate risk over the next decades, which will have a
profound socioeconomic effect on our communities. Morgan
Stanley recognizes the threat that global climate change poses,
and we are working with our clients to find ways to mitigate
it.
Finally, early in the pandemic, we committed to making no
reductions in our workforce through 2020 to help our employees
navigate this crisis, thereby providing reassurance to 70,000
families in a very difficult time. I am proud of that
commitment and the commitment our employees have shown to their
clients.
Chairwoman Waters, in your letter dated April 30, 2021, you
asked me to provide information on 14 topics. In the spirit of
brevity, that information is now included in the attached
addendum, and I look forward to your questions.
[The prepared statement of Mr. Gorman can be found on page
110 of the appendix.]
Chairwoman Waters. Can you hear me?
Voices. Yes.
Chairwoman Waters. Thank you, Mr. Gorman.
Next, we will go to Mr. Moynihan. You are now recognized
for 5 minutes to present your oral testimony.
TESTIMONY OF BRIAN T. MOYNIHAN, CHAIRMAN AND CHIEF EXECUTIVE
OFFICER, BANK OF AMERICA
Mr. Moynihan. Chairwoman Waters, Ranking Member McHenry,
and distinguished committee members, at Bank of America, we
serve 1 in 2 American households, and my 200,000-plus teammates
and I take that responsibility very seriously. Our incredible
team interacts with clients tens of millions of times a day. We
do so through our 4,300 financial centers, one-third of which
are located in low- or moderate-income (LMI) communities,
17,000 ATMs, on the phone, and through our digital capabilities
with 40 million active digital users.
In 2020, our clients turned to us for support like they
hadn't done before. Thanks to years of investment and focus on
responsible growth, our teammates were there to support those
in need, and through it all, a growing number of clients have
placed their trust in us. Since the start of the healthcare
crisis, deposits have increased significantly, and our customer
base has grown across all of our businesses. We helped our
clients and the U.S. economy through the worst economic shock
in recent years. For clients in need, we delivered financial
assistance through our business-as-usual work and by helping
deliver the timely Federal relief programs that you and your
colleagues authorized.
We helped nearly 2 million consumers and small businesses
defer payments on credit cards, vehicle loans, and home loans.
Even with a deferral, the vast majority of these clients remain
current on their payments, and that is a good thing. We
provided PPP loans to nearly half-a-million small businesses:
83 percent of those loans have gone to businesses with 10 or
fewer employees; and nearly 40 percent have gone to businesses
in majority-minority communities. We sent millions of emails to
help clients understand the program and to encourage them to
apply, including targeted outreach to drive awareness to all
communities.
Apart from PPP, we remain the largest lender to small
businesses in the United States, according to the FDIC, with
$35 billion in small business loan balances, 60 percent of
which is in LMI communities. We also processed more than $73
billion in stimulus payments authorized by Congress, and took
additional steps to help overdrawn clients access their full
payment without any offset.
The products and services we provide are central to our
clients, to our communities, and to the economy, and we
continue to take steps to help our clients with their day-to-
day financial needs. And 2020 is a complement to our successful
Safe Balance, no overdraft checking account. We launched
Balance Assist, a low-cost digital-only alternative to payday-
type loans, allowing clients in need to borrow up to $500 for a
flat fee with no interest. We also increased investments in our
team during the pandemic. We expanded many of our benefits,
including support for mental health, free virtual medical
consultations, and no-cost coronavirus testing. We offered
teammates $100 per day to hire someone to come into their home
to take care of their children or their adult dependents. We
have funded more than 4 million days of care for our teammates.
We implemented coronavirus testing and daily health
screening, and installed wellness fairs in all of our branches.
We provided special compensation programs for our teammates,
including supplemental pay and enhanced overtime pay, as well
as transportation and meal subsidies, and we had no layoffs in
2020.
We ensure that all employees are compensated well. Last
year, we increased our minimum hourly wage rate of pay for U.S.
teammates to $20, one year earlier than planned, and we have
committed to raise that to $25 per hour by 2025. Vendors within
the United States are also required to provide wages at or
above $15 per hour if they serve us. Today, thousands of vendor
employees have benefited by this. Since 2012, we have not
increased medical premiums for teammates earning less than
$50,000. For 2020, we provided special compensation awards to
97 percent of our talented team globally, the 4th straight year
we have done so.
Maintaining our diverse and inclusive workplace also
continues to be a priority: 50 percent of our management team
and 50 percent of our board of directors is diverse. More than
half of our global workforce are women, and 45 percent of our
U.S.-based teammates are people of color. We hired and trained
more than 10,000 employees from LMI communities in the last 3
years alone.
Finally, over the past year, we increased our investments
to support our communities. In June 2020, we accelerated our
longstanding work to promote racial equality and economic
opportunity to drive investment, jobs, small business, housing,
and healthcare to our local communities. We have committed
$1.25 billion over 5 years, and have already deployed $350
million of that, including common equity capital investments in
17 MDIs and CDFIs, investments in 90 private equity funds that
are both run by minority women entrepreneurs and also focus on
minority- and women-owned businesses.
We have distributed 29 million masks and other PPE to
underserved communities and community centers. We increased our
Home Ownership Assistance Program to raise the goal from $5
billion to $15 billion. We also are accelerating the transition
to a low-carbon economy. At Bank of America, we are committed
to achieving net zero greenhouse emissions before 2050. We are
working alongside and supporting our clients in every industry
to help make that transition.
We at Bank of America believe in capitalism and believe it
is the best way to solve the challenges facing society. We can
deliver for our shareholders and for society. We call that
responsible growth. Thank you.
[The prepared statement of Mr. Moynihan can be found on
page 136 of the appendix.]
Chairwoman Waters. Thank you very much, Mr. Moynihan.
Mr. Scharf, you are now recognized for 5 minutes to present
your oral testimony.
TESTIMONY OF CHARLES W. SCHARF, CHIEF EXECUTIVE OFFICER AND
PRESIDENT, WELLS FARGO & COMPANY
Mr. Scharf. Chairwoman Waters, Ranking Member McHenry, and
members of the committee, good afternoon, and thank you for the
opportunity to be here today.
Just over a year ago, I appeared before this committee upon
assuming my role as CEO. We were on the verge of a global
pandemic, and I cannot help but look back and think how little
we understood of what 2020 would bring. When the pandemic
struck, we all came together to stand up unprecedented
assistance at a scale and speed that had never been done
before. Although the process was not perfect, we, the
government, and others rallied to do what needed to be done,
and now we must continue to work together to ensure a fair and
equitable recovery. As we begin taking steps towards recovery,
I am proud of Wells Fargo's efforts to support our customers,
our employees, and the communities we serve, all while
continuing to transform our organization. We believe our
country and communities benefit from a strong Wells Fargo.
I am proud that we have been a source of strength for our
customers and communities during the toughest of times. They
are our core and must remain our priority in all we do. To
support our customers during the pandemic, we deferred payments
and waived fees for more than 3.7 million consumer and small
business accounts to help people make ends meet. We provided
over 1 million mortgage forbearances and suspended residential
property foreclosures and evictions to keep Americans in their
homes. And we acted as a leading lender in the Paycheck
Protection Program, funding more than $13.7 billion in aid to
small businesses. Over 40 percent of our loans were made to
businesses located in low- to moderate-income or majority-
minority census tracts.
Recognizing that the goal of the PPP was to provide a
lifeline to struggling small businesses, we also took more than
the $400 million in fees generated by the program in 2020, and
are donating them to our Open for Business Fund, which is
allowing us to engage CDFIs, not-for-profits, and others to
help businesses manage the economic effects of COVID-19, and we
will continue to do our part by working on solutions to tackle
the problem of unbanked and underbanked individuals and other
efforts to foster an inclusive recovery. We look forward to
defeating the impact of the pandemic together, and believe
Wells Fargo will play an important role in helping to rebuild a
stronger America.
To our employees, I am proud of the work you have done over
the past year to support our customers and communities during
these uncertain times. We prioritize safety and well-being, and
my deepest gratitude goes out to our frontline workers who made
it possible to keep branches safely open. We transitioned more
than 200,000 employees to remote work last March, and we
understood the tremendous strain the pandemic would place on
all of our employees and their families. We made special cash
awards to approximately 165,0000 employees, offered enhanced
support for employees who are parents or caregivers, provided
free, voluntary COVID-19 testing for all employees working in a
Wells Fargo location, and we offered paid time off to employees
for vaccination appointments.
For the communities we serve, we continue to invest in the
institutions critical to their success. While we are very
encouraged to see signs of improvement, we realize that not all
of our communities are benefiting equally in the recovery. That
is why Wells Fargo has been working to support a more inclusive
economic recovery with a focus on racial and social equity,
economic mobility, and investments in low- to moderate-income
communities. For example, we are investing in Black-owned
Minority Depository Institutions (MDIs) across the country as
part of our $50 million commitment to support MDIs, and we have
given more than $150 million to CDFIs around the country who
are providing grants to hard-hit small businesses.
Additionally, last week we announced our Banking Inclusion
Initiative, a 10-year commitment to accelerate unbanked
individuals' access to affordable mainstream accounts, and
helped unbanked communities have easier access to low-cost
banking.
We are also committed to helping transition to a low-carbon
economy and have set a goal of achieving net zero greenhouse
gas emissions, including our financed emissions, by 2050. And
finally, for our company, while we still have significant work
to do, we are committed to devoting the resources necessary to
operate with strong business practices and controls, maintain
the highest levels of integrity, and have an appropriate
culture in place.
Thank you again for having me, and I look forward to
answering your questions.
[The prepared statement of Mr. Scharf can be found on page
167 of the appendix.]
Chairwoman Waters. Thank you very much, Mr. Scharf.
Finally, we will go to Mr. Solomon. You are now recognized for
5 minutes to present your oral testimony.
TESTIMONY OF DAVID M. SOLOMON, CHAIRMAN AND CHIEF EXECUTIVE
OFFICER, GOLDMAN SACHS
Mr. Solomon. Thank you, Chairwoman Waters, Ranking Member
McHenry, and members of the committee. Thank you for giving me
the opportunity to speak today.
These last 14 months have been an incredibly challenging
time as the pandemic has swept across the world, killing almost
600,000 Americans and plunging us into a steep economic
retraction. Even today, our hearts go out to the people of
India and others around the world who continue to suffer from
this virus. However, because of the swift actions taken by
Congress, the Federal Reserve, and others to combat this health
and economic crisis, I am optimistic about our future. As more
people are vaccinated, the U.S. is poised for a very strong
recovery, and I would be remiss if I didn't thank Moderna,
Pfizer, Johnson & Johnson, and AstraZeneca for the amazing work
they and others have done on lifesaving vaccines.
The banking industry performed well during this crisis, as
the Fed's two stress tests in 2020 confirmed. This is due in
part to the Dodd-Frank Act and other financial regulations put
in place since the 2008 crisis. Goldman Sachs remained well-
capitalized both leading up to and throughout the pandemic.
Goldman Sachs has more than 40,000 employees, and I continue to
be in awe of their resilience. To help them through the
pandemic, we gave people an additional 10 days of paid family
leave, expanded access to child and adult care, offered free
telemedicine, and rolled out a global COVID testing regime. In
addition, we have continued to pay our onsite vendor staff,
whether they worked or not. That includes our mailroom staff,
cafeteria workers, security guards, and janitorial staff.
Over the last year, we experienced historically-elevated
levels of client demand, and because we were well-capitalized,
we were able to help our corporate clients weather the impact
of COVID-19 and position themselves for a post-pandemic
recovery.
For our digital bank customers, we launched a COVID
Customer Assistance Program, which allowed customers to defer
loan payments for 4 months, and credit card payments for 6
months, at no additional cost.
We also found innovative ways to support small businesses.
We are not an SBA lender, so we did not participate directly in
the Paycheck Protection Program. Instead, we committed $1.4
billion in capital to Community Development Financial
Institutions (CDFIs) and mission-driven lenders, who
facilitated PPP loans across the country. The capital we
deployed with our CDFI partners reached very small businesses,
nearly half of which are in minority communities. The average
loan size is around $43,000, and the median employee count is
two.
In addition, last week we committed another $1 billion in
partnership with the SBA and our CDFI partner, Lendistry, to
fund approximately 40,000 PPP loans, over half of which will
benefit minority-owned businesses. We did this to ensure these
applicants were able to have their loans processed and approved
before the PPP funds were exhausted. We also continue to
support small businesses through our 10,000 Small Businesses
program, launched in 2010. Through this program, we provide
education by partnering with community colleges, and greater
access to capital to thousands of small businesses. Last year,
we committed an additional $250 million to serve another 10,000
small business owners. We have also committed an additional
$500 million to our program for diverse entrepreneurs, launched
with Goldman Sachs.
I now want to focus on three other initiatives that are
incredibly important to us. First, we have already achieved
more than a 5th of our 10-year target of $750 billion in
financing, investing, and advisory activity focused on climate
transition and inclusive growth. We have been carbon-neutral
across our operation since 2015, and we recently set a goal of
net zero carbon emissions in our supply chain by 2030.
Second, we commissioned extensive research on how to
mitigate income inequality, which showed that Black women are
one of the most marginalized groups in this country. It found
that if we can reduce the earnings gap for Black women, we
could see U.S. GDP increase by $300 billion a year. In
response, we developed a new initiative called One Million
Black Women, where we will invest $10 billion over the next 10
years to narrow opportunity gaps for at least 1 million Black
women in the United States.
The final initiative relates to our diversity and
inclusion. When I became CEO 2\1/2\ years ago, I said that this
would be a top priority. Since I last testified before
Congress, we have made progress. Our board will now have 6 out
of 13 directors who are women, 62 percent diverse by race,
gender, or sexual orientation. Our newest partner class
includes the highest percentage of women and Black partners in
our history. In addition, our 2020 Campus Analyst Class in the
Americas was 55 percent women and 11 percent Black talent, our
highest ever. However, I am not satisfied with where we are,
and we continue to work to address this.
Thank you. I would be happy to answer any questions you
have.
[The prepared statement of Mr. Solomon can be found on page
182 of the appendix.]
Chairwoman Waters. Thank you very much, Mr. Solomon. I now
recognize myself for 5 minutes for questions.
I am going to go to a question that I had not anticipated
at this point, because I wanted to talk about low-cost homes.
But let me just ask, we have supported forbearance, and some of
you certainly have been very good at doing that. However, we
are hearing a lot of concerns from homeowners, many of whom
have lived in their homes for 15 or 20 years, and because of
the pandemic, they found themselves in difficulty. They were
laid off from their jobs, or the jobs closed down, et cetera.
They could not afford to pay their mortgages in the same way
that they had been doing for many, many years. We had
forbearance in the Coronavirus Aid, Relief, and Economic
Security (CARES) Act, I believe, and also in the American
Relief Plan. That foreclosure moratorium ends around June 30th
for those who have been in forbearance. I want to know from
each of you, how many of you are going to offer these
homeowners an opportunity for loan modifications, real loan
modifications? Even if they don't know about them, are you
going to initiate them? Are you going to deal with them in ways
that will help them save their homes and avoid foreclosure? Let
me start right out with Jamie Dimon.
Mr. Dimon. Yes?
Chairwoman Waters. Can you tell me whether or not you are
going to employ the kind of operation such that we won't have
to get into a confrontation about that, and we don't have to
try and do something in the law? Are you going to initiate this
program?
Mr. Dimon. Well, I can't promise you that, because I don't
know the details, but we don't like foreclosing on people. We
give modifications. We have plans. We will work with everyone,
and where appropriate, we will not be foreclosing on people. I
do want to point out that some are appropriate, where homes are
vacant, where people have been paying for years, their vacation
homes, their second homes. So, where appropriate, you can
expect us to bend over backwards to help those folks stay in
their homes.
Chairwoman Waters. Thank you very much, Mr. Dimon. I
described the kind of homeowner who would be looking for a loan
modification. I didn't talk about any houses that were boarded-
up and no one was there, and all of that. I took an opportunity
to describe that. I am going to hold you to it. Let me go on to
Ms. Fraser.
Ms. Fraser. Thank you very much, Chairwoman Waters. We no
longer service our own mortgages. We do so with our partners
now. We require that they follow GSE and Federal guidelines on
these matters, and we only work with people who have good best
practices in these--
Chairwoman Waters. Okay. So, you are going to be offering
loan modifications. People don't have to not know about them,
you will be offering them, is that right?
Ms. Fraser. We will be ensuring that our partners provide
that, yes.
Chairwoman Waters. Okay. Thank you. Mr. Moynihan?
Mr. Moynihan. Chairwoman Waters, we have already modified a
bunch of these loans, and the good news is that a lot of them
also have paid off through normal things, a lot of concurrency.
Yes, we will continue to modify them, because, as Mr. Dimon
said, the last thing we like to do is to take the home of
someone who can pay us through foreclosure.
Chairwoman Waters. Okay. Thank you. I don't have time to
continue on that line of questioning, because I want to talk
about the fact that the cost of housing is just escalating so
much. In my own State of California, it has increased probably
about 20 percent, and so it is very difficult for people to be
able to get these down payments, et cetera. But I want to ask
you about this low-cost housing, housing that is under
$100,000. In some of these areas all across the country, in
small towns and communities of color, in particular, they can't
get loans from your banks, they tell me. I asked you to submit
some information on that. Most of you did, but how many of you
are absolutely committed to taking a look at this market and
understanding that this is a way by which people in low-cost
housing can become owners if, in fact, they can get their loans
from you? I will go back to Mr. Dimon again.
Mr. Dimon. You raised a very good point with us a couple of
days ago, and we are going dig deep into it and see if we can
come up with programs that work.
Chairwoman Waters. Ms. Fraser?
Ms. Fraser. Exactly the same, Chairwoman Waters.
Chairwoman Waters. Okay. Mr. Moynihan?
Mr. Moynihan. Chairwoman Waters, yes, we are going to take
a look at it. You raised a good point, and as we enter some
markets with lower-cost housing, we probably will be doing more
of them anyway.
Chairwoman Waters. Mr. Scharf?
Mr. Scharf. Chairwoman Waters, we do a significant amount
of loans under $100,000. We will absolutely look to see if we
can do more.
Chairwoman Waters. Okay. Mr. Gorman?
Mr. Gorman. It is not really a business, Chairwoman Waters,
that we are in. We only did seven loans this year of that size.
Chairwoman Waters. Okay. Thank you. My time has expired,
and I can't get into this any deeper, so I yield back the
balance of my time. And I will now call on our ranking member,
Mr. McHenry, for 5 minutes.
Mr. McHenry. Thank you, Madam Chairwoman, and I want to
thank you all for being here in this format. And as I opened,
this is a sequel that no one asked for. In the hearing 2 years
ago, I don't know that much was learned. We are going to have a
similar issue set, but modified by the political discourse of
the day. And so, I think of this is as an opportunity for me to
ask you important questions about your insight into the
economy. We know that through the financial crisis, the banking
sector provided important liquidity and played its role in our
economy to ensure that lending was possible, that smart
underwriting and lending was still possible in the midst of a
pandemic. So, I think that is commendable work that your
institutions, and banks, and FinTechs, and credit unions put in
during the financial crisis.
The question I have for the whole panel is to have the
outlook on jobs going forward. We had 8 million unfilled jobs
last month. We had a 266,000 net increase in employment, but 8
million jobs unfilled. There is a lot of debate in Washington
about why that is happening. I would like to hear from you as
experts on the economy about the nature of that. So if we can
begin with you, Mr. Scharf, and then you, Mr. Moynihan.
Mr. Scharf. Congressman, I am not sure I have a great
answer as to why that is the case. What I can tell you is what
we hear from our clients and what we see ourselves, and what we
see from our clients is that their confidence is building and
they have very, very good prospects for the second half of the
year. Debt levels are down on a corporate basis--
Mr. McHenry. But how can you have economic growth if you
can't get people to go back to work? That is the fundamental
question. Let me move on to you, Mr. Moynihan. Same question.
Mr. Moynihan. Our small business customers--we just
completed a survey and the issue raised has come up to the
highest level of all of the issues. It was the pandemic,
obviously, 6 months ago, and now it has turned to getting
workers for the jobs. I think it is a serious concern, and I
think that the States and others I talked to are trying to put
money to work to train people. And I agree with you, if you
think forward about the risk to the economy, it is the
inability to get stuff through ports, and it is the inability
to get people back to work in a fashion now that the economy is
opening up.
Mr. McHenry. Ms. Fraser?
Ms. Fraser. Yes, I think we are seeing significant
dislocations as the economy normalizes. One of the pieces that
will be critical as the savings go back to work and as
liquidity that is sitting out there at the moment gets
translated into ways that create more employment and new
business creation to drive the recovery.
Mr. McHenry. Mr. Dimon?
Mr. Dimon. Ranking Member McHenry, I think the reasons are
many-fold, including some of the unemployment insurance,
including the fact that our schools haven't reopened, and
including the fact that people actually have a lot of money and
they don't particularly feel like going back to work, but I
think you should rest assured--I think we are going to see a
completely booming economy. A lot of people are going back to
work, and hopefully it will continue for quite a while.
Mr. McHenry. Thank you for answering that. Now, I have
questions about, on the international front, we see the lack of
transparency associated with China's lending across the globe.
China has resisted international standards set by a body, such
as the Paris Club and the Organisation for Economic Co-
operation and Development (OECD), an arrangement on officially-
supported export credits. We see this globally. Moreover, we
see the Federal Reserve has flagged elevated debt levels in
China, high real estate valuations, and weaknesses in their
financial sector. And what I see is a lack of transparency in
their lending and a lack of transparency internationally to
their domestic actions. Can you give me further insight into
this, and should we believe China? Do you believe that China's
lack of transparency and its official financial sector
vulnerabilities pose a potential risk to global financial
stability? Mr. Solomon, that question is for you, then to you,
Mr. Dimon.
Mr. Solomon. I appreciate the question, Ranking Member
McHenry, and I think you have raised a bunch of issues that are
issues that we spend a lot of time thinking about. Transparency
in markets is always extremely important, and more transparency
is better. I think that we understand that we operate in
globally-interconnected markets, so to the degree that some of
the issues you highlight do become issues that have an impact
on China's economic activity, we will certainly feel it back
here in the United States, and it will have a contagion effect.
I don't see that at the moment as a likely issue given the
recovery they have had coming out of their pandemic, but I
think all of these things are things that should be watched and
observed closely.
Chairwoman Waters. The gentleman's time has expired.
Mr. McHenry. Mr. Dimon, I think you were saved by the bell,
and thank you all for testifying.
Chairwoman Waters. The gentlewoman from New York, Mrs.
Maloney, who is also the Chair of the House Committee on
Oversight and Reform, is now recognized for 5 minutes.
Mrs. Maloney. Thank you, Chairwoman Waters, for holding
this hearing and for standing up for consumers, and thank you
to the panel for participating.
I want to follow up on the questions from Senator Warren
about overdraft fees. President Obama signed into law my Credit
Card Act, the bill I wrote to end the most abusive practices of
the credit card industry.
According to one study, this bill alone is estimated to
have saved consumers nearly $12 billion a year. A 2015 CFPB
study estimated that it saved consumers $16 billion in the
first years of its enactment.
But where we made great progress on topping abusive
practices in the credit card market, there is still much work
to do on banks' overdraft practices. I plan to soon reintroduce
my legislation, the Overdraft Protection Act, to crack down on
unfair, predatory overdraft fees.
Bank overdraft fees are outrageously priced, predatory, and
beyond the scale of what a reasonable charge should be for this
service, and we know that these fees and practices are harming
consumers and taking billions out of their pockets.
According to an S&P Global Market article from earlier this
year, the larger banks collected $8.8 billion in overdraft fees
alone and reported over $147 billion in net income in 2020.
Making these practices even more egregious, overdraft fees
hit those who can afford them the least, the hardest. Those who
are trapped are often cash-strapped hardworking Americans and
college students who are struggling to pay their bills.
And so, that $8.8 billion collected last year is money
taken out of the hands of Americans who are trying to just keep
food on the table and stay afloat in the middle of our
pandemic.
Each bank has slightly different policies, making this even
more confusing to consumers. All of your banks, basically,
charge around $35 for each overdraft. But the worst of these
fees can be on debit card transactions, where the overdraft
averages $20, but comes with a $35 fee.
Multiple transactions can quickly add up to where a
consumer is charged well over $100 in fees alone.
Let's focus on Wells Fargo. Mr. Scharf, neither Citi nor
Bank of America charge overdraft fees on debit card
transactions, apparently deciding this practice was not in the
best interest of their customers.
I find it curious--why has your bank made the opposite
decision, seemingly thinking a sandwich or a cup of coffee at a
deli should result in a $35 overdraft fee if they can't afford
it?
Mr. Scharf. I'm sorry. Are you--
Mrs. Maloney. I am waiting for your answer.
Mr. Scharf. Congresswoman, we are constantly looking at
ways to be more consumer-friendly. We introduced an account
last year which has no overdraft fees at all. It is actually
one of--probably our most popular account since we have
introduced it. So, we have options that are readily available
for customers who do not want to overdraft.
We also offer overdraft protection in something called
Overdraft Rewind for those who have an account that can
overdraft, which allows us to look back 24 hours for a direct
deposit coming into that account.
These are things that we have added where we are looking to
become more consumer-friendly. But it is, certainly, something
that we will continue to look at.
Mrs. Maloney. When did you introduce your--you have an
account that has no overdraft fees?
Mr. Scharf. We introduced it--
Mrs. Maloney. I would think that everybody would take that
one because I don't think many people want to pay a $35
overdraft fee for a cup of coffee. When did you introduce the
program that has no overdraft fees?
Mr. Scharf. We announced it approximately a year ago, and I
believe we have had it in the market for probably 6 months or
so. I will get you the specific dates.
Mrs. Maloney. And how do you inform your customers that
they can have this option of not having any overdraft fees?
Mr. Scharf. It is part of the suite of products that we
talk to our customers about on a very regular basis.
Mrs. Maloney. It seems like everyone would choose that, if
it was really possible, and I think everyone likes a good
sandwich and a cup of coffee, but not at a cost of $40 or $50,
and I feel that these fees are unfair, unaffordable, and
unreasonable for all Americans, plain and simple.
Let me ask you, Mr. Scharf, do you think a $35 fee for a $6
debit charge is reasonable?
Chairwoman Waters. The gentlelady's time has expired. Would
you please get back to Mrs. Maloney to answer that question?
With that, we are going to go on to Mrs. Wagner from
Missouri. You are recognized for 5 minutes.
Mrs. Wagner. Thank you, Madam Chairwoman, and I would like
to also thank our witnesses for being with us today. It is
important to me that public companies such as the ones that you
all lead continue to focus less on political agendas and more
on what will benefit your investors, your customers, and your
workers the most, that is, maximizing profits and shareholder
value. I would just like to say that up front.
Mr. Moynihan, and Mr. Dimon, this is for you. The Biden
Administration has proposed an increase in the tax rate as high
as 28 percent for American businesses and industry, along with
many other tax increase measures, all to offset an additional
anywhere from $1.7 trillion to $2.3 trillion in government
spending.
How would an increased rate impact your ability to support
our economic recovery and what sort of burden would American
workers and small businesses bear? I will start with Mr.
Moynihan's response first.
Mr. Moynihan. Thank you for the question.
I think, starting with your point about what our customers
tell us, our small and medium-sized businesses, of which we
have many, are worried about tax increases slowing down their
ability to invest in employees, invest in new equipment, and be
competitive, because many of the small businesses supply into
the supply chain for the larger companies in this country. And
so, their concern is about that.
When you go to the larger companies, an increase in taxes
is a couple of things. One is that their fear is that it will
lead them back to put more capital available outside the United
States because, frankly, the type of demand, the globalization
of the economy provides opportunities that weren't here 30
years ago and I think they are concerned about that. They are
also concerned about the impact of prices coming into them from
suppliers.
So, yes, I think that is what is on the minds of our
customers, and I know that there is a lot of work going on in
this body and other bodies regarding the merits of all that.
But that is what we hear from our customers.
Mrs. Wagner. Thank you. I appreciate it.
Mr. Dimon, briefly?
Mr. Dimon. Yes. The Biden tax number has taxes going from
21 percent to 28 percent, which is halfway back to what we
think we had in 2017 before the last Tax Act of 1935.
But the tax increase is actually 4 times what the tax
decrease was in 2017. You all know the phrase, ``the devil is
in the details.'' Well, the details here are all that matter,
not the top line of 28 percent.
I have always believed that we need--if you want to have a
healthy, growing, competitive America against the rest of the
world, you need a global competitive tax rate, because at the
margin capital, will be retained and invested overseas, the
same cap you want retained and invested over here.
So, I think it would be detrimental to a lot of--I am not
worried about banks, per se. It will be detrimental to a lot of
companies. It will push a lot of capital overseas. It will be
unfortunate. There are better ways to collect taxes that would
do less than that.
Mrs. Wagner. And it would hurt the customers and the
clients that you serve every single day?
Mr. Dimon. That is correct.
Mrs. Wagner. And we must also remember that 55 percent of
small businesses are organized as a C-corp. Quickly, would an
increased rate allow your firms to be more or less competitive
globally?
Mr. Moynihan, more or less competitive?
Mr. Moynihan. I am so sorry.
An increased rate could lead to less competitiveness
globally.
Mrs. Wagner. Mr. Dimon?
Mr. Dimon. They will be less competitive and they will get
increasingly worse over time.
Mrs. Wagner. Thank you.
Mr. Dimon, and Ms. Fraser, would you describe the
challenges your firms face in terms of global competition?
Specifically, how does China factor into those challenges as a
global competitor?
I will start with Ms. Fraser's response, please?
Ms. Fraser. Thank you very much.
China is playing an increasing role in the global financial
system, and I think it is very important that preserving
American multinationals abroad and, indeed, the U.S. Government
and other entities that the important flows of foreign
exchange, trade, cash management, and, indeed, the access of
global investors, the U.S. market happens on American rails and
not on another country's. I think it is of strategic importance
for our multinational companies and those working abroad.
Mrs. Wagner. Mr. Solomon and Mr. Gorman, discussions around
a financial tax transaction tax have increased over the last
several months. I am concerned about the harm that this tax
would do to our Main Street investors saving for college or
retirement.
What adverse effects would this type of tax create within
our financial system, Mr. Solomon? And I have very limited
time.
Mr. Solomon. It impacts investors and it would impact
investor activity, Congresswoman.
Mrs. Wagner. If I could, Madam Chairwoman, I have run out
of time. I would ask for Mr. Solomon and Mr. Gorman to send me
a written response, if they wouldn't mind, on the concept of
this financial transaction tax.
I thank you, and I yield back.
Chairwoman Waters. Thank you very much.
The gentlewoman from New York, Ms. Velazquez, who is also
the Chair of the House Committee on Small Business, is now
recognized for 5 minutes.
Ms. Velazquez. Thank you, Madam Chairwoman.
Mr. Dimon, I would like to address my first question to
you. In addition to being a senior member of this committee, as
mentioned by the Chair, I am also the Chair of the House Small
Business Committee, which has primary jurisdiction over the
Paycheck Protection Program.
Despite making several changes to the program between the
first round and the second round to make it easier for LMI
small businesses to access funding, and including a specific
set-aside for borrowers located in LMI areas, the number of PPP
loans issued by JPMorgan in LMI communities actually decreased.
In round one, your bank issued approximately 58,000 loans
to LMI small businesses, while in round two, you only issued
approximately 14,000. Can you explain this decrease?
Mr. Dimon. We were the largest lender in PPP. We loan as
much as we can, everywhere we can, according to government
guidelines.
Ninety percent of the loans in the first round went to
companies of less than 20 employees, and we reached out
everywhere to LMI communities. I will get you the exact
numbers, but I think we did a fairly good job at it. I would
like to add to the--
Ms. Velazquez. Well, I do have the numbers. I do have the
data because I am the Chair of the Small Business Committee,
and I work with the SBA. In fact, we held a hearing yesterday.
So my question to you is, despite the fact that we put
aside a set-aside for just lending to LMI small businesses,
your bank not only decreased the number, compared to the first
tranche and the second tranche, but also the size of those
loans.
It went down from approximately $120,000 in round one to
$80,000 in round two at the exact time we all knew that small
businesses in LMI communities were starving for capital, and
despite how hard they worked at applying for those loans.
So, it doesn't seem to me that your bank was doing
everything it could to reach these businesses.
Mr. Dimon. Well, we did, and we reached out everywhere we
could. There was less demand. The second program was smaller,
and then we went at it in other ways, too. We invested $70
million in MDIs.
We invested in some of the Latinx banks. We reached out to
CDFIs. We begged them to help us find more people. So, we did
everything we could reasonably do and we always try to do the
best we can.
Ms. Velazquez. Well, sir, the numbers showed otherwise, and
those numbers change in LMI communities when we worked and
brought in mission-based lenders such as CDFIs, CDCs, micro
lenders.
I hope that we can do a better job in reaching out to those
businesses that are starting to get access to capital.
Ms. Fraser, when we held this hearing 2 years ago, I
questioned your predecessor on Citigroup's CEO pay ratio, which
was the largest of any bank testifying that day, a remarkable
486-1 ratio.
Can you explain how you are working to reduce this ratio?
And in your explanation, can you discuss not only the CEO side
of the equation but the median employee compensation side as
well?
Ms. Fraser. Thank you very much for the question.
Yes, I want to start by saying I completely appreciate how
fortunate I am for the compensation that I do get as the new
CEO at Citi.
We want to make sure that our employees have a fair
competitive wage, that they have the opportunity to grow inside
our company, that we provide them development opportunities,
and also provide them the different benefits that they need to
support their families and for all of the challenges during
COVID and beyond.
The different things that we are looking at are the
programs that we can put in place to support our employees'
growth in their compensation, going forward.
Ms. Velazquez. I yield back, Madam Chairwoman.
Chairwoman Waters. Thank you very much. The gentlelady's
time has expired.
The gentleman from Missouri, Mr. Luetkemeyer, is now
recognized for 5 minutes.
Mr. Luetkemeyer. Thank you, Madam Chairwoman.
As the largest financial institutions in the country, we
understand it was for $8.3 trillion in credit last year, which
is a testament to your ability to advance our economy, and I am
very thankful for that, quite frankly.
However, when you all decide to boycott industries, you use
your size and power to put companies out of business. What is
worse is that these decisions, clearly, are not made as a
matter of conscience.
Your investments in China prove that. These decisions are
being made to pacify political activists who want to do what
the law cannot do, which is shut down legal American
businesses.
By complying, you are no longer supporting our economy, but
actively working against it, I would argue. To that end, there
is a report that all of you have put out, ``The Environmental,
Social and Governance Report,'' where you publicly acclaim the
actions of your bank in these different areas.
Five of the six reports of your institutions specifically
mentioned moving away from coal financing and investing in
other things. There was an article that came out in Bloomberg
titled, ``Goldman, Citi Lead U.S. Banks Plowing Billions into
China.'' Specifically, JPMorgan and Citi, $21 billion; Goldman
Sachs, $17 billion; Bank of America, $13 billion; and Morgan
Stanley and Wells Fargo, $4 billion.
To that end, it is worth noting that in the ESG reports
condemning the coal industry, only Goldman Sachs mentioned
China in terms of carbon emissions.
Ms. Fraser, a quick question for you. Is coal, and drilling
for oil and gas, illegal?
Ms. Fraser. No, it is not illegal.
Mr. Luetkemeyer. Are you taking similar actions in China to
what you are doing in the United States by boycotting specific
industries and putting pressure on companies to change their
business model?
Ms. Fraser. We are supporting the clients that we serve,
multinationals and local companies, to make the transition to
lower carbon technologies, mindful that different industries
are at different stages of doing so.
Mr. Luetkemeyer. So, you are probably not. Is that what you
are telling me?
Ms. Fraser. Correct.
Mr. Luetkemeyer. Okay.
Mr. Gorman, Morgan Stanley has about $4 billion. Same
question, is mining coal and drilling for oil and gas illegal?
Mr. Gorman. No, it is not.
Mr. Luetkemeyer. Are you taking similar action in China
that you are doing here with boycotting specific industries and
putting pressure on companies to change their business model?
Mr. Gorman. We continue to support coal--existing coal
businesses around the world. We are not financing new coal
businesses in any country in the world. That all goes to our
franchise committee.
Mr. Luetkemeyer. Thank you for that.
In addition to the ESG reports, each of your institutions
has published statements on human rights which include actions
your companies are taking to improve human rights around the
globe. I want to point out that not one of your statements on
human rights mentions China. Not one single company mentioned
China in your human rights statement.
The State Department has a statement out with regards to
what is going on in China, which is widely reported, the kind
of religious genocide that is going on, the horrible torture
and other things that are going on with minority religious
groups over there.
And now, even the Administration, in the last couple of
days, has acknowledged the development of the COVID virus at
Wuhan labs and is going to go after that, which was done,
obviously, for nefarious purposes.
Mr. Solomon, Goldman Sachs has been in China since 1994,
and has $17 billion in investments there. Do you intend to
alter your business in China as a result of these human rights
violations?
Mr. Solomon. Congressman, I appreciate the question, and
first and foremost, we are an American company, but we operate
on a global basis.
I think the bilateral relationship between the U.S. and
China is incredibly complex. There are places where, obviously,
we cooperate, and there are places where we are
confrontational. We try to navigate that in an appropriate way
and stay engaged with our clients around the globe.
Mr. Luetkemeyer. So is the lure of profits that great that
you will turn your eye to the human tragedies and sufferings
that are going on in China by their government and the
Communist Party, which is one and the same, which is whom you
have dealt with for the last almost 30 years here?
Mr. Solomon. We, I think, look at this broadly as a complex
relationship. I saw recently that Secretary of State Blinken
said that we have to at all times be competitive,
collaborative, and adversarial.
Our clients are U.S. companies that we serve, Congressman,
operating in China, and we try to serve them in that context.
We think it is better to stay engaged than not.
But we will follow very closely what you all do as
legislators in terms of how U.S. companies should be engaged
around the world and we take that very seriously.
Mr. Luetkemeyer. Mr. Dimon, would you like to answer the
same question? Do you intend to alter your business in China
because of these human atrocities that are going on?
Mr. Dimon. We operate in over 100 countries, and we operate
under the law of the land in each of those countries, and under
the law of America's--
Mr. Luetkemeyer. Even though the law of the land is the
Communist Party law?
Mr. Dimon. No, but we follow the foreign policy of the
United States of America, which is your policies. We follow
engagement with your policies--
Mr. Luetkemeyer. Foreign policy in the Trump Administration
was to get out of China.
Mr. Dimon. --and when you tell us not to, we don't, like
Cuba, how we do business with Russia. We follow exactly what
you tell us to do because we are patriots just like the rest of
you on this call.
Mr. Luetkemeyer. I think the previous Administration--
Chairwoman Waters. The gentleman's time has expired.
Mr. Luetkemeyer. --was focused on getting China--cutting
trade ties and getting the trade deficit down. Thank you very
much. I yield back.
Chairwoman Waters. The gentleman from California, Mr.
Sherman, who is also the Chair of our Subcommittee on Investor
Protection, Entrepreneurship, and Capital Markets, is now
recognized for 5 minutes.
Mr. Sherman. In 2008, the financial system caused a
horrendous crisis that devastated our country. Democrats
responded by changing the regulatory system, particularly with
the Dodd-Frank Act.
Now, the financial system has survived the greatest stress
test that I could have imagined. It did not cause this crisis
and it has shown resiliency during this crisis.
That is, in part, because of the regulatory changes that we
made and it is in part because of the stewardship of some of
the executives who are before us today.
We now face another systemic crisis that is, certainly, not
at the same level of COVID, and that is the London Interbank
Offered Rate (LIBOR). We can solve this in advance and avoid
the problem. My colleagues have heard me talk about this again
and again.
We have several trillion dollars of instruments
outstanding, where next year or in the following year you will
not be able to calculate the amount of interest that is due
because they are tied to the LIBOR rate that the folks in
London will no longer publish.
So I will ask each of you, and I am going to ask you to
answer in one word. Do you feel that Federal legislation is
warranted to deal with the financial and legal fallout that
will occur if we don't have a replacement rate for LIBOR?
Mr. Dimon?
Mr. Dimon. Yes.
Mr. Sherman. Ms. Fraser?
Ms. Fraser. Absolutely. Yes.
Mr. Sherman. Mr. Gorman?
Mr. Gorman. Yes.
Mr. Sherman. Mr. Moynihan?
Mr. Moynihan. Yes.
Mr. Sherman. Mr. Scharf?
Mr. Scharf. Yes.
Mr. Sherman. Mr. Solomon?
Mr. Solomon. Yes.
Mr. Sherman. Thank you.
Mr. Solomon, Archegos put a light on total default swaps in
family offices. We have and had in this country a limitation on
margin lending. You have to put up half of the money, and that
has been the rule, basically, my entire long lifetime.
But we saw the Archegos family office get 9:1 leverage by
using the total return swap, and so my question is, should we
allow the average Robinhood investor to get 9:1 leverage?
Should we prevent Archegos and the other well-connected and
wealthy institutions from getting more than 1:1 leverage by
banning the total return swap and similar devices? Or should we
have one rule for Robinhood and another rule for the Sheriff of
Nottingham and his family office?
Mr. Solomon. I appreciate the question, Congressman, and I
think that this is an area that I know people are looking at
closely, and I think it is probably a good thing to continue to
look at it.
I think the big thing I would focus on is transparency, and
I think one of the things that would be interesting is to
update the disclosure regime around the different, more
moderate ownership disclosure.
Mr. Sherman. Mr. Solomon, I asked the question. It is not
very transparent. If you are a Robinhood customer, you get 1:1
leverage.
If you can negotiate a total default swap because you are
big, you can get 8:1, 9:1 leverage. That is transparent. The
question I asked you is should we stop it, and your response
was, well, we should disclose it.
My question is, should we have the same rule for Robinhood
as the Sheriff of Nottingham in his family office?
Mr. Solomon. I think when you look at institutional
participants in markets, the variety of ways where people can
get leverage that is more than 1:1, generally, for just
straight stock ownership, straight-up cash stock ownership,
whether retail or institutional, if you are looking at straight
margin Reg T margin rules, it is 1:1. Generally speaking,
individuals--
Mr. Sherman. Reclaiming my time, the total default swap is
a way to have all of the economic benefits of stock ownership
and obey the rules.
I am going to try to squeeze in one more question for Mr.
Scharf, and that is, we see that a trillion dollars of Federal
taxes go unpaid by the top 1 percent.
President Biden has indicated, along with his Treasury
Secretary, that to collect that, we need more reports from
banks.
If those are legally required, are you prepared to
cooperate and not only disclose the taxable income but the
transactions required?
Mr. Scharf. Congressman, we will do whatever is legally
required.
Mr. Sherman. Thank you.
Chairwoman Waters. Thank you very much.
The gentleman from Oklahoma, Mr. Lucas, is now recognized
for 5 minutes.
Mr. Lucas. Thank you, Madam Chairwoman.
Forty years ago as a young man, I was trying to get into
the farming business, and I went through the inflationary
period in the late 1970s and early 1980s, very exposed,
operating in debt, interest rate controls had gone off. It was
a wild ride.
That brings me to where we are 40 years later. Over the
past several months, we have experienced a surge in commodity
prices, crude oil, natural gas, corn, soybeans, wheat,
materials like lumber and cotton. What do you believe has been
driving this rise in prices and do you expect this to be
sustained for some time to come?
I would first like to turn to Mr. Solomon and Mr. Gorman.
Mr. Solomon. Thank you. Thank you, Congressman. I
appreciate the question. It is, certainly, something that we
have been spending a meaningful amount of time thinking about.
I think there are a number of factors that have been
affecting commodity prices, and I think, as you stand back and
look, the shutdown of the pandemic and the dramatic contraction
of the economy had a profound contracting effect and now we are
opening up very quickly.
And so, we have the combination of demand picking up very
quickly and supply production and availability and supply
chains and distribution chains not being as full as they would
normally be.
That is, obviously, leading to inflation in prices. I think
what is hard to see at this point is whether or not it is going
to be transitory or whether or not it will continue or be more
sustained.
I do think it is something to watch very carefully and the
speed of recovery--the recovery, combined with other fiscal
actions or monetary actions we take, will obviously have an
impact on this.
Hopefully, the Fed can manage appropriately as we go
forward in what is, obviously, going to be a strong economic
pickup from the demand perspective.
Mr. Lucas. Mr. Solomon?
Mr. Gorman. Representative Lucas, thank you also, for the
question. And coming from a long line of farmers from the
Outback in Australia, where wheat and sheep were the family
products, I have a lot of sympathy for the space.
Commodity prices are simply a function of supply and
demand. We have had interrupted supply, we have had a global
recession, and now we are getting extraordinary demand. We have
never had this kind of global synchronized growth that we are
going through now.
So, you are going to see surges in prices. But as more
capacity is brought online, whether it is oil rigs or more
mining around the world, these things rebalance. But right now,
we are in a surge.
Mr. Lucas. I am just a little nervous, having increased the
national debt from, what, $20 trillion a year-and-a-half ago,
to $28 trillion. That seems like a rather expensive increase in
the monetary supply, and as the economy picks up, and what is
the term, velocity of circulation, increases, I am just
nervous.
Anyone under 60 did not live through that period. But when
Mr. Volcker decided to wring it out of the economy, it almost
wrung a lot of us out of existence.
That said, I have a second question. As Congresswoman
Wagner discussed, the Biden Administration has proposed more
than $4 trillion in spending for the American Jobs Plan and the
American Families Plan, which the Administration plans to
finance by hiking corporate and individual taxes.
The Administration has also proposed a global minimum
corporate tax rate. While we should level the playing field for
U.S. businesses, some argue that global minimal corporate tax
rates would be disadvantageous to U.S. companies.
Mr. Dimon, could you comment on this concern and how
feasible this proposal would be to actually achieve a global
tax rate?
Mr. Dimon. Yes. America would be the only country, I think,
in the world that would have what you would call a global tax
rate.
I pointed out earlier that going from 21 to 28 percent
isn't the issue, because people say it's halfway back to what
the tax cuts were. But the tax increase because of something
like that is actually 4 times the tax cut of 2017.
There is no question in my mind at the margin--not for
every decision made, but at the margin that will drive capital
and, eventually, brains and R&D and investment overseas, that
would be a mistake for America.
Mr. Lucas. Ms. Fraser, could you share your thoughts on how
feasible a global minimum corporate tax rate is?
Ms. Fraser. I think it is very hard to get other countries
to sign on to an equivalent program, and despite some optimism
of doing so, I think that will be extremely difficult.
And, therefore, it could put the U.S. in a position of
being less competitive around the world.
Mr. Lucas. My background, and representing an agriculture
and an energy industry kind of a district, those international
markets are critically important for us, and we have gone
through trade wars beyond belief for the last 50 years trying
to have fair access and to be able to compete.
I am just very sensitive about undoing the progress we have
made, just as I am very sensitive about setting off a Carter-
era kind of inflation wave, too.
Thank you for your comments, and I yield back the balance
of my time, Madam Chairwoman.
Chairwoman Waters. Thank you. Thank you very much.
The gentleman from New York, Mr. Meeks, who is also the
Chair of the House Committee on Foreign Affairs, is now
recognized for 5 minutes.
Mr. Meeks. Thank you, Madam Chairwoman. Thank you for
having this important hearing.
Institutional investors are monitoring racial and equity
commitments. For example, BlackRock announced in April that
they plan to conduct a racial equity audit to integrate equity
and inclusion into all aspects of their business model.
Additionally, here in New York, the New York State
Comptroller announced in February that the State's retirement
fund will submit shareholder proposals on conducting racial
equity audits, including calls upon Amazon to conduct such an
audit.
However, many of you seem to disagree with this idea. So
let me ask Mr. Dimon, JPMorgan's proxy statement states that,
``Conducting a racial equity audit would not provide us with
useful additional information.''
And, Ms. Fraser, similarly, we have heard that Citi
recently urged its shareholders to vote against a similar
proposal. So, both Mr. Dimon and Ms. Fraser, could you
elaborate on your opposition to independent racial equity
audits?
Mr. Dimon. I will start. We are devoted to the principle of
trying to do a better job for the Black and Latinx community.
We have announced an extraordinary amount of programs that
you are welcome to come and look at, from community branches--I
just visited one in Harlem--to $30 billion for affordable
housing and mortgages for Black folks, for small business
enterprise, for getting kids through high school, it is pretty
extraordinary. It is pretty global.
I think a lot of the other companies do it, too. We are
doubling down after the murder of George Floyd. So, the company
is completely devoted, and we report it out. That is completely
different than the bureaucracy and BS of having outside orders
come in to certify something. I would rather take our time and
our effort, put in the effort.
If there are best practices that we can learn from, we will
learn from them. But this kind of thing is not going to make it
much better over time. It just adds another whole layer of
unnecessary cost.
Ms. Fraser. And from the Citi end, we feel we have been
very transparent. We just put out another very extensive update
on our billion-dollar action for racial equity plan, and it
covers all different dimensions of the bank's activities, both
inside the bank and outside, many of which are verified by
third parties.
So, we didn't think it was necessary to have a separate
audit. But it is something that we are looking at again, given
that it was brought up by our shareholders.
Mr. Meeks. Yes. I think it is something, and in reply to
Mr. Dimon, you say it is not unless you can verify something
with an independent audit.
I have seen in my time here, for example, internal audits,
like what happened to Exxon on something that wasn't verified.
If you are having someone come in independently to verify
what is going on, then it is something that is trustworthy, not
something that may be just in favor of a particular company or
financial institution.
And that is why independent audits for various institutions
are always important, just as an independent audit on whether
or not these commitments are lived up to.
But I just have a minute. I am pleased to hear that many of
you have committed significant capital investments towards
Minority Depository Institutions, and I have really been
encouraging such investments over the past few years, along
with Mr. Green and Chairwoman Waters and a number of other
members of this committee.
And I would love to hear more about the implementation,
because a commitment to invest is very different from an
agreement to invest, and I will be asking all of you for
written responses to this question.
But in the meantime, Mr. Scharf and Mr. Moynihan, can you
let this committee know whether or not your public commitments
to invest in MDIs have or will result in direct agreements with
these institutions?
Mr. Scharf?
Mr. Scharf. Congressman, we have agreements with 13 Black-
owned Minority Depository Institutions, representing $50
million of equity commitments, and that is separate from the
commitments that we have made to the CDFIs, where we have
committed another $250 million and we have already given out
$150 million of that $250 million.
Mr. Meeks. Mr. Moynihan?
Mr. Moynihan. Congressman Meeks, we have completed and the
money is in common equity for 17 institutions today up to 5
percent, based on what they wanted. And we have made offers to
the other 120 or so that are out there.
We, similarly, look at investing in them. Many don't need
the money and told us they don't want the equity. So we have
gone, literally, institution by institution to make the
investments.
Mr. Meeks. I am out of time. I yield back, Madam
Chairwoman.
Chairwoman Waters. Thank you very much.
The gentleman from Michigan, Mr. Huizenga, is now
recognized for 5 minutes.
Mr. Huizenga. Thank you, Madam Chairwoman, and to all of
the participants, I intend to touch on a few issues that my
previous colleagues have touched on, but I also want to explore
some other things.
And to Ms. Fraser, congratulations, and welcome to the
frying pan. I want to talk a little bit, and I would like to
hear, very quickly, from each one of you, what do you see as
the greatest threat to our financial system right now and to
your company as well?
Mr. Moynihan?
Mr. Moynihan. As a financial institution, the number-one
question is, what is the economy going to do, because as you
know--
Mr. Huizenga. The economy. Okay.
Mr. Moynihan. Yes, sir.
Mr. Huizenga. Okay. I need it to be really brief.
Ms. Fraser?
Ms. Fraser. Cyber security, given that much of the private
infrastructure sits in or the infrastructure sits in private
hands.
Mr. Huizenga. Okay.
Mr. Solomon?
Mr. Solomon. I would highlight three things we are focused
on: cyber; central clearing risk; and growing government debt
around the world.
Mr. Huizenga. Okay.
Mr. Dimon?
Mr. Dimon. Public policy not being properly executed in the
United States of America, which means we may not be able to
take a leadership role in the world for the rest of our lives.
Mr. Huizenga. Okay. What does that mean exactly?
Mr. Dimon. I think we have done public policy not
particularly well. Whether because of infrastructure,
immigration, healthcare, taxation, regulation, we have stifled
the formation of small business. American leadership really
matters. If we don't get our economic act together, we won't be
a leader in 20 years.
Mr. Huizenga. Okay.
Mr. Gorman?
Mr. Gorman. Narrow cyber and, specifically, the potential
impact on consumer data and data privacy.
Mr. Huizenga. Mr. Scharf?
Mr. Scharf. Cyber.
Mr. Huizenga. Okay. So to paraphrase my friend, Mr.
Perlmutter, in his opening, one of his goals is, basically, to
have safe and sound lending and banking for everyone. I
wholeheartedly agree.
What is interesting to me, though, is that only Mr. Dimon
came close to talking about sort of the social issues side of
things. Yet, all of you have indicated that by 2050, you intend
to be at a zero emission scheme within your banking system.
Mr. Solomon, I guess you have outdone everybody by saying,
2025. And I am curious, I didn't hear, ``climate'' in any of
that. The closest, again, was Mr. Dimon.
But why are you putting so much time and effort into this?
Mr. Dimon, you were just expressing why you felt frustrated
that you would have to be going through formal audits of these
things because it is not necessarily productive. And I am very
concerned about the pressure that you all are receiving as CEOs
and as an organization.
By the way, I am curious, I would like to hear from
everybody, very quickly, whether you are banking in Taiwan or
not? If anybody isn't banking in Taiwan, I would love to hear
from you. Any clients that are not--everyone else is in Taiwan,
or you do not have any clients in Taiwan?
Mr. Scharf. Congressman, it is Wells Fargo--I don't know
the answer to the question. But we can get back to you.
Mr. Huizenga. Tell you what, let's reserve that. I would
like to hear back from everybody, because I think that is
another pressure point, as one of my other colleagues, Mr.
Luetkemeyer, was talking about.
All of your firms have pledged fidelity to this whole
notion of bowing to the wokeness that is going on, on
environmental issues.
And I am curious--and, Madam Chairwoman, I would like to
submit for the record a letter that is from 15 different State
Treasurers led by the West Virginia State Treasurer to former
Senator Kerry--Secretary Kerry, the Special Envoy now,
indicating that they are going to be coming back to you, their
financial institutions, with whom they do over $600 billion
worth of business.
Now, I know in D.C., we are spending trillions like it is
Friday night poker money. But $600 billion is a significant
amount of business for everybody. And I am curious from
everybody, have you seen this letter and what is your response
to that?
And, basically, they are saying if you are going to limit
our ability to have companies in our States in the energy
sector, in oil, gas, coal, we are not going to do business with
you. Are you aware of this letter and what is your reaction?
Mr. Dimon, you are first on my screen.
Mr. Dimon. We think that climate is a serious issue--
Mr. Huizenga. I understand. Are you aware of the letter?
Mr. Dimon. Yes.
Mr. Huizenga. Okay. Is anybody unaware of the letter?
Mr. Solomon. I have not seen the letter.
Mr. Huizenga. Okay.
Mr. Scharf. I have not seen the letter either.
Mr. Huizenga. Okay. We will ship it over. We will make sure
that you get that. I know my time is up. I do want to hear
about LIBOR, and SOFR (the Secured Overnight Financing Rate) as
well, and I will submit some questions in writing on LIBOR--
Chairwoman Waters. Thank you.
Mr. Huizenga. --and whether SOFR is the answer for this
problem. And I yield back.
Chairwoman Waters. The gentleman's time has expired and
your letter is submitted, without objection.
Thank you. We will move on.
The gentleman from Georgia, Mr. Scott, who is also the
Chair of the House Agriculture Committee, is now recognized for
5 minutes.
Mr. Scott. Thank you, Madam Chairwoman, and I am so excited
to be on this panel at this time because we have a major issue
here. I want to talk about our unbanked and underbanked, as we
apply that to the child tax credit that has been in this,
because we have an excellent opportunity here with you all who
are the leaders: Mr. Dimon, Ms. Fraser, Mr. Moynihan, Mr.
Solomon, Mr. Scharf, and Mr. Gorman.
You all represent our largest banks, and I want to put this
to you. We just passed the child credit, expanded the Child Tax
Credit Act in the $199 trillion COVID relief package.
Here is what it does: $3,600 for children under 6; $3,000
for children under 17; and each of the parents are getting
guaranteed checks every month.
But here is the problem. They cannot do this and receive it
with direct payments, and that is what I am concerned about. To
help us to make sure that their child tax credit payments can
come by way of direct deposits, it is dangerous out there when
they don't get it directly.
These large series of money every month have to go to a
payday lender or somebody on the check-cashing service where
they have to pay money. So, we need to find out what we need to
do about this.
Mr. Scharf, let me talk with you, because Wells Fargo has
the largest number of branches, and I also checked with our
Federal Deposit Insurance Corporation and let me give you the
statistics: 13.8 percent of Black households are unbanked; and
12.2 percent of Hispanic households are unbanked. But do you
know what it is for White households? It is less than 2.5
percent.
So it seems to me, my bipartisan colleagues--Reverend
Cleaver, myself, and Congressman French Hill from Arkansas have
a bill moving, it is over in the Senate now, for financial
inclusion.
Tell us, if you can, what we must do. Seventy percent of
African Americans live in neighborhoods with no bank branch.
So please, Mr. Scharf, you may start. What are you all
doing? What can we do? Is there something we can add to our
financial inclusion bill?
Reverend Cleaver, myself, and Mr. French Hill from Arkansas
would be glad to work with you.
Mr. Scharf, you have the largest number of bank branches.
What percentage of yours are in the Black neighborhoods?
Mr. Scharf. Congressman, I share your concern on the issue
and also the desire to make changes, and we as an institution
are committed to bringing about the change that is necessary to
bring more of the individuals that you are talking about into
the system. We have just--
Mr. Scott. What would be that change? A move to make more
branches available? Reach out to community organizations? Get
these accounts established. It is dangerous.
Mr. Scharf. I think it is a combination of financial
education, product design, and also about having the right kind
of facilities and the right kind of partners outside of the big
banks themselves to ensure that what we are building is serving
the needs of the community.
Mr. Scott. Mr. Dimon, what about you?
Mr. Dimon. The answer is financial education. It is us
doing a better job reaching out to the community and, like
Charlie said, it is the work of the CDFIs and MDIs to improve
that outreach.
Mr. Scott. Okay. What about you, Mr. Solomon?
Mr. Solomon. We have a very, very small consumer business.
We have no branches. But I do think at a high level, just
commenting generally, the comments that Mr. Dimon and Mr.
Scharf made are correct. Financial education, using the network
of CDFIs, mission-driven lenders, et cetera, for better
outreach.
Mr. Scott. I hope you all know we have to solve this
problem. We can't leave these poor folks. Many of them are
single heads of households, people with disabilities, people
with no bank accounts. They are out there and the predators are
waiting on them. We have to get direct payment.
Chairwoman Waters. The gentleman's time has expired.
Mr. Scott. Thank you.
Chairwoman Waters. The gentleman from Kentucky, Mr. Barr,
is now recognized for 5 minutes.
Mr. Barr. To our witnesses, thank you for your time today.
Each of you or your predecessors signed the Business
Roundtables' 2019 restatement of purpose of a corporation,
subordinating shareholders to so-called stakeholders.
As yesterday's hearing in the Senate Banking Committee
demonstrated, this redefinition of a corporate purpose did
absolutely nothing to placate or appease Senator Warren or the
extreme far left.
In fact, it emboldened them, and whether you admit it or
not, there are instances where the interests of shareholders
and stakeholders come into conflict.
For example, in October of 2019, Senator Warren wrote a
letter to Mr. Dimon stating that because of the restatement,
she, ``expects that you will endorse and wholeheartedly support
her Accountable Capitalism Act.''
The bill would, among other things, require workers to
comprise 40 percent of the board, and dictate that companies
obtain a Federal charter to operate. I will ask each of you to
answer yes or no, if you could. In an event where there is a
direct conflict between the interests of shareholders and non-
owner stakeholders, will you prioritize shareholder interests?
Mr. Dimon, we will start with you.
Mr. Dimon. Yes.
Mr. Barr. Mr. Moynihan?
Mr. Moynihan. As I said in my opening testimony, we deliver
both for shareholders and for society.
Mr. Barr. When there is a conflict, which one will you
prioritize?
Mr. Moynihan. We will prioritize the returns for the
company.
Mr. Barr. Thank you.
Mr. Solomon?
Mr. Solomon. Yes, we would prioritize shareholders.
Mr. Barr. Ms. Fraser?
Ms. Fraser. Yes, we will prioritize our investors.
Mr. Barr. Mr. Scharf?
Mr. Scharf. Yes, our shareholders.
Mr. Barr. Mr. Gorman?
Mr. Gorman. Generally, shareholders. There are
circumstances where it is a no. Last year, we guaranteed every
employee their job as stakeholders. That was, obviously, to the
detriment of shareholders if we hadn't been profitable.
Mr. Barr. Thanks for mostly keeping in mind your fiduciary
duty to shareholders. Three of you signed onto the Net-Zero
Banking Alliance, while three of you did not.
The Alliance is part of President Biden's, John Kerry's,
and the Bank of England's Mark Carney's misguided plan to
weaponize the financial system and politicize it to choke off
funding to legal fossil energy businesses.
Joining the Alliance requires your institutions to submit
information to the United Nations so they can certify that you
are green enough.
Mr. Dimon, you did not sign this. Why not?
Mr. Dimon. It was too vague. It is hard to meet the
commitments. We have already made a very detailed public
statement about what we are going to try to accomplish.
We will be working very closely with auto companies and oil
companies and utilities to figure out how to do it the right
way. We need to do this the right way, and signing statements
is not the right way.
Over time, there will be better disclosure of what people
are trying to get done.
Mr. Barr. I appreciate it, as we discussed your commitment
on this in your shareholder letter as well.
Mr. Moynihan, Mr. Dimon says he doesn't need John Kerry,
Mark Carney, or environmentalists at the U.N. to tell him how
to manage his risk or run his business.
My question to you is, should access to financial services
be tied to the creditworthiness of borrowers regardless of
politics?
Mr. Moynihan. Creditworthiness of borrowers is the primary
way we underwrite credit. Yes, sir.
Mr. Barr. That is good to hear. Thank you.
And I would encourage all of you to prioritize credit risk
as opposed to politics.
Finally, on fossil energy, does anyone on the panel think
it is a good idea to immediately and completely cut off
financing to fossil energy? Please raise your hand if you think
it is a good idea to immediately cut off financing for fossil.
[No response.]
Mr. Barr. I want the record to show that none of our
panelists believe that is the case.
Unfortunately, some of your financing commitments, combined
with the Administration's desire to, ``change the allocation of
capital and energy or disrupting supply without doing anything
about demand,'' data published even by the Biden Administration
concludes that fossil energy will constitute more than 70
percent of all energy consumption in the United States by 2050,
this supply-demand disruption will raise prices for consumers
and cede economic competitiveness to countries like China.
In 2020, Citi, JPMorgan, Goldman Sachs, Bank of America,
and Morgan Stanley had a combined $77.8 billion in exposure to
China, up 10 percent from 2019. And yet, China is responsible
for more than 27 percent of total global GHG emissions.
Are any of you mandating the same environmental standards
in your Chinese investments as you work with American companies
to help them with the transition?
Anyone can offer your opinion?
Mr. Moynihan. Our standards are globalized.
Mr. Dimon. Our standards are global, too.
Mr. Solomon. Our standards are also global.
Mr. Barr. Ms. Fraser?
Ms. Fraser. It is a global policy, yes. It is--
Mr. Barr. I am running out of time. But I appreciate that
approach. When China is by far the leading emitter of global
greenhouse gases (GHG), there needs to be a uniform policy.
If Global Systemically Important Banks (G-SIBs) are to
promote American competitiveness, let us hold China to the same
standards to which we hold American companies.
Thank you for your time, and I yield back.
Chairwoman Waters. Thank you. The committee will be in
recess for 5 minutes.
[brief recess]
Chairwoman Waters. The committee will come to order.
The gentleman from Texas, Mr. Green, who is also the Chair
of our Subcommittee on Oversight and Investigations, is now
recognized for 5 minutes.
Mr. Green. Thank you, Madam Chairwoman. Madam Chairwoman,
regardless as to what anyone says, you are bending the arc of
the moral universe towards justice. This hearing has been
centuries in the making, and I am proud that I am here with you
while you have the hands of justice making a difference in the
lives of people.
Chairwoman Waters. Thank you.
Mr. Green. I don't know of anybody else who would be doing
this, Madam Chairwoman. You are unique in all of history.
Chairwoman Waters. Wow.
Mr. Green. Now, to my six friends, I have a question for
you. If you find that your bank owned slaves or accepted slaves
as collateral, would you publicly atone for this seminal sin?
Mr. Solomon, as a person of good will, would you publicly
atone if you find that your bank owned slaves or accepted
slaves as collateral? ``Yes'' or ``no,'' kindly, please, sir?
Mr. Solomon. The bank has never owned slaves, so I don't
think it is something that I am in a position to opine on.
Mr. Green. Let's just assume that you could be in error,
sir. If you find out--
Mr. Solomon. We were established in 1969, sir.
Mr. Green. Sometimes, things happen.
Mr. Solomon. Excuse me. We were established in 1869, and
throughout our history, we never owned slaves. We had no
involvement with slavery.
Mr. Green. If you found that you did, would you atone?
Mr. Solomon. I am not going to speculate on something that
is not correct, sir.
Mr. Green. Quite regrettable, sir. Quite regrettable. Mr.
Scharf, if you found that you owned them or had slaves as
collateral, would you atone?
Mr. Scharf. Yes, Congressman.
Mr. Green. Thank you, sir. Mr. Moynihan, if you found that
you had slaves as collateral or your bank owned them, would you
atone, sir?
Mr. Moynihan. Yes, sir.
Mr. Green. Mr. Gorman, if you found that your bank owned
slaves or had them as collateral, would you atone?
Mr. Gorman. Like Mr. Solomon, we were founded more
recently, 1935, but, yes, I would atone if it happened.
Mr. Green. You would atone. Thank you. I appreciate it. Ms.
Fraser, similar question for you.
[No response.]
Mr. Green. Ms. Fraser?
[No response.]
Mr. Green. I am having some technical difficulties on my
end. It may have something to do with the question, Madam
Chairwoman. Again, I am having technical difficulties. Madam
Chairwoman, I am going to have to ask if you would give me an
additional minute of time. Something is happening.
Chairwoman Waters. Okay. Mr. Green, you are absolutely
correct. There is some problem, and I don't know what it is at
this point. I will ask the staff to try and find out what is
going on.
[pause]
Chairwoman Waters. Okay. Would you try to start again, Mr.
Green?
Mr. Green. Yes, ma'am.
Chairwoman Waters. And we will certainly make up for the
time.
Mr. Green. Thank you, ma'am. Ms. Fraser, now to you. Ms.
Fraser, I have to tell you that I believe that some of the
things that have been done on this committee are in part
responsible for your occupying that seat. But be that as it
may, Ms. Fraser, would you atone if you found that your bank
owned or had slaves as collateral?
Ms. Fraser. We would absolutely accept responsibility, yes.
We believe we never have.
Mr. Green. Thank you, ma'am. Now, Mr. Dimon, my dear
friend--and I say that sincerely because of something that I
know that you have done, that was very positive. At this
hearing in 2019, you acknowledged that JPMorgan had accepted
slaves as collateral according to the bank's own analysis, but
let's strike that. In addition, I would say Citizens Bank and
Canal Bank in Louisiana, both now a part of JPMorgan, served
plantations from the 1830s until the American Civil War. These
banks sometimes took ownership of slaves when the plantation
owners defaulted on loans. Between 1831 and 1865, these two
banks accepted approximately 13,000 slaves as collateral and
ended up owning about 1,250 slaves. Mr. Dimon, there can be no
redemption without recompense. Mr. Dimon, will you atone? Will
your bank atone for the ownership of human beings?
[audio malfunction]
Mr. Green. Madam Chairwoman, I cannot hear Mr. Dimon.
Chairwoman Waters. I cannot hear him either. Would you try
again, Mr. Dimon?
Mr. Perlmutter. You are muted, Mr. Dimon.
Chairwoman Waters. Mr. Green?
Mr. Green. Yes, ma'am?
Chairwoman Waters. We are going to try and work this out.
Staff, can you help me to find out what is happening? Mr. Dimon
is indicating that he is not muted, but we can't hear him.
Mr. Dimon. Can you hear me now?
Chairwoman Waters. I can hear you now.
Mr. Green. I can, as well.
Mr. Dimon. Okay. I said that the company did research and
found out that companies that had been bought many years
earlier, in fact, did take slaves as collateral and ownership
in some cases. We apologized profusely at the time, and, as you
know, we are making extraordinary efforts to help lift up the
Black and the Latinx communities.
Mr. Green. Mr. Dimon, the question is, will you atone in
the form of some sort of redemption so that you may receive
redemption, because there can be no redemption without some
sort of recompense? What will you do to atone for your bank
owning human beings? This is not about what you are doing. All
of the other banks are doing these things that you are talking
about now. We are talking about the ownership of human beings,
Mr. Dimon. What are you going to do about this, and I want it
directly linked to the ownership. You must say, Mr. Dimon, ``We
owned them, and here is what we are doing to take corrective
action.'' Find those families that are still with us, and
atone. Will you atone?
Mr. Dimon. I would love to come see you and figure out what
you think we could do that would atone properly to the families
who were damaged by these activities 200 years ago. I would be
happy to do that.
Mr. Green. Mr. Dimon? I am going to accept your offer. I am
going to accept your offer because once before, you and I had
an opportunity to resolve a circumstance, and we did. I accept
your offer, and I look forward to meeting with you. And I am
going to ask that your staff contact my staff immediately so
that we can arrange such a meeting.
Mr. Dimon. Consider it done.
Mr. Green. Thank you.
Chairwoman Waters. Thank you very much. The gentleman's
time has expired. The gentleman from Texas, Mr. Williams, is
now recognized for 5 minutes.
Mr. Williams of Texas. Thank you, Madam Chairwoman. I want
to thank all of you for coming before the committee today. Just
in background, I am from Texas. I have been a small business
owner for 51 years. I still own my business. I am a car dealer,
and there has never been a day in my life that I haven't owed
money to a bank.
And with that being said, I have said it many times, the
United States' banking system, what it did to respond to COVID-
19 and get PPP money into the hands of struggling businesses
was something no other country, I believe, could have pulled it
off, and no other banking system. I know you had employees
working around the clock when PPP first opened to process as
many loans as possible and help your customers in some of the
most uncertain times of the pandemic. Your banks were
instrumental in making that happen. So, I wanted to start off
by saying thanks to you and all of your employees on behalf of
the millions of small businesses that were able to survive
because of their hard work.
We all know that a strong banking system is essential to
building a strong economy. Your institutions and the community
banks they help and support allow entrepreneurs to get the
necessary capital to start their own businesses, expand
operations, and hire more people. And we need to make sure you
can continue getting money out to Main Street America support
small business owners like myself and others, instead of
navigating additional regulations and reporting requirements
from the Federal Government. My hope is we can all get your
banks hiring more loan officers and compliance officers over
the next few years so we can get our economy back on track and
away from this liberal socialist agenda that we hear from the
Democratic left.
My first question is to you, Mr. Moynihan. Did your bank
run into any government regulations during the pandemic that
prevented you from making additional loans that we, as
Congress, should be looking to re-evaluate as we look to get
the economy back to pre-pandemic levels?
Mr. Moynihan. I think obviously, there are a lot of
regulations we think could be fine-tuned based on what we
learned during the pandemic, some liquidity rules and stuff
which is quite technical. But even to the question of these
small loans, the Federal Advisory Committee just gave the Fed a
presentation in which the 12 banks that are representative of
all the banks said, we need to work on the appraisal process,
the appraisal regulations, because for these smaller balance
loans--it might be a $50,000 loan, which is going to have a
property improved to go to $100,000 or something like that--the
appraisal guidelines would never let you go to the $100,000
loan.
So, I think there are ways that we can, for the safety and
soundness of this industry and the great work they have done,
move some of these rules, knowing that the banks are well-
regulated, well-capitalized, very liquid, and could help, but
sometimes those rules do constrain us. That is just a very
specific example, which was a topic earlier in the
conversation.
Mr. Williams of Texas. We have these rules that affect your
consumers, too, so the less regulations, the better the
consumer service gets from you. The Biden Administration has
proposed increasing taxes--we talked about this already this
morning--to pay for the progressive wish list that is being
discussed in Congress. But if we increase the corporate rate or
raise the capital gains tax, it will make the long-term
economic prospects of America much less attractive, and we know
this. We all know that when the government takes a larger
portion of any business' profits, it will cause them to invest
less back into their own operations and be very defensive.
But for global institutions like your own, all of you,
these actions would be even more detrimental. This would
increase the competitive advantage that the international banks
have over all of the institutions that are before us today. And
my question to you, Mr. Dimon is, can you discuss the
challenges that your bank currently faces against international
competition, specifically China, and how raising taxes, as the
Biden Administration wants to do, could make the challenges
even harder for you?
Mr. Dimon. Yes, thank you. I think the way to look at this
is, obviously, most of these banks are doing fine now, and
people often say because you are doing fine, it is not a
problem. But over a long period of time, we have had to compete
with the Chinese banks, and I think they have huge advantages
in terms of how their regulations are dealt with and how ours
are calibrated around things like G-SIFI. And America was gold-
plated, so, in a sense, you have to hold much more capital than
our Chinese or Japanese competitors. That would be a very big
one. And another one would be how the liquidity coverage ratio
(LCR) that Brian mentioned stops us from doing a lot of
intermediation in the markets that we could otherwise do in the
United States.
Mr. Williams of Texas. Thank you for that answer, and less
government regulation works better. Lower taxes work better and
keep our economy going. With that, Madam Chairwoman, I yield
back.
Chairwoman Waters. Thank you very much. The gentleman from
Colorado, Mr. Perlmutter, who is also the Chair of our
Subcommittee on Consumer Protection and Financial Institutions,
is now recognized for 5 minutes.
Mr. Perlmutter. Thank you, Madam Chairwoman, and to our
panel, I just want to restate my thanks to all of you for
leading your institutions through a difficult time, and I want
to also agree with Mr. Williams in terms of your lending
through the PPP program. It wasn't without hiccups, it wasn't
without some glitches, but it was pretty solid, and so I want
to thank you for both of those.
Mr. Solomon, in his opening, credited Dodd-Frank for the
ability and the strength of the banking sector as it went into
the pandemic, as it has come through the pandemic, as one of
the things that has helped the banking sector be a strong
shoulder to rely on during this period of time. Can all of you
raise your hands if you agree with the way I paraphrased his
testimony? Do you think Dodd-Frank is due some credit for us
getting through the pandemic?
[hands raised]
Mr. Perlmutter. I see Mr. Gorman, Mr. Dimon, Ms. Fraser,
Mr. Scharf, Mr. Moynihan, and Mr. Solomon. Thanks. I appreciate
that, and I appreciate what you said, Mr. Dimon. There is
always an issue--too much capital, too little capital--but
everybody came into this thing strong and was able to absorb a
real shock to our economy, so thank you.
Mr. Scharf, I have a couple of questions for you. As a
customer of the bank for, I was told, 44 years, I just want to
understand where you are on the various consent orders that the
bank has had to enter over the course of the last several
years. I think there has been some progress. I would like to
hear where you are.
Mr. Scharf. Yes, Congressman. We believe we are making
progress, but we are also very, very clear that this is a
multi-year journey, just given the amount of work that has to
get done here. We have made extensive changes inside the
company, from the management team, to how we run the business,
to how we prioritize the effort, and the way we are going about
this work is completely different than it was in the past.
Ultimately, this is all about creating a sustainable set of
systems and processes inside the company that is appropriate
for a company of our size and complexity. And so, we are
completely committed to having this be our number-one priority,
and ultimately, our regulators will decide when each of the
individual pieces of work are done to their satisfaction.
Mr. Perlmutter. Okay. Thank you. And as I said in my
opening, as the Chair of the CPFI Subcommittee, two
responsibilities in that subcommittee are: one, the solvency
and stability of the banking system; and two, consumer
protection and making sure we don't face increasing sharp
practices in the financial sector.
Mrs. Maloney described the Credit Card Act that she passed
a number of years ago. I am concerned that we see some
practices seeping back into the financial sector. Mr. Dimon, I
have had complaints raised with respect to Chase credit cards,
that the default rate has been increased substantially even as
the bank has been making substantial profits.
[audio malfunction]
Mr. Perlmutter. It must be your microphone, Mr. Dimon. I
guess the question is, has the bank recently increased the
default rate under its credit cards to most of its members?
[audio malfunction]
Chairwoman Waters. Mr. Dimon, can you hear me? Would you
check, are you unmuted? Okay. Let's try again. One moment, Mr.
Perlmutter, and we will make up for the time. Staff, can you
help us out? Now, it is on my phone. One moment.
[pause]
Mr. Perlmutter. Why don't I just have him answer that at
some point in writing?
Chairwoman Waters. He can hear you. Mr. Dimon, we still
can't hear. Go right ahead, Mr. Perlmutter.
Mr. Perlmutter. Okay. I will just end, Madam Chairwoman. I
would just make one statement on Archegos. The Justice
Department has opened an inquiry into that, and I would just
advise or just recommend that all of you keep your investments
transparent and minimize the risk.
The last thing I will say, Madam Chairwoman, as a heads up
to all of you, is that our subcommittee is probably going to
have a hearing in the near future on, what does your bank look
like in 10 years? And we know you do that kind of scenario
planning, and we are interested in having that as a subject of
a hearing. Thank you.
Chairwoman Waters. Thank you very much, Mr. Perlmutter. The
gentleman from Arkansas, Mr. Hill, is now recognized for 5
minutes.
Mr. Hill. Thanks, Madam Chairwoman, and I empathize with
you in trying to run this hearing remotely. I hope we can get
back to the hearing room so that we can do this in person and
not have these distractions, so thank you for endeavoring to
get that done. I thank our witnesses for spending 2 days on
Capitol Hill talking about issues of importance to your
companies, your shareholders, and your employees, as well as to
Members of the House and Senate. We appreciate your
perseverance, and I know you appreciate the 5-minute break
every 2 hours.
A lot of the questions have been geared towards the banks'
political agenda or joining in on the political agenda inside
the beltway, responding to progressive pressures from the left.
And as a former bank CEO, having been in your shoes, albeit at
a community bank, both public companies and private companies,
I am not going to spend my time here today telling you how to
manage your day-to-day operations. Only you and your board of
directors know how best to run your business on behalf of your
clients, the shareholders, the regulators, and the larger
communities that you participate in.
I do want to share a few thoughts on what I have heard over
the last couple of days, and make sure that your companies and
your management teams are being thoughtful in how you respond.
I want to spend my time to talk a little bit about the climate
risk disclosure process that we have been debating here in the
House Financial Services Committee. These are mandates on all
public companies, and, in fact, some are contemplated for all
private companies, as it relates to climate financial
disclosure. And it is based on the Task Force on Climate-
Related Financial Disclosures (TCFD), which I have talked about
in the past.
Many of you have stated that you are complying with the
Partnership for Carbon Accounting Financials (PCAF), which
claims to help financial institutions assess and disclose
greenhouse gas emissions from their loans and investments
through GHG accounting, but this is precisely, I think, the
challenge in making this a mandate.
As I understand it, the PCAF is built off of the task
force's recommendations, and yet that task force, chaired by
former Mayor Mike Bloomberg, and staffed with several Biden
Administration officials, states that disclosures have to be
reliable, verifiable, timely, objective, and comparable across
portfolios and across industries. And yet, this issue of GHG
emissions, trying to come up with scope one, scope two, and
scope three emissions, they say in the Bloomberg report, is
very challenging and not doable right now. And, in fact, they
offer not to use GHG and instead use something called a carbon
intensity metric.
My concern about these mandated disclosures is that we are
not ready to do that in the financial industry in a way that
will really provide value to investors. I believe you all
echoed something to the effect in a question answering Senator
Smith's question yesterday that there should be a standardized
climate disclosure. That would be good sometime in the future,
and I think that is possible after study and agreement,
industry by industry. I think Mr. Barr covered that topic well.
Let me turn to China and ask you, Ms. Fraser, how you are
thinking about China as it has changed its economy since 2012
and 2013 to be more aggressive in trying to displace the U.S.
as an economic leader in the world and exerting its military?
This is something we have never faced before, where we are
trying to do business with a big country, and yet how do you
assess the risk to your doing business in China?
Ms. Fraser. We serve multinational companies from all over
the world, many great American companies that are participating
in the growth in China. We follow our clients to where they are
doing business. Obviously, there are concerns around a number
of different topics in China, from human rights and the
military financing, and where we certainly would never finance
any institution that is involved with the military in China and
the financing of that. We see them playing an increasing role
around the world, and, again, I think it is one of the reasons
it is critical to have American banks playing a role globally.
Mr. Hill. We appreciate American banks leading the charge
on economic freedom at home here for that student who is
getting out of an Historically Black College and University
(HBCU), looking for a job, and buying a house, but also around
the world. But I think risk management is putting your company
at risk and your clients at risk because it is hard in that
opaque system and the Belt and Road Initiative approach for you
to be able to judge what is a good deal and a bad deal, and
what is a compliant deal and what is not a compliant deal.
Mr. Dimon, I want to welcome you. I want to just take a
moment to thank you for coming to Arkansas, and I want to
submit a question for the record about the Federal Reserve
policy, and I will do that. Thank you, Madam Chairwoman. I
yield back.
Chairwoman Waters. Thank you very much, and we are going to
take a 5-minute recess to see if we can't straighten out the
little technological problem that we have. I do not want Mr.
Dimon to miss his opportunities to share his thoughts with us.
And so, we will be in recess for 5 minutes.
[brief recess]
Chairwoman Waters. The committee will come to order.
The gentleman from California, Mr. Vargas, is now
recognized for 5 minutes.
Mr. Vargas. Thank you very much, Madam Chairwoman. Mr.
Dimon was reminding me of the movie, ``Young Frankenstein.''
Every time they said, ``Frau Blucher,'' the horse would get
scared. Every time they said, ``Jamie Dimon,'' it looks like
the computers would get scared. Thank God we fixed that.
One of the most remarkable things that I heard today was
the first three people who spoke--and, again, thank you, all of
you, for being here--with really some pride, I think, in being
either sons of immigrants or immigrants themselves. I think,
Mr. Dimon, you said that you were the grandson of Greek
immigrants, and I think that, Ms. Fraser, you stated that you
are an immigrant, and certainly your elegant English proved
that. And then, Mr. Gordon, you stated that you were an
immigrant, and your English proved that. And then, Mr.
Moynihan, I was surprised that you broke the daisy chain with a
name like, ``Moynihan.'' I knew Daniel Patrick Moynihan. He
used to come to Fordham when Father Joe O'Hare was the
president. I was a Jesuit Scholastic at the time, and they used
to have great stories about being an Irishman.
The reason I mention all that is around here, oftentimes
you hear, sadly, ugly words like, ``illegal'' and ``anchor
babies,'' and one Member even said, ``wetback,'' although he
did walk it back, to be truthful. And I guess I look at
immigrants the way that the Bible looks at immigrants. In
Leviticus, if you recall, it says, ``When an alien lives among
you, treat him as your native born because you, too, were
immigrants in the land of Egypt,'' or in Matthew 25, ``When I
was hungry, you gave me to eat. When I was thirsty, you gave me
drink. When I was a stranger, you welcomed me.'' So once again,
thank you for pointing that out, and thank you, again, Mr.
Dimon. I think you said that hopefully, we will get back to
public policy and do it right as Americans, and one of the
things that you mentioned was immigration, and I hope that we
do that right. So, thank you again.
One of the things that I used to hear all the time about
Dodd-Frank was how terrible it was. That was all the
Republicans could talk about. They thought it was the spawn of
Satan or something, and now, not a peep out of them. Now, we
hear instead from the bankers saying, hey, it is working well.
It worked well. We need to adjust it here and there on some of
the leverage issues. I understand that, but it worked well.
Now, of course, the spawn of Satan is environmental issues. And
I believe deeply in ESG and that we have to have metrics, but
now you hear them saying, oh, this is terrible, it is a
horrible thing, but the reality is the environmental issue is
important. So are the social and governance aspects. Now, it
seems to me that you all do take them seriously. Why don't I
ask, first, I believe, Mr. Moynihan, you take these things
seriously in your bank, do you not?
Mr. Moynihan. Yes, we do, and we publish an ESG report,
like many of my colleagues do, and we have also, just to go
into the metrics to measure, we have been working with the big
four accounting firms, and 80 companies have signed on to
voluntarily disclose what we think the relevant, constructive
metrics are that take the best of what is out there and would
make it simple so a company can actually do it. And that way,
we can then stay with those oil companies to declare what they
are going to do and help them make the transition that they
would all declare.
Mr. Vargas. Thank you. Does anyone think that environmental
issues and ESG is not important? If you don't think it is
important, speak up right now, please.
[no response]
Mr. Vargas. Let the record reflect that I didn't hear
anyone speak up. See, the reality is that the climate is
changing, and if you listen to some of the people, even
Republicans--the leader of the World Food Program says there
are 280 million people marching towards starvation. Why is
this? Because of conflict and because of environmental change.
Those are the two things. We have to take these things
seriously, and I am glad that the banks are.
I don't have a whole lot of time here, but I do want to
talk about foreclosures. I am very concerned, because June 30th
is when forbearance goes away as a Federal issue. And I heard
some of your statements earlier, but I hope you do work with
these customers because I think that the last time this
happened, you didn't do a good job, and you got a black eye
because of it, and you deserved it. But this time, I think you
have an opportunity to work with people, because this wasn't
their fault. This was a pandemic, for God's sakes. Work with
these poor people to make sure that they can stay in their
homes, and I think that this time you won't get that black eye.
It will be just the opposite. You will get praised for it.
So, again, my time is up. Thank you for, especially the
immigration. Mr. Moynihan, do not break that daisy chain, for
God's sakes. You should have continued it. Thank you.
Chairwoman Waters. Thank you very much, Mr. Vargas. The
gentleman from Ohio, Mr. Davidson, is now recognized for 5
minutes.
Mr. Davidson. I thank the chairwoman, I thank our
colleagues, and I thank our witnesses. For our witnesses, I
think, my, what an interesting time it must be to try to
navigate these waters as CEOs of some of our nation's and,
frankly, some of the globe's largest banks and financial
institutions. What we have seen today is, essentially, the
challenge of navigating this new woke heresy code. If you
transgress it, you are forced to repent publicly. Who knows
what remuneration or other penance you might be called to pay
for the sins of people past, but be assured, there is no grace
in this new woke heresy system that some of my colleagues are
trying to foist upon our country.
And the other challenge is you have a similar authoritarian
regime in China, the next largest economy, trying to force
their system on us. I will at least say that in China, they are
completely hypocritical while they are engaged in horrendous
acts against the Uyghurs. They act and pretend that there is a
moral equivalence between China and the United States' conduct
with respect to the treatment of ethnic minorities. Certainly,
we can acknowledge sins of the past, but we should focus on the
sins of the present. So, I appreciate the challenges that you
all have to navigate so that you may be permitted to operate
your businesses. The challenges are difficult just talking
about the politics, but let's get to the actual policy.
Mr. Scharf, in a recent stress test the Federal Reserve
completed in December 2020, the large bank post-stress capital
ratio was 9.6 percent, more than twice the regulatory minimum.
Obviously, this is reassuring because it shows that large banks
are adequately capitalized. However, do you think that it also
shows that our current capital requirements may be out of
balance and the Fed should revisit these issues? Do you believe
that this approach could be impeding economic growth?
Mr. Scharf. Congressman, I think there is no question that
the banks have a substantial amount of excess capital at this
point. The results that came out of the stress tests are
obviously very idiosyncratic to what the individual assumptions
are for that scenario as well as each of our positions, so I
think it is hard to draw a conclusion from any one specific
stress test. But I do think that when you look across the
industry, there is an exceptional amount of capital in the
system, also because of the restrictions that the G-SIBS have
had more recently.
Mr. Davidson. Thanks for your answer. I would love to spend
more time on that, but I have a couple of other topics I want
to get to. Mr. Dimon, last month, reports were circulating that
JPMorgan was looking to offer a bitcoin fund for private wealth
clients. I have been following your rhetoric on cryptocurrency.
I have spoken to you in the past about cryptocurrency, but you
have obviously walked back comments from saying bitcoin was a
fraud to now saying it might not be your cup of tea, and that
you do agree that regulations are needed, but you believe it is
important for Congress to provide regulatory certainty so the
firms, such as JPMorgan, can offer additional crypto products.
Can you describe how your views have changed over the past few
years on this important area and why Congress needs to provide
regulatory clarity for this asset class?
Mr. Dimon. Yes. They haven't changed that much, and put
aside blockchain, and put aside stable coins, which is
supported by assets. Something that is not supported by
anything I do not believe has much value. My own personal
advice to people is to stay away from it. That does not mean
that clients don't want it, and it goes back to how you have to
run a business. I don't smoke marijuana, but if you make it
nationally legal, I am not going to stop our people from
banking it, et cetera. I don't tell people how to spend their
money, regardless of how I might personally feel about some of
the items people might buy with their money.
So we are debating, should we make it available in some
way, in a safe way that people can buy and sell it and put it
in the statement systems. But my own personal view is it is
nothing like a fiat currency. It is nothing like gold. Buyer
beware, and I do think that eventually the regulators who are a
day late and a dollar short should be paying a lot more
attention to the future, like payment for order flow, high-
frequency trading, cryptocurrency, and put a legal regulatory
framework rather than a--
Mr. Davidson. Thanks. Thank you so much. In the last few
seconds I have, I would just ask that if any institutions
represented here today have policies that prevent your donor-
advised fund donations to certain 501(c)(3) organizations based
on political affiliation or causes they support, could you
please coordinate with our office? We are trying to understand
who is blocking people from using the donor-advised funds they
established. And, frankly, my concerns aren't so much with the
G-SIBS, though they are not abstinent. It is an issue broadly,
and we will be working on a letter soon to address to the SEC.
My time has expired, and I yield back.
Chairwoman Waters. The gentleman from Illinois, Mr. Foster,
is now recognized for 5 minutes.
Mr. Foster. Thank you. Many of you were probably on shift
10 years ago during the Tea Party default crisis of 2011 when
the Federal debt suffered a ratings downgrade that was caused
when newly-elected Republicans threatened to default on the
U.S. debt by blocking an adjustment of the debt limit. The
resulting panic cost the stock market over a trillion dollars
and cost the average American over $10,000. It also delayed the
economic recovery by somewhere between 6 months and a year.
Normally, Treasury bonds are some of the safest instruments
in the world because the U.S. has always paid its debts. Many
other rates are pegged against U.S. Treasuries, including
mortgage rates, which are fixed against the 10-year Treasury,
and a default caused by failure to raise the debt ceiling would
impact our housing market and hurt hardworking Americans in
many ways. So, in the United States, we have this anomalous
rule called the debt ceiling that does not occur in really any
other advanced country and triggers an automatic default on
Treasuries.
There are troubling signs politically that we may be headed
for another default crisis. And so my question to you is, how
do you handle a default on U.S. Treasuries in your risk
management and stress testing? Everyone always picks on you,
Mr. Dimon, so I will let you go first. How do you manage such a
risk, and what would you do the day after we defaulted on
Treasuries?
Mr. Dimon. I hope that we don't have to start doing a
review of that again. It would be an unmitigated disaster. We
spent about $50 million just investigating that issue, if I
remember correctly, and I don't want to have to brush up on
that. But there are some very complex questions which you shall
have to answer. Do Treasuries cross default? Can the Federal
Reserve buy defaulted Treasuries? What happens to defaulted
Treasuries in pension plans, investment plans, bank accounts,
accounting rules? It could cause, literally, a cascading
catastrophe of unbelievable proportion and damage to America
for 100 years.
Mr. Foster. Thank you. I think that is a pretty good
summary for just everyone who has looked at this. And, again,
this is an instance where I think we need one of these red-flag
rules that removes a gun from Congress' hands. And as you may
be aware, there have been numerous proposals to permanently
repeal this debt limit rule that triggers the automatic default
by Members on both sides of the aisle, and, frankly, both
parties have been guilty of weaponizing the default.
When George Bush went and spent a lot of money on a war and
then lowered taxes, the Democrats gave him a lot of grief over
the necessity to raise the Federal debt when that happened, and
the same thing has happened in a mirror image. And so, I think
it is really important that people at this time, when it is not
an emergency, just step back and say, yes, this is one of the
good workmanlike fixes that we should put forward on a
bipartisan basis, because the threat is so real and the
benefits are near zero.
Does anyone else have any specific comments, because the
odds are not zero? You can see threats already happening from
the other side of the aisle. Oh boy, we are going to go cause
trouble over the debt ceiling. Do you actually have planning
sessions where you say, what do we do, or is it just one of
these things like planning for a nuclear war that is so bad,
that you can't really realistically plan for it? Can any of you
just indicate that actually this is part of your normal
planning, dealing with a Federal default?
Mr. Moynihan. We take a look at lots of tail scenarios, and
this is one of them. But I think, as Mr. Dimon said, it is
imponderable to think that we would get in the position, and I
think the market often takes great comfort at the time this
comes to fore when bipartisan people say it won't happen. But I
think it is something to be very careful about, so we take it
into account as a tail risk, and it would be very bad.
Mr. Foster. Okay. Unfortunately, I think you should start
taking the possibility more seriously, and maybe think about
using some of your political muscle to encourage Members on
both sides of the aisle to hold hands and jump on this, and
just take this disaster scenario that really provides no
benefit to our country, to just take it off the table once and
for all. That was the point I wanted to make, and with that, I
will yield back.
Chairwoman Waters. Thank you very much. The gentleman from
Tennessee, Mr. Kustoff, is now recognized for 5 minutes.
Mr. Kustoff. Thank you, Madam Chairwoman. Thank you for
convening today's hearing, and I do thank the witnesses for
appearing. Mr. Moynihan, there was a story that posted within
the past few hours to the Wall Street Journal website, and I
would like to read the headline, ``Biden Budget Set to Assume
Capital Gains Tax Rate Increase Started in Late April.'' In
other words, it would be retroactive, and it says Congress must
still approve any rate changes and retroactive effective dates.
My question, Mr. Moynihan, to you is, if a retroactive capital
gains tax rate increase were to become a reality, would that
have a negative effect on the economy? And if so, how?
Mr. Moynihan. I think if you think about it from two sets
of people, general investors, and the capital gains rate
affects all investors, many investors invest even through
mutual funds, et cetera, and capital gains that get reported
out to them at a higher rate would affect them. But,
importantly, for businesses, small businesses trading hands,
retroactivity is sort of never in anybody's mindset, and I
think it would have a bigger effect if, ``retroactive'' then
could be planned for in the future. But in any case, those
businesses are very worried about it, as we said earlier.
Mr. Kustoff. Thank you, Mr. Moynihan. Ms. Fraser, could I
ask you those same two questions as it relates to that Wall
Street Journal story?
Ms. Fraser. Thank you. I very much agree with Mr. Moynihan
that retroactivity creates a lot of confusion, and I think
unnecessary consternation for investors and for companies
involved that should ideally be avoided. We are in a very low-
rate environment at the moment. We are seeing a lot of sabers,
which includes retirees and pension funds and others, moving to
longer-dated assets, and, therefore, a change in these bulls
would have an impact on that at a time when the returns on
people's savings are already low.
Mr. Kustoff. Thank you, Ms. Fraser. Mr. Solomon, could I
ask you those same two questions? Assuming that story is true
and it became a reality, would it have a negative effect on the
economy, and if so, how?
Mr. Solomon. I think both of my colleagues have commented
on this. Uncertainty obviously dampens growth and dampens
activity, and so anything that is retroactive creates extra
anxiety and extra uncertainty, and that would just slow down
economic activity. And so, I think retroactivity is something
to be very, very cautious about. And I do think a chilling of
investment activity through higher capital gains tax is
something to also think through carefully.
Mr. Kustoff. Thank you very much. Mr. Dimon, could I ask
you those same two questions?
Mr. Dimon. I can't add anything of substance to what my
colleagues have already said.
Mr. Kustoff. If I could take it one step further, there has
been talk of other tax hikes. In this hearing today, we have
talked about a possible increase in corporate tax rates. If
there were any tax rate increase this year as it relates to any
taxes and they were retroactive--this relates to any tax
increase--would that be negative as it relates to the economy?
Mr. Dimon. Yes, but pretty much like my colleagues already
described, even more so as it relates to business.
Mr. Kustoff. Thank you. Mr. Gorman, could I ask you,
please, those same two questions. Assuming that story is true,
assuming that Congress were to enact retroactive capital gains
tax rate hikes, would that be negative to the economy, and, if
so, how?
Mr. Gorman. Yes, because every business and every
individual deserves to know what the tax regime is when they
are making their decisions. So, by definition, in my view, any
retroactive tax is unfair and not good for confidence and
sentiment.
Mr. Kustoff. Thank you, Mr. Gorman. Mr. Scharf, if I could
ask you those same two questions in my remaining time?
Mr. Scharf. I agree with what everyone has said, and I
would just stress what Mr. Gorman just said. People make
decisions based upon a set of rules that they believe are in
place, and if you change that, it calls into question any
future decisions that people make and could be quite harmful.
Mr. Kustoff. Thank you, Mr. Scharf. Madam Chairwoman, with
my remaining 16 seconds, I yield back.
Chairwoman Waters. Thank you very much. The gentleman from
New Jersey, Mr. Gottheimer, is now recognized for 5 minutes.
Mr. Gottheimer. Thank you, Madam Chairwoman, and to our
witnesses for being here today. I am very grateful. Nearly 50
million Americans don't have a credit score and are left out of
the traditional banking system. According to the Consumer
Financial Protection Bureau (CFPB), Black and Hispanic adults
are the most likely to lack credit scores. This absence of
credit history limits opportunities to qualify for student
loans, a small business credit line, or a mortgage to buy a
home.
Mr. Dimon, if I can start with you, sir, your bank utilizes
information on your customers' banking activity to extend
credit. Has it been successful in providing access to credit
for more customers who may not otherwise be eligible, and what
are some of the benefits and risks your institution has had to
navigate in utilizing the source of information?
Mr. Dimon. Yes. We have been using alternative sources of
information to provide credit. It is a great way we all can
work together. I don't know if you saw the article that all the
banks are now sharing banking data with each other in a way to
extend more credit to those who need it. And I think it is a
great way we can all accomplish some of the same goals we all
want.
Mr. Gottheimer. It has been sort of reported of your bank's
participation in Project REACh, the OCC program to increase
access to credit for underserved communities, as you were
referencing. JPMorgan will be working with other banks to
exchange data to further identify creditworthy customers. What
more do you think we can be doing to expand credit access for
underserved communities?
Mr. Dimon. We are going to be using a lot of alternative
data, like do you pay your rent on time, to, I am almost going
to call it reverse discrimination, seek out those with good
credit who are not in the normal credit system, including
immigrants who are here, who have credit histories in their
home countries. And so, there are a lot of ways to do this, and
we completely applaud Project REACh.
Mr. Gottheimer. Thank you, sir. Mr. Moynihan, your bank has
more than 23,000 employees in New York City and New Jersey.
Every day, we are hearing more and more about families fleeing
from New York and New Jersey, especially because of
affordability, therefore, moving to low-cost States like Texas
and Florida. Do you support making it more affordable to live
and work in New Jersey and New York or reinstating the State
and Local Tax (SALT) deduction?
Mr. Moynihan. I think the SALT has had an impact that has
been well-written. I think our job as banks is to continue to
support the people who are in those communities. Interestingly
enough, if you start to see the fact that, alone, we are
bringing back probably 6,000 kids who have never really resided
in New York City over the last 3 years, who are now coming back
to work, I think you will see a lot of positive momentum in
some of the housing in New York just in terms of filling up
those apartments that were empty. So, we have to do it through
our lending. We have to do it through our employment. But also
it would be helpful, I think, if the tax rates were more
normalized.
Mr. Gottheimer. Thank you, sir. Mr. Solomon, I know that
Goldman Sachs does not have debts that are actually involved
with trading cryptocurrencies, and I know your bank can't own
or trade cryptocurrencies for regulatory reasons, but you have
many clients who are coming to you for advice on investing
digital assets. How do you help them navigate the risks of
cryptocurrencies like bitcoin?
Mr. Solomon. I appreciate the question, Congressman. You
heard a little bit from Jamie on this. There is a lot here, and
it is complex. There is no question that both institutions and
individuals are looking for exposure to bitcoin. We are trying
to provide information to them around the potential asset
class. Like Jamie, when you talk about cryptocurrencies, like
bitcoin, specifically, I am extremely cautious. There is no
question that if lots of people believe in something, it can
sustain value for a period of time, but the use cases are
relatively unclear, and the regulatory and government oversight
is still relatively unclear. And so, there is a lot of work to
do around this.
I think, ``buyer beware'' is absolutely the right thing to
think about, but there is no question there is significant
interest, and so we are trying to help our clients and track it
accordingly.
Mr. Gottheimer. Thank you so much. Madam Chairwoman, I
yield back. Thank you so much.
Chairwoman Waters. Thank you very much. The gentleman from
North Carolina, Mr. Budd, is now recognized for 5 minutes.
Mr. Budd. I thank the Chair, and I thank, again, our guests
for being here. I have long supported the services that banks
provide to our communities, and the great work that you all did
during the pandemic supporting consumers and small businesses
is a prime example.
That is why it concerns me when I see financial
institutions really shift their focus and move to carrying out
political and social agendas instead of just providing capital
and liquidity to consumers and to businesses. As an industry, I
really believe that you should be focused on being a good
neighbor by providing greater value to your consumers and your
shareholders.
I want to ask you all a ``yes'' or ``no'' question, and I
will go around. As your banks begin to shift your business
decisions and include more or environmental, social, and
governance (ESG) goals, are any of you concerned that this may
cause affected industries, and as a Federal Firearms Licensee
(FFL), I think of legal firearms, and I want to add coal, oil,
et cetera, that have thousands and hundreds of thousands of
jobs in this country. Are you concerned that with more ESG in
banking, that they can lose investors, forcing these businesses
to move operations overseas, or even close and create job
losses here in the United States? And, Mr. Moynihan, as a North
Carolinian, I will start with you.
Mr. Moynihan. Mr. Budd, I think a perfect example is what
we did with Duke Power in our backyard there. We basically,
because of their commitments to provide more clean power and
our commitments to buy more clean power, we put up a large
installation, which now other people can purchase from. I think
these commitments are consistent with good business and growth
in the companies. And Duke Power, a major company that has all
sorts of sources in their environment, can help make a contract
come to life. It is a great business opportunity, and I think
we all have to have judgment at the pace of the transition to
make this happen.
Mr. Budd. Thank you. And I want to just make sure we
understand the question as I continue. Do you think focusing
not just on providing capital to businesses, but including ESG,
can hurt certain businesses, ultimately causing job losses in
the U.S., Ms. Fraser?
Ms. Fraser. I think we are seeing some industries which are
reducing down in size, for sure. We are seeing a reduction in
the size of the coal sector, for example, as other industries
in the energy sector grow, so I think that will be part of the
natural transition. The important piece, which I think we have
all talked about, is that we support our clients in making the
transition, making sure that there is a good balance between
that energy policy and the move to greener and decarbonized
technologies, and that most important piece is we get that
balance right.
Mr. Budd. Thank you. Mr. Solomon?
Mr. Solomon. I think there is no question that as capital
cases, new opportunities, it has an effect on some legacy
businesses. I do think the important thing to recognize is, as
we direct capital toward new technologies, there are jobs that
are created with that, and that is one place America has always
led. And I am sure we will lead here when you look at the
transition that so many companies and so many different
industry are focused on.
So, I think there is an enormous job creation opportunity
in that also. It is obviously a balance. It is a transition. It
is not going to happen tomorrow. It is going to take a long
time. In my opinion, we will be financing oil and gas for quite
a long time, but there are new technologies that will have an
impact. They will create jobs, and that is a great opportunity
for us, too.
Mr. Budd. Mr. Gorman, I am going to give you a quick pass
so I can use my time on a different subject.
Mr. Moynihan, back to you. Like many of my colleagues, and
Mr. Gottheimer from New Jersey mentioned this earlier, I am
concerned that we are ceding our position as the world leader
in global digital finance to countries like China. America has
always been quick to embrace technology and innovation in the
banking space, but recently, due to a lack of regulatory
clarity around digital assets, we are seeing innovation go
offshore to Singapore, Switzerland, and Japan.
One area of innovation I am particularly interested in is
decentralized finance (DeFi). Your bank issued a report earlier
this year talking about that. But as DeFi innovation continues
to build, how can banks engage with this technology to offer
better products and services to their customers?
Mr. Moynihan. The report you are probably talking about is
from a research group, which is independent of what we tell
them to do. As we operate the bank, we have, I think, 60
patents on blockchain. We are heavily involved in figuring out
that technology and whether it really has a purpose. More than
60 percent of our consumer activity goes digital today. We are
driving digital usage. When you get to the new types of things,
like FTEs and things like that, we will study them and look at
them. When you get to the question my colleagues answered about
holding digital assets, our clients are asking us, trying to
figure out how to facilitate their decision to buy digital
assets, especially on the institutional side. Those are debates
going on. But all that is part of, as you said, the ingenuity,
and I think this country is the most innovative country in the
world, and has been and will continue to be, and our industries
are driving it.
Mr. Budd. Thank you. I yield back.
Chairwoman Waters. Thank you very much. The gentleman from
Florida, Mr. Lawson, is now recognized for 5 minutes.
Mr. Lawson. Thank you, Madam Chairwoman. I would like to
welcome all of you all to the committee.
Mr. Dimon, I would like to thank you for your response to
Congressman Green's concern, because it is very hard to make up
for some of the sins of the past. But to meet with Congressman
Green to talk about these issues is just tremendous.
I would like to say to Mr. Moynihan that 43 years ago, I
got a $10,000 loan from what was then NationsBank to go into
business. And like Mr. Williams from Texas, I have been in
business ever since then. And that is the importance of having
a good relationship.
Now, to the panel, there are many people in this country
who struggle to access financial services in areas without
significant access to bank branches, for example, Gaston
County, one of the areas that I represent in Florida. And
Gaston was deemed deeply affected, meaning that the County had
10 fewer branches in 2012, and lost at least 50 of them by
2017. Rural communities are deeply affected by branch closures,
and typically have higher poverty rates, lower median income,
and higher shares of their population with less than a high
school degree, and higher shares of their population who are
African American, relative to all rural counties. Can each of
you please provide a quick overview of what your bank strategy
is to increase access to financial services and branch presence
in rural communities such as Gaston, one of the communities
that I represent?
Chairwoman Waters. Who is your question directed to, Mr.
Lawson?
Mr. Lawson. To everyone on the panel. My time is running
out, and I have another question, so I want to make sure--
Chairwoman Waters. Who do you want to start with?
Mr. Lawson. Okay.
Chairwoman Waters. Start with one of them.
Mr. Lawson. Okay. I will start with Mr. Dimon.
Mr. Dimon. We are always adjusting our fleet of branches.
It is a normal thing to do. We always make sure we are serving
communities. About 25 or 30 percent of our branches are in LMI
neighborhoods, and of all the new branches, and we are opening
branches all the time, including maybe 500 or 600 in just the
last couple of years alone, about 25 or 30 percent will be in
LMI or majority-minority neighborhoods. And rural, we are not
very big in rural. We are looking at what we can do there. We
are going to study some versions of how we can extend into
rural banks, and some of the banks here do more than we do in
the rural communities. Digital will also help fix that problem.
Mr. Lawson. Okay. Let me go to Bank of America [inaudible].
Mr. Moynihan. Congressman Lawson, yes, similar. We continue
to fine-tune our branches. So, as we move branches around, we
basically make sure that about 30 percent are in LMI
neighborhoods, and that has been true all the way through time.
Interestingly enough, when we looked at the rural areas at the
beginning of the decade--2010, 2011--we sold 500 or 600
branches to small community banks to make them stronger, and so
on the idea that we may not want to have them open, but yet we
sold the deposits to those companies and they consolidated them
in areas that we didn't think we could serve as effectively as
them, so we made those companies stronger.
And, again, I challenge our team like Jamie has. We touch,
within a reasonable distance, about 80-plus percent of the U.S.
population. We have challenged them to how we get coverage to
other parts, and the digital platform is very capable of doing
that. We have 400,000 customers in States in which we don't
even have branches, so it is doable.
Mr. Lawson. Okay. Thank you, and I am going to try to get
this other question in. Yesterday, it was suggested that short-
term lenders should not be allowed to provide their products
which help working people, and I get a lot of them. And I
believe that banks have moved away from serving that market,
which includes many of my constituents. For proof, all we need
to do is look at the FDIC's Small Dollar Loan Pilot Program,
saying that we can do these small loans, which charge 36
percent or less. What has happened? Anyone who would like to
comment on that, because it affects small lending. Can anyone
comment on that?
[no response]
Chairwoman Waters. The time has expired. We are going to
move on. If you have an answer, please send it in writing to
Mr. Lawson.
The gentleman from Ohio, Mr. Gonzalez, is now recognized
for 5 minutes.
Mr. Gonzalez of Ohio. Thank you, Madam Chairwoman, and
thank you to our CEOs for being on today, and, quickly, a big
thank you for all that you did to help us weather the storm
during the pandemic. I think it was all-hands-on-deck across
the country, and you all certainly pulled your weight. And I
know we are all appreciative.
I am going to stay on the Special Purpose Acquisition
Company (SPAC) retail investor topic, and, Mr. Solomon, I am
going to focus primarily on questions to you, because we have
chatted about this. We had a hearing earlier this week on the
initial public offering (IPO) market, traditional direct
listing SPACs. Obviously, we have seen a lot come public in the
last year, and I think that is good for two reasons: one, it
means retail investors have access to more investment options;
and two, the fact that we have three solid options for
companies to come public, and it creates important options and
competition for these companies to raise money in the public
markets. I think these are good. Of course, none of these
vehicles are perfect, and SPACs, in particular, I believe could
benefit from clear disclosures so retailers can better
understand the incentives of the sponsor, IPO investors, and
pipe participants as these facts go through their life cycle.
SEC Chair Gensler yesterday suggested that this is an area the
SEC is looking at, which I think is appropriate.
My question to you, Mr. Solomon, is, in your view, where do
you believe the disclosure regime with respect to SPACs could
be improved such that retail investors have the right
information to understand what is necessary to make a fully-
informed investment decision?
Mr. Solomon. I appreciate the question, Congressman, and
you and I have talked a little bit about this. I think there is
an opportunity for more plain language disclosure so that
investors really understand the sponsorship economics in plain,
clear language, and they also understand the process. There are
also differences around the use of projections of the De-
SPACing process. As private capital funds the De-SPACing for a
number of these, I think there are also opportunities there to
think carefully about how disclosure works in the typical IPO
process, and how the liability structure works in those
processes versus how it might work in a SPAC process. And so,
there is a lot of discussion about that.
I know that Chairman Gensler is giving it attention, and I
assume that there will continue to be evolution around this, to
support the continuing use of SPACs as a capital markets
innovation.
Mr. Gonzalez of Ohio. Thank you. And then, specifically, do
you think that it should be disclosed if the sponsor syndicates
the risk capital, because I know that is happening, but it is
not currently disclosed. Do you think that is something we
should be disclosing?
Mr. Solomon. It would depend on how and when it is done,
but, yes, particularly if it is done up front. More
transparency rather than less transparency in the context of
something like that, I think is correct and important. And
especially if it is being done up front or it is committed to,
I think it should be disclosed.
Mr. Gonzalez of Ohio. Great. And then I am going to shift
to Archegos and total return swaps. As you know, Archegos had
greater than 10 percent exposure to the economics of various
firms, but was able to avoid the disclosures because they
acquired via total return swaps, meaning they didn't own the
shares outright. That damage was largely contained that day,
but I think it does beg the question, two things I think it
really focuses on.
First, how many other firms are out there running similar
strategies in your view? Do you think that is sort of a
systemic problem? And second, do you think we should adjust the
disclosure regime with respect to swaps and other instruments
that allow clones, in essence, to mask the percent exposure and
the leverage that they have on their balance sheet?
Mr. Solomon. I think there are certainly lots of
significant institutional players that have exposure to
equities through total return swaps. I think what was unusual
here was the concentration levels, particularly in certain
securities where the market cap of those securities was moving
very, very quickly for a variety of other ancillary reasons. I
do think, and I touched on this a little bit earlier, that a
more modern disclosure structure around total return swaps and
other forms of equity ownership is something that I know people
are looking at, and I would advocate that some focus there is
probably a good thing for us to think about as we go forward.
Mr. Gonzalez of Ohio. Great. I am going to switch to
infrastructure for a quick second. The debate we are talking
about is largely about, how do we pay for the infrastructure,
and what kind of infrastructure? One thing that I think we
should be entertaining in a serious way is the notion of an
infrastructure bank similar what has happened in Australia and
the EU and parts of Canada. Just a quick question for Mr.
Solomon and Mr. Dimon, do you believe there would be an
appetite from institutional clients to help fund American
infrastructure via a well-structured infrastructure bank or
similar mechanism?
Mr. Solomon. I will go first, and then Jamie can certainly
comment. There is an enormous amount of private capital that is
in a position to be dedicated toward infrastructure. Thinking
about ways, whether through an infrastructure bank or other
public and private partnerships, to unleash that would be quite
productive.
Mr. Gonzalez of Ohio. Thank you. I see my time is up.
Maybe, we will get your answer in writing, Mr. Dimon, and thank
you. And I yield back.
Chairwoman Waters. Thank you very much. The gentleman from
Guam, Mr. San Nicholas, is now recognized for 5 minutes.
Mr. San Nicolas. Thank you, Madam Chairwoman, and thank you
to all of our guests on the panel. Our Pacific Territories are
America's gateway to our Asian markets. Our Atlantic
Territories are America's gateway to our Latin American
markets. Our combined GDP in our Territories is greater than 13
U.S. States. Our combined population in our Territories is
greater than 20 U.S. States. And yet, we have no meaningful
presence from any of the G-SIBs on this panel in any of our
Territories.
And so, while we listen to all of this effort to expand
access to our banking system, to expand American influence in
international arenas, and as I hear $30 billion over 5 years,
$1.25 billion over 5 years, $50 million to MDIs, $150 million
to CDFIs, as I listen to quotes such as an obligation to ensure
that everyone can participate in the American Dream, or that we
have a collective interest in opportunity for all, I sit here
as a Representative of our Territories witnessing a lack of G-
SIB investment in our Territories, and a lack in exploring the
opportunities that our Territories present for our very strong
financial system to use our Territorial capacities to reach out
into our international markets.
I wanted to very specifically ask all of the members of the
panel if they can share what their vision is for expanding into
our Territories, establishing a meaningful presence, and
capitalizing on the opportunities that we can bring to this
country? Let's go ahead and start with you, Mr. Dimon.
Mr. Dimon. I think you raise a very important subject. This
may be an area where the extra capital liquidity and other
costs of being a G-SIB make it prohibitive to want to do that,
but I am sympathetic to your concern. We certainly will look at
what you are talking about and see if we can be helpful in any
way. It may be something that is better done by a community
bank, but we would be happy to sit down with you and discuss
it.
Mr. San Nicolas. On that subject, I have G-SIBs at the
table who have very strong investments in international markets
like Hong Kong or Singapore, even exploring Taiwan now that the
Hong Kong option is kind of questionable. And yet, I don't hear
of any efforts to really explore Guam, for example, as an
option when we are literally 3 to 5 hours away from every major
metropolitan area in Asia. And that is why I think that there
is a lack of awareness perhaps, but definitely a lack of
investment, and I wanted to definitely put that on the table
today.
Ms. Fraser, can you share some insight?
Ms. Fraser. Yes, we do serve, not in a huge way, but we do
serve clients in many of the Territories, and Puerto Rico is an
example of one where we have an important presence and are a
major bank there. And that is both for corporates primarily
that we work with and commercial banking clients. But through
digital capabilities now, the ability to serve customers in the
Territories will be in an opportunity going forward, and we are
very happy to spend some time exploring that further with your
office.
Mr. San Nicolas. I just wanted to share that Citibank
closed its branch at the earlier part of the century, so that
is something that I would very much like to have revisited.
Mr. Gorman?
Mr. Gorman. We are predominantly a capital markets and
wealth asset management business, so we are in places like Hong
Kong because we serve enormous capital markets range of clients
across of all of Asia. So, Guam is probably not at the scale
where we would put operations, just being completely honest
about it, for those kinds of businesses that we're in. We are
not in the traditional retail branch-based banking businesses
or the credit card or much of the consumer lending businesses.
Mr. San Nicolas. But your businesses that you do in Hong
Kong, that is not just strictly limited to Hong Kong proper,
correct? Hong Kong is a staging point for Asia proper, yes?
Mr. Gorman. That is right. Hong Kong, New York, Tokyo, and
London are the major staging points around the world.
Mr. San Nicolas. And so, Guam may not necessarily have the
population per se within its vicinity to be a market, but
definitely as a staging point, similar to Hong Kong, it is
something that should be looked at.
Mr. Moynihan?
Mr. Moynihan. Representative San Nicolas, I think you asked
us this question in 2019, with a pandemic focus. But like the
others, I think we should take a look and see what is doable in
the context of business that we conduct, and also, is there a
way to do it in partnership with other people to help build
them up to supply local services better than we could? So, you
asked the question before, and we will take a look at it.
Mr. San Nicolas. Thank you very much. I have the same
question for Mr. Scharf and Mr. Solomon, but my time is running
out. But I would like to just reiterate that the reason why I
am on this committee is to make sure our Territories are not
forgotten in the largest financial system in the world, that is
a part of our country. Thank you so much, Madam Chairwoman, and
I yield back.
Chairwoman Waters. You are welcome. Thank you. The
gentleman from Tennessee, Mr. Rose, is now recognized for 5
minutes.
Mr. Rose. Thank you, Madam Chairwoman, and Ranking Member
McHenry, and thank you to our witnesses for being here and for
staying engaged throughout this hearing. Before I get into my
questioning, I do want to thank you for the work that you, and
all of our financial institutions did throughout the last 15
months to ensure that families stayed in their homes and
businesses kept their doors open. The swift rollout of the
Paycheck Protection Program is further proof that our private
sector remains more efficient than our Federal Government.
However, today, I want to discuss something several of my
other colleagues have touched on, which is capitalism versus
stakeholder or woke capitalism. I find it unfortunate that each
of your firms feel comfortable picking winners and losers based
on a political litmus test. A topic we continue to debate in
this committee is that of equity versus equality. I am of the
belief that everyone deserves an equal opportunity for success,
but it is not the place of government nor of private industry
to guarantee an equally-successful outcome.
As I have read through your testimonies, and the reporting
documents of your companies, ``equity'' continues to be a
popular word. In fact, Mr. Solomon, you are quoted as saying,
``We must stand up and support organizations dedicated to the
fight for a more just and equitable society; not equal, but
equitable.'' In just a few words, Mr. Solomon, how does Goldman
Sachs define, ``equity?''
Mr. Solomon. I appreciate the question, Congressman. It is
a very broad question, and I am not sure that I understand in
exactly what context you are asking it. But I, too, like you,
am an American who believes deeply that everyone deserves an
opportunity to have success, and I think one of the things that
we can do with our business is to help create opportunities.
When I think about our 10,000 Small Businesses Program and the
commitment we have made over the last 12 years to invest in
small businesses, provide education, and provide capital and
resources, all of that is helping small businesses to bootstrap
up, and employees to grow and have success.
And so, when we serve a lot of big companies and big
institutions around the world, there are ways that we can use
our expertise and our platform to help others come along and
share more in the context of opportunity. A society that, as
you state, gives great opportunity to all, is a society that we
certainly want to be a part of.
Mr. Rose. Thank you. I appreciate that. And speaking of
winners and losers, several of my colleagues have talked about
this today, but I cannot stress enough the importance of
providing access to capital for all legal businesses. Mr.
Dimon, you, for instance, are on the record saying that you
have no interest in bitcoin, but JPMorgan Chase will allow
clients to invest in bitcoin because, in your words, you,
``don't tell clients what to do.'' What if your client wants to
invest in a fossil fuel company or a private prison?
Mr. Dimon. We don't tell the clients what to do. We do make
our own decisions about what we want to do based upon our risk
assessments and things like that. So, our clients are
completely free to buy bonds of a private prison. We do not
tell them what to do. But even cryptocurrencies, we want to set
it up in a way we think is safe and proper for them, and we are
still working on that.
Mr. Rose. So what I am hearing, I think, is that you have
no problem investing in or seeing your clients invest in
cryptocurrencies that are not only volatile, but currently
being abused by cybercriminals, but legal businesses, such as
fossil fuel companies, is where you decided to draw the line.
Mr. Dimon. No, you are totally wrong. We have been quite
clear that there will be fossil fuel companies for decades to
come, and we finance them and we are proud of it, and we are
working with them on trying to reduce their CO2. We have
certainly not cut back on that, and we have a very good
relationship with them. We have cut back in certain areas
because we think the risk, legal or regulatory, is too high to
do the business there.
Mr. Rose. And finally, Mr. Dimon, earlier you pointed out,
in Mr. Luetkemeyer's questioning, about dealing with China,
that when it comes to investing overseas, you will follow the
laws of the United States, and that if the U.S. does not allow
certain investments, JPMorgan would certainly follow the law. I
think it is interesting that when it comes to investing in
China, JPMorgan is very interested in following the law, but
here in the U.S., you are going well above and beyond to not do
services with legally-operating businesses. With that, Madam
Chairwoman, I yield back.
Chairwoman Waters. Thank you very much. The gentlewoman
from Iowa, Mrs. Axne, is now recognized for 5 minutes.
Mrs. Axne. Thank you, Madam Chairwoman, and thank you to
the witnesses for being here. I want to change course a bit
here and talk about housing. We all know that housing demand
has been very strong, and prices have gone up a lot this past
year. The concern here is that is exacerbating the problem that
we had before, which was that homeowners who normally had
higher incomes already were doing well, had their home, higher
incomes, but younger people and those with less income and less
wealth opportunity weren't able to get into a home that they
could afford.
And I will tell you what, I hear from businesses that have
trouble attracting employees because of this. Just last week, I
was down visiting a local manufacturer, Wellman Dynamics, which
has people driving 70 miles to work because there is no housing
in that community, and we know this hurts the economy.
Productivity is certainly affected as well. Mr. Scharf, I want
to thank you for having 14,000 of your employees living in my
district, and I am wondering what your opinion is on agreeing
or disagreeing that affordable housing can help us create
growth?
Mr. Scharf. Congresswoman, there's no question that
affordable housing--first of all, I think it is something we
should all be concerned with, and we should all be figuring out
what we can do to provide more financing and more opportunity,
which is what really we all can do, and you can do that in a
variety of ways. You can do it by making sure you are lending
into lower-dollar loans. You can help people with down payment
dollar amounts. You can help them with closing costs. Those are
things that we are all very, very focused on. And I think the
more leverage you create in that, in terms of all of us
participating in programs like that, the bigger impact we can
have.
Mrs. Axne. Thank you for that, and I couldn't agree with
you more. That leads me to my next question. It's good to see
you, Mr. Dimon, and I am just wondering what you think may be
some of the ways that we could address these shortages with
inequality in housing, both in terms of policy that we can be
taking here in Congress, but, of course, as Mr. Scharf
mentioned, the banks can be taking to decrease that inequity?
Mr. Dimon. The first thing you can do is, if you speak to
builders, local zoning laws and regulations hold them back and
make things more costly. But the other thing that Congress
could do, which I think is bipartisan, is that the mortgage
laws for underwriting mortgages got so strict and so
restrictive for origination and servicing, that if they were
simplified without creating any additional risk, it would
reduce the cost of mortgages and make far more affordable
mortgages available to people, particularly between $200,000
and $300,000, and I have been talking about that for years. It
has not been done. It is one of those things that needs to be
recalibrated. The sooner you do it, I think it would be a huge
boost to the American economy, and to lower-paid individuals,
and smaller homes.
Mrs. Axne. That is perfect. I will talk to the committee
about that. What are some of the things the banks can be doing
differently?
Mr. Dimon. Most of these banks have already doubled down on
their affordable housing, and are trying to get the loans out
there, and are working with more CDFIs. And CDFIs, a lot of
them do a great job on this, by the way, and you all have
already given them a lot more money, which they need to deploy
now, and we can help them deploy it.
Mrs. Axne. Okay. I would be curious to talk about that. You
mentioned homes in the $200,000 to $300,000 range. Even in
Iowa, though, that is above our affordable housing. And
unfortunately, between 2009 and 2019, the amount of mortgages
that were made for $150,000 or less dropped by 25 percent, and
those over $150,000 grew by nearly 70 percent. I appreciate you
bringing up the $200,000 to $300,000 because for a lot of
markets in this country, that is entry-level. Can we get more
support from banks? We need more support to help us get to
these lower, smaller-dollar mortgages. And we can work on the
paperwork thing, but can we get some support so that we know
you can be there for us to help with this?
Mr. Dimon. I think I should have said, it is all lower
mortgages, including under $100,000. Those costs are
astronomical, and more clarity around FHA. A lot of the banks
are very coarse in FHA because of the legal and regulatory
risk, and they would be doing a lot more of it, which is very
good for that segment, if those things were clarified.
Mrs. Axne. Okay. Any other comments? Mr. Moynihan, do you
have any thoughts on how we might address this?
Mr. Moynihan. Chairwoman Waters asked us this question, and
we all responded to her, and there is a falloff. I think the
FHA/VA rules and regulations in the last crisis, as a company
that had to deal with that, we have all restricted our
activities, point blank, in that area, and I think it would be
helpful if those rules were clarified and simplified so that it
would be attractive enough to do. Right now, it is not very
attractive.
Chairwoman Waters. Thank you very much.
Mrs. Axne. Well, we have our marching orders. Thank you.
Chairwoman Waters. The gentlelady's time has expired. The
gentleman from Indiana, Mr. Hollingsworth, is now recognized
for 5 minutes.
Mr. Hollingsworth. Good afternoon. I appreciate everyone
being here. I think a lot has been said about what banks can
do, but I want to talk a little bit about what banks have done
throughout the course of this pandemic and the lifeline that
they have served to countless businesses and American families.
Banks have helped raise $2.2 trillion in corporate bonds and
$339 billion in equity in the last year. Large banks have
modified $330 billion in loans, about 6 percent of all
commercial loan balances in this country, including payment
deferrals, fee waivers, and forbearances. Banks deployed almost
$539 billion in commercial loans during March of 2020 alone at
a time when the Federal Government had not yet stood up its
coronavirus response, facilities or programs, or financial
support. Those are really big numbers, and they made a big
difference to a lot of those businesses that are operating
across this country because of that.
But I also want to talk about other numbers that made a big
difference: 720,000 employees is what I calculated between each
of your firms, and I know figuratively, not literally, sitting
behind you are those hundreds of thousands of employees who
showed up every single day to help American businesses, and to
help American families get through this crisis.
I remember last March and April in D.C., when a lot of
people were talking about, if bank branches shut down, would
there be runs on banks? If capital raises stopped, how would
businesses be able to get through this? If loan processing
ceased because we couldn't get people into call centers, how
would mortgages still function? None of that came to pass. None
of that happened because 720,000 Americans showed up every
single day. They got up and they went to work, whether that was
going to work at a branch, whether it was going to work at a
call center, or, frankly, going to work at their kitchen table.
Your employees, like millions of other Americans who work in
financial services, made sure that they showed up for America.
This didn't become a financial crisis because when
Americans called those bank employees, they picked up the
phone. When Americans were at a drive-through, those bank
employees were on the other side of the glass. When Americans
opened their apps, those apps connected, and when Americans
needed a loan, bank employees were willing to email them the
paperwork to help get that started. Millions of businesses are
alive today because of your frontline employees, millions of
Americans can put food on the table because of your employees,
and America's economy is growing robustly in part because of
your employees.
So, to the tens of thousands of those employees who work in
Indiana's 9th District, and the millions of Americans who work
in financial services all across this country, I want you to
know you were not found wanting in this crisis. We are deeply
grateful that America's economy is recovering and was able to
function throughout the crisis because of the work you did
every single day.
All that being said, I want to turn our attention to a few
questions. I want to ask about the divergent trends we see
between deposits and loan growth. Commercial deposits have been
blowing into financial institutions since last year. Between
February 2020 and February 2021, commercial deposits grew by
$3.2 trillion compared with just, and I use that very
generously, ``just'' $800 billion in growth over the previous
12-month period.
I wanted to talk to Mr. Moynihan about this. Holding excess
bank deposits in a weak lending environment can accompany some
negative impacts, especially in terms of the regulatory
requirements that you face. I was hoping that you might speak a
little bit to the Supplementary Leverage Ration (SLR) and your
decisions related to deposits, and whether you think the SLR
capital requirements are at the right levels going into this
period, and if there any changes that you think should be made
to SLR to accommodate an environment where bank deposits seem
to be growing robustly, but loan demand seems to be very tepid.
Mr. Moynihan. Thank you, number one, for recognizing all of
the teammates that we all represent who did go to work every
day, and opened those branches, and kept the economy going, and
did such a great job. So, thank you for recognizing that.
On the question of SLR, the industry has made many
suggestions over the years that completely riskless assets may
not have a place. And what happened was when the deposits took
off and we went out and bought Treasuries and left overnight
cash in the Fed, we probably went from $100 billion to $300 or
$400 billion overnight in the Fed. You were still holding
capital against that, and that doesn't quite make sense and can
work against the idea of injecting monetary support into the
economy. So, we raised the questions, and then the Fed made an
accommodation which, frankly, didn't make a difference. We were
above the levels for our company, but they made an
accommodation to help ease conditions. But now, after the
crisis, I think it is important to look at it again and make
sure to calibrate it correctly because it has a governing
effect on the ability to do what you are saying.
Mr. Hollingsworth. Great. Thank you so much. My time is up,
so I will yield back, Madam Chairwoman.
Chairwoman Waters. Thank you very much. The gentleman from
Illinois, Mr. Casten, is now recognized for 5 minutes.
Mr. Casten. Thank you, Madam Chairwoman. And thank you to
our witnesses. I want to start by apologizing to our witnesses.
I am awfully troubled that some of my colleagues across the
aisle, who are so outspoken in their opposition to socialism
and the Belt and Road Initiative seem to be so predisposed to
policies that would direct our banks to invest in politically-
preferred industries or else. I apologize. I encourage you all
to get copies of, ``The Wealth of Nations'' and send it to them
if they get those letters, and remind them how capitalism
works.
Mr. Scharf, the last time you were here, we spoke about
your exposure to the oil and gas sector and potential write-
offs. You subsequently posted your first quarterly loss since
2008, and I think some of the reports I have seen suggest that
over half of the past due loans were in the fossil fuel sector.
Just, ``yes'' or ``no,'' is your total exposure to the fossil
fuel sector bigger or smaller than it was when we spoke a year
ago?
Mr. Scharf. Congressman, I am not sure of the answer. I
would be surprised if it were that different.
Mr. Casten. Okay. So if it has been written down, would
that imply that you have, because there is the total value,
right, and then there is the total value of the initial
holdings?
Mr. Scharf. Yes, but there is a difference between adding
losses and actually writing it down. It is certainly something
we can get back to you on.
Mr. Casten. Okay. I would be interested in understanding
that.
Mr. Gorman, you said in your prepared testimony that
climate change considerations are integrated into the firm's
risk management and governance processes. You have advanced
diligence process [inaudible] sectors. Are you satisfied that
you have a consistent methodology for calculating the carbon
impact of your investments that is used by all the portfolio
companies and businesses you invest in and by your competitors
so that you have a consistent reporting standard?
Mr. Gorman. No, I think, clearly, this is a space that is
evolving. It is still in its infancy. Various government
bodies, international bodies, and banks are trying to sort out
the right methodology. Clearly, the Sustainability Accounting
Standards Board (SASB) is involved in this. So, no, we are in
the early days.
Mr. Casten. Okay. As you put these processes that you have,
however imperfect they are, in place, have you ever written up
or down your carbon exposure as you would with a piece of debt?
If the utilization factor changes in ways that you look at the
security from a financial perspective, have you ever changed
it, or is that just at the point of investment you do that
diligence?
Mr. Gorman. I don't think we have. To the best of my
knowledge, we have not. If I am wrong on that, I will certainly
let you know.
Mr. Casten. Okay. Mr. Solomon, you made similar statements
that you have been carbon-neutral since 2015, will be net zero,
and I think these statements are terrific. I am not saying it
as criticism. The same questions as Mr. Gorman, are you
satisfied that you have a consistent methodology, and have you
ever written up or down the greenhouse gas exposure?
Mr. Solomon. With respect to carbon-neutral, that is in our
buildings, that is taking our buildings. I am not aware of any
material up and down, and I would echo what Mr. Gorman said
just about the process. The process is new. It is not
consistent, it is not clear, and so it is still an evolving
space.
Mr. Casten. Okay. Mr. Dimon, you said in your opening
remarks that abandoning fossil fuels is not an option right
now. Over the suite of the investments you have in the fossil
fuel space, you have senior debt, you have various levels of
subordinated debt, and presumably some equity. Setting aside
the total exposure, have you taken any steps to shift the risk
exposure in your portfolio to the space? In other words, have
you shifted more towards more senior secured vehicles?
Mr. Dimon. I do not believe so, no.
Mr. Casten. Is it reasonable to assume that if you saw a
risk coming, you might take measures to protect your investment
and move to a more senior position?
Mr. Dimon. You certainly should assume that.
Mr. Casten. Mr. Moynihan, your bank is one of the largest
financers of fossil energy, I believe, of the folks here. Same
question as Mr. Dimon, are you changing your risk exposure?
Mr. Moynihan. We look at individual credits based on their
prospects, and so we have not, to my knowledge, changed any
material exposure in our risk today. But in terms of the
discussion, we continue to look at the portfolios and figure
out how you can measure the types of things you are talking
about, and that work has been going on.
Mr. Casten. Okay. I am about out of time, but today, I
introduced the Climate Change Financial Risk Act with Senator
Schatz, that is designed to do the scenario testing in our
financial sector. In my view, you all are crazily smart. You
are extremely sophisticated. I have high confidence that your
banks are probably going to be fine because you are the most
sophisticated, and when you see these risks coming, you will
find ways to offload them to other people in the financial
sector who are not. We have an obligation on this committee, to
our prudential regulators, of making sure that as cash moves
around the system, as we transition to a cleaner economy, we
are protected, and I hope you will support us in our efforts to
make sure that we maintain a robust financial system. Thank
you, and I yield back.
Chairwoman Waters. Thank you. The gentleman from Wisconsin,
Mr. Steil, is now recognized for 5 minutes.
Mr. Steil. Thank you, Madam Chairwoman. I think we all look
forward to the day where we are back in person taking advantage
of the axis of vaccines. It has been a long time staring at
Webex. I think it has been for most of us on this, but let's
dive right in, if I can.
Mr. Solomon, many people in our community are deeply
concerned about rising inflation, and last month, we recorded
inflation rates at nearly a 13-year high at 4.2 percent.
Families across the country, in particular, in places like
Janesville or Kenosha, Wisconsin, are seeing and feeling the
effects of rising costs every day. Food, gas, vehicles,
everything seems to be getting more expensive. Some of that is
tied to the supply chain issues we are seeing. Some of it is
probably tied to inflationary pressures. A member of your
research team recently described price data from the last few
weeks as, ``pretty alarming from an inflation perspective.''
And among other things, he pointed to some of Washington's
fiscal choices as a major driver of recent inflation. In fact,
we spent trillions of dollars, and some are looking to spend
even more in a fiscal blowout. And while some of these fiscal
effects are time-limited, some will have a persistent impact, I
believe, on our economy, in part, by shifting the public
inflation expectation. Your research team has also expressed
concerns about falling into this, ``self-perpetuating cycle.''
Your research department published a report earlier this
year titled, ``Fiscal Policy: The Next Round,'' which correctly
noted that much of the COVID-era spending and the current Biden
spending proposals weren't fully paid for, so what we are
looking at is elevated spending and more debt. Would you agree
that the spending imposes an inflationary risk, and, following
on that, what would you be doing with your firm to prepare
yourself for a potential inflationary environment?
Mr. Solomon. I appreciate the question. There is certainly
a lot of focus on inflation, and I am finding it a topic of
discussion with most CEOs. As I talk to people and make my way
around, there is no question that the current combination of
monetary policy and fiscal spending, combined with a re-
acceleration of the economy coming out of the pandemic, is
leading to some inflation. As we discussed earlier in the
hearing, there is a big debate about how much of it is
transitory or how much of it will be sticky and will last. I
think it is hard to tell.
I certainly think that we have spent a lot of time thinking
about it from a risk management perspective, always focused on
safety and soundness, and managing the institution, just being
more aware of that scenario where suddenly monetary policy to
slow down and overheating economy raises interest rates more
quickly than market participants expect, is certainly something
that is more possible than we might have expected pre-pandemic.
And so, we obviously think about that and focus on the risk and
the implications that would have on asset prices and markets.
But I think this is very fluid, and I think we all have to
continue to monitor closely, and obviously, decisions we make
as we go forward will have an impact on all this, and the pace
of the economic recovery will have an impact on all this.
Mr. Steil. Thank you. Thank you very much, Mr. Solomon. If
I can jump over to you, Mr. Dimon, with a similar question,
knowing your significant retail operation, how potential
inflationary pressures would impact your consumers. Could you
comment on that?
Mr. Dimon. Sure. The consumer, fortunately, is in great
shape. They have a lot of cash and capability. Their jobs are
coming back. Their asset prices are good. Their home prices are
good. And the good news is loans are down because they have
money. They are not down because of a normal thing where they
are trying to pay off debt in a recession. Inflation, I think,
is coming. The only question is, how much and how quickly? We
have never seen fiscal stimulus like this, other than World War
II, and half of that money was spent on the war.
And also, in 2008 and 2009, there was huge de-leveraging in
the years after 2008 and 2009, fundamentally different. If
there is real inflation, the people who get hurt the most are
the lower paid, and because it is gas and it is food, and that
causes certain social disruption, and that, we should be very,
very conscious about.
Inflation is not a good thing. It was at 1.6 percent. I
don't know what was so bad about that. If it goes to 2.5
percent, I don't think it is that important. It is more than
that today, but if it hits 4 percent on a sustained basis, it
will cause disruption for the lower-paid individuals in
America.
Mr. Steil. I appreciate you sharing that because I
completely agree with you. The mismatch of both the fiscal
policy and our monetary policy, I have significant concerns
that we are going to see inflationary pressure, and it will
function like a tax on all Americans, in particular, some of
the lower-income earners as they see real cost increases and a
decrease in their standard of living. I appreciate everyone's
time here today. In observance of the clock, Madam Chairwoman,
I yield back.
Chairwoman Waters. The gentlewoman from Massachusetts, Ms.
Pressley, is now recognized for 5 minutes.
Ms. Pressley. Thank you, Madam Chairwoman. Panelists, as
industry experts, I want to ask your opinion on several
hypothetical questions to help me better understand how your
bank gathers information and assesses risk before extending a
loan. Mr. Moynihan, if my friend Joe started a business, would
Bank of America provide him with a loan? Please answer with,
``yes,'' ``no,'' or, ``I would need more information.''
Mr. Moynihan. I would need more information to underwrite
credit.
Ms. Pressley. Let's assume his financials are in good
order, Mr. Moynihan. Would your bank then make the loan, or are
there other risk factors that you would need to take into
consideration? ``Yes,'' ``no,'' or, ``I would need more
information.''
Mr. Moynihan. We look at a series of risk factors,
including the person, their credit, if it is a small business
loan, and the person who is starting a business. It is probably
going to be based more on the individual. Credit score is
another factor, as we talked about earlier.
Ms. Pressley. Reclaiming my time, I will take that as you
need more information. So, Mr. Moynihan, please answer with,
``yes,'' ``no,'' or, ``I would need more information'' for the
following two questions. Imagine a former employee of the
company told you that Joe dismissed more than half of his
workforce, including the CFO, for misconduct. Would your bank
lend to Joe? ``Yes,'' ``no,'' or, ``I would need more
information.''
Mr. Moynihan. We would need more information to understand
the situation.
Ms. Pressley. Thank you. Imagine you heard from a customer
that Joe lost sensitive data and 75 percent of his company's
earnings due to a cybersecurity breach. Would your bank lend to
Joe if you heard this rumor?
Mr. Moynihan. We would need more information. If you are
referring to a specific case, we can talk about that.
Ms. Pressley. Thank you. Mr. Moynihan, you just expressed
to me that you will not put your bank's money on the line if
you were made aware of these red flags or if you are kept in
the dark about these risk factors. The hypocrisy I see here is
unbelievable. While you expect consumers and businesses to
disclose this important information about risk when they apply
for a loan, you withhold the same information about your
megabank from the public and from Congress. The Federal
Government and the public provide you with many benefits
despite the systemic risks your institutions pose and the
limited information you all share with us on a voluntary basis.
This must end. This is unacceptable.
My bill, the Greater Supervision in Banking Act of 2021,
would fix this by requiring your companies to publicly disclose
cases of misconduct, your approach to protecting consumer data,
climate risk, employee compensation, and support for CDFIs and
MDIs. Allowing the public to make informed decisions and
Congress to conduct oversight cannot be optional or
inconsistent. Thank you, Chairwoman Waters, for holding this
hearing and continuing to prioritize our role in oversight
here. I yield back.
Chairwoman Waters. Thank you very much. The gentleman from
Texas, Mr. Gooden, is now recognized for 5 minutes.
[no response]
Chairwoman Waters. Is Mr. Gooden on the platform?
[no response]
Chairwoman Waters. If not, the gentleman from South
Carolina, Mr. Timmons, is now recognized for 5 minutes.
Mr. Timmons. Thank you, Madam Chairwoman, and I want to
thank each of the witnesses for taking time out of their busy
schedules to come before the committee today and answer our
questions.
Yesterday, in the Senate Banking Committee, you all said
you believe capitalism is the economic system that produces the
best economic outcomes. ``Capitalism'' is defined essentially
as conducting business in such a way as to earn a return on
invested capital. But my question is, can your banks process a
$500 loan for a term of 90 days for a new customer for a $45
fee? That is the amount of revenue that would be earned on such
a loan at 36 percent APR. And obviously, if one such loan
defaults, it would wipe out all of the revenue for 10 other
such loans that are being paid when due. So, tell me how
financial services operators could feasibly provide this kind
of short-term, small-dollar loan on a sustainable basis?
Mr. Dimon, you said yesterday that you would support a 36
percent cap on all loans pending a review. If such lending
cannot be done profitably, what is the sustainable source of
access to credit for the millions of customers who require this
kind of short-term, small-dollar loan?
Mr. Dimon. You are asking a great question. It does cost
money to produce a loan and underwrite it, and if that cost
goes into APR and you include that in the 36 percent, it is
impossible to do loans like that and make a profit. That is
precisely why we don't do it, and there is no safe harbor. It
doesn't affect us, so I am not going to fight that bill, but I
do think it does push out some institutions. There are a lot of
non-banks, and shadow banks, and payday lenders, and all who do
that business, but they don't bear the legal and regulatory
risk that we do.
Mr. Timmons. Sure, and I appreciate that answer. Ms.
Fraser, you said yesterday that you supported the spirit of the
proposal, but want to make sure that there are no unintended
consequences. I think it is fairly obvious there will be many
unintended consequences for short-term, small-dollar loans. In
your opinion, would these types of loans be possible with a
blanket 36 percent APR rate cap?
Ms. Fraser. As we said yesterday, we certainly don't charge
a customer 36 percent, but I worry about the imposition of flat
caps. They often have unintended consequences. I have seen this
in many other countries where they have limitations on access
to credit, and they actually end up almost hurting the
customers they are trying to help more than they aid them. So,
I think these types of rules require very careful consideration
because of those factors. We have seen it elsewhere. You have
to be very careful.
Mr. Timmons. Thank you, Ms. Fraser. Mr. Moynihan,
companies, including your firm, face increasing risk of
cybersecurity attacks. In addition, banking agencies recognize
that cybersecurity risk from third-party vendors is also
increasing, and Federal banking agencies recently provided
guidance with respect to practices that banks can utilize to
reduce vendor risk and improve operations. Can you please speak
to how your firm approaches cybersecurity risk management, and
discuss any improvements you have made or plan to make to your
risk management frameworks, both in general and, in particular,
with respect to vendor risk management?
Mr. Moynihan. If you go back and think about the last
decade or so, this issue has gone from something that was
relatively contained to something that we spend a billion
dollars a year on, and have 2,500 to 3,000 people working on
every day. They are very good. We also work with the industry,
so over the last three Administrations, we have worked closely
with industry to create industry-sharing networks, ``The Ark,''
it is called. FSAIC, I think, is the acronym. These are all
institutions to share information.
So, we work very hard on this. There is a White Paper
coming out from a group called Business, which studies this
across all industries, and that White Paper is something that
we would propose represents the interests of the financial
services sector about what more can be done. So, we work very
hard at making sure we manage this risk well, and we continue
to learn more about it every day, and we continue to make
suggestions and improve the practices.
Mr. Timmons. Sure. I really appreciate that. I actually
graduated from NYU with a Master's in cybersecurity just last
week, and many of your firms had some of your executives or
team members in that program. So, I just appreciate you all
making it a priority to learn from the past and make sure that
you are doing everything you can to secure our data. And with
that, Madam Chairwoman, I yield back. Thank you.
Chairwoman Waters. Thank you very much. This committee will
stand in recess for 5 minutes.
[brief recess]
Chairwoman Waters. The committee will come to order. The
gentleman from New York, Mr. Torres, is now recognized for 5
minutes.
Mr. Torres. Thank you, Madam Chairwoman. I have a question
for the CEO of Morgan Stanley. How much did you sustain in
losses from the collapse of Archegos?
Mr. Gorman. $911 million.
Mr. Torres. And Bill Hwang, the head of Archegos, pleaded
guilty to insider trading about a decade ago. Were you aware of
his history of insider trading before entering into a credit
swap contract with him?
Mr. Gorman. I was not personally, but as a company, we were
aware of that.
Mr. Torres. Were you aware of all of the other credit swap
contracts he had any entered into, and the lack of
diversification in those contracts, and the extent of his
overleveraging?
Mr. Gorman. No, there was not clarity and transparency
around his positions across the street.
Mr. Torres. So, given the lack of transparency and clarity
surrounding the credit risk of Archegos, would you support an
SEC rule requiring disclosure of a significant economic
interest in a company, regardless of the form that interest
might take?
Mr. Gorman. I think it is in everybody's best interest for
adequate disclosure. I know Chairman Gensler is going to be
looking at this, and I would certainly work with him on it.
Mr. Torres. Is that a ``yes?'' I am not clear on the
answer.
Mr. Gorman. Clearly, the lack of disclosure here hurt.
Fortunately, it didn't hurt taxpayers. It didn't hurt
investors. It hurt Hwang and his family office, and it hurt the
banks that were prime brokers to him. But generally, yes, I
think this is something that should be figured out and the SEC
is focused on it.
Mr. Torres. The largest banks are earning more and more
profits than ever before, but appear to be making fewer and
fewer loans to consumers and small businesses. Citi had record
profits in the first quarter, yet lending is down by 10
percent. Bank of America saw doubling of profits in the first
quarter, yet lending is down by 14 percent. My questions are
specifically for the CEOs of Bank of America and Citi. Can you
briefly explain to me the dramatic decline in lending in the
midst of record quarterly profits?
Mr. Moynihan. Why don't I start? Our loans are down largely
through a series of factors. One of them was obviously for
small business loans, $35 billion of PPP loans that replaced
loan credit. For middle-market companies, they are borrowing a
percentage of their revolvers, 1 through 30, 5/30, 7 percent to
27 percent. That is tens of billions of dollars of loans. And
then, consumers paid off their credit cards. We had $90 billion
of credit cards before the crisis, and we would still want all
of those loans obviously, because that is the business were in.
So, it was demand-side driven by the markets.
The good news is, as the economy has healed and as final
demands come back in, and spending by consumers and businesses
is growing, you have seen the loan balances start to grow this
quarter, and we will see where we end up. That has been a
hopeful sign. But when you think about it, to give you just a
snapshot, in May of 2021, we committed $1.1 billion in
commercial lines of credit for small businesses. That is up 30
percent from where it was in May 2019. And you will see loan
balances grow as companies reopen and need the lines of credit
and start to access their lines.
Mr. Torres. I am going to actually move on just in the
interest of time. I have a question specifically about New York
City. The government of New York City draws more than half of
its revenues from real estate, particularly commercial real
estate, and the vitality of the New York City economy, as well
as the viability of New York City transit, depends heavily on
foot traffic from those commuting to and from the office. My
question to each of the CEOs is, do you plan to send most or
all of your employees back to the office 5 days a week, and, if
so, when? Please provide an exact timeline. Let's start with
JPMorgan.
Mr. Dimon. Congressman, I would say we don't have a long-
term plan, but we are aiming for everyone to be in half of the
time starting around mid-July, and we are asking people to come
in now, and get comfortable. It is very safe. No one is being
forced to do anything. We want everyone to be vaccinated. We
are not requiring that yet. It is quite safe. And a lot of us
have been coming in every day since last June.
Mr. Torres. Bank of America?
Mr. Moynihan. Yes. We have started to bring vaccinated
employees back. We collected the information voluntarily from
them. We have about 50,000 teammates who put the information in
and gave us the ability to call them back and have them work.
In New York City, in particular, that is starting to take
place. The top levels will be back in the office effective June
1st, and our goal is, by after Labor Day, to effectively be
back to sort of where we were in January of 2020.
Mr. Torres. Citigroup?
Ms. Fraser. Thank you. I am in the office in New York
myself today. We are expecting to get 30 percent of our people
back in the office in America by early July, with a view of 50
percent being back in September. And we are going to take it
from there, depending on the guidance of social distancing and
other factors.
Mr. Torres. I see my time has expired.
Chairwoman Waters. Thank you very much. The gentleman from
Texas, Mr. Taylor, is now recognized for 5 minutes.
Mr. Taylor. Thank you, Madam Chairwoman. I appreciate you
calling this hearing. And I appreciate the witnesses taking the
time to be here with us. I wanted to talk about inflation and
overheating. We have had a couple of allusions to that, and as
I go around Texas' 3rd Congressional District, I talk to auto
dealers that have 10 percent of the new cars they usually have
on the lot. I talked to a steel manufacturer who has watched
steel prices go from $500 a ton to $1,600 a ton. Gas prices
from 1 year ago are up 70 percent. Lumber prices are up from 1
year ago, 300 percent, coffee up 45 percent, cotton prices up
43 percent, sugar prices up 54 percent, and propane prices up
20 percent.
Do any of you CEOs--and if you believe this, just put your
hand in the air, and I would be happy to call on you--think the
economy is not overheating? If you disagree with the statement,
``the economy is overheating,'' just put your hand in the air.
We would love to hear your thoughts on that because you all,
collectively, are overseeing trillions of dollars of the U.S.
economy. Yes, Mr. Gorman, please?
Mr. Gorman. I don't think the economy is overheating. The
economy is obviously making a dramatic recovery from a very
depressed state a year-and-a-quarter ago. We have record-low
interest rates and record-high fiscal stimulus. But I don't see
that yet as saying the economy is overheating. I just think it
is growing faster than it was, and it is a function of the
recovery we are under.
Mr. Taylor. Okay. And, Mr. Gorman, thank you for
volunteering that. I appreciate that perspective. Do you think
in Washington, Congress should dump a couple more trillion
dollars into the economy and government spending to kind of get
things back where they need to be?
Mr. Gorman. No, and that is obviously a separate question
of where are we right now and where are we heading. Clearly,
with the global economic recovery and the amount of stimulus so
far, I would be very cautious about further elevated levels of
stimulus. At some point, the combination of low interest rates,
extra stimulus, and synchronized recovery becomes a problem. We
are not there yet, which is why I said, ``no'' to the
overheating.
Mr. Taylor. Okay. And Mr. Solomon, I think we have spoken
about this, talking about some research that your bank did on
Goldman Sachs, and I actually referenced it in a previous
hearing, talking about fiscal stimulus as a percentage of slack
in the economy. I think your bank's analysis, Goldman's
analysis, was that last year, the Federal Government spent 4
times slack. Already this year, we have spent 6 times slack. Do
you think the prescription for Washington is to dump a few more
trillion dollars in the economy to get things going?
Mr. Solomon. My response to that would be very similar to
Mr. Gorman's response. I think at some point, the loose
monetary policy and the fiscal stimulus, combined with an
accelerated recovery, will create issues. I don't think we are
overheating yet, I agree with that, but I would be very
cautious about putting additional stimulus in at this point in
time.
Mr. Taylor. Mr. Dimon, I saw you nodding your head. What
are your thoughts?
Mr. Dimon. I am right with them, and using Mr. Gorman's
heating analogy, we are heating up. We are not boiling yet, but
we are putting a lot more fuel on the fire, and my own view is
we will get to the boiling point. And I don't know that for a
fact. I am not betting that, but I just think with $6 trillion
in stimulus, all the QE recovery from the pandemic, the balance
sheets, which are raring to go, I think there is a good chance
to see overheating sometime in 2022.
Mr. Taylor. And, Mr. Dimon, earlier you mentioned that you
were concerned about inflation. I think you were very sure that
inflation was coming. Are you changing the composition of your
balance sheet in anticipation of inflation coming?
Mr. Dimon. We protect ourselves against multiple scenarios,
and that is one of the scenarios, yes.
Mr. Taylor. Okay. So you are anticipating that, and then
financially putting your money where your mouth is in terms of
changing your asset-liability composition in anticipation.
Mr. Dimon. I will refer to the 10-Q, but it shows you that
we have done some of that, yes.
Mr. Taylor. Okay. I don't mean to put you on the spot, sir.
I appreciate that. And then, Mr. Moynihan, do you want to
comment on reacting to inflation?
Mr. Moynihan. Sure. If you look at it straightforwardly, as
my colleagues said, the economy this quarter is expected to be
as big as it was in 2019 before the pandemic. The growth rate
projected forward is 7 percent, 3 times the rate the economy is
projected to grow, and the interest rate environment is much
more accommodative. That sets up a robust growth in the second
half and beyond, as we all spoke about, and also the very tough
discussion about whether it is inflation or not and whether
that will be permanent. So, I think we have to be very vigilant
right now or else we can find ourselves past the point of
pulling back.
Mr. Taylor. Thank you, Mr. Moynihan. And I would just
caution my colleagues to think about next steps for Washington
to not dump trillions of dollars into the economy
unnecessarily. I yield back.
Chairwoman Waters. Thank you very much. The gentlewoman
from Michigan, Ms. Tlaib, is now recognized for 5 minutes.
Ms. Tlaib. Thank you, Madam Chairwoman. Thank you so much
for this hearing. I just want to ask my own yes-or-no question.
Are you all familiar with the term, ``environmental racism?'' I
will start with Chase Bank.
Mr. Dimon. Vaguely.
Ms. Tlaib. Are you familiar with environmental racism?
Mr. Dimon. I said vaguely, yes.
Ms. Tlaib. Vaguely. Okay. How about you, Citigroup? Ms.
Fraser?
Ms. Fraser. The same, only vaguely. I don't know the
specific definition of it.
Ms. Tlaib. That is fine. And how about you, Mr. Gorman?
Mr. Gorman. No, I am not.
Ms. Tlaib. Morgan Stanley isn't familiar. Okay. How about
Bank of America? Are you all familiar with the term,
``environmental racism?''
Mr. Moynihan. Vaguely familiar.
Ms. Tlaib. Yes. Wells Fargo, do you know what environmental
racism is, yes or no?
Mr. Scharf. I am not familiar, Congresswoman.
Ms. Tlaib. That is unfortunate. How about you, Mr. Solomon,
Goldman Sachs?
Mr. Solomon. Vaguely familiar, but not specifically.
Ms. Tlaib. I want you all to know that environmental racism
showed its face in a deadly way during the pandemic in my
district, where more of my Black neighbors died at a higher
rate from COVID than any other community in Michigan, even
though our Black population in Michigan is less than 15
percent, due to the preexisting health conditions that come
from living in the backyard of corporate polluters financed by
your banks. When it comes to racial justice, I see many of you
having these commitments to diversify your executive ranks.
Good. But I think the American people really, truly want to
know, what about the actions that are needed to invest in our
communities, like mine, that you all profited off of, that left
us with more pollution, decay, and poverty?
You all should know and be familiar with the term,
``environmental racism,'' because for generations, Black,
Brown, and Indigenous communities have seen the fossil fuel
corporations use your banks to finance and construct oil and
gas refineries, petrochemical plants, and pipeline projects.
These polluting projects haven't been built in wealthy
neighborhoods, as you all know. They have been built on land in
frontline communities of color, and have contaminated our air,
and polluted our water for generations to come.
JPMorgan Chase, Citibank, Wells Fargo, and Bank of America,
all of you collectively financed $977 billion worth of fossil
fuel projects and infrastructure since the Paris Agreement.
That includes financing Marathon Petroleum right in my
backyard. All of your institutions financed Marathon, but Mr
Scharf, Wells Fargo led the pack, providing nearly $7.2 billion
in financing Marathon over the past 5 years.
I want you all to know that Marathon has fought to
dismantle fuel efficiency standards tooth and nail, and their
refineries pollute frontline communities in my district and
across the country: 48217, the neighborhood I represent with
Marathon there, is the most polluted ZIP Code in the State of
Michigan, and it is a majority Black community. It has left us
with high rates of asthma and cancer. Countless families have
lost their loved ones too soon because they were forced to
breathe the polluted air your banks financed.
So, I want to ask you all, one by one, starting with Chase
Bank, Mr. Dimon, do you live near a refinery? Yes or no, do you
live near an oil refinery?
Mr. Dimon. I do not.
Ms. Tlaib. How about you, Ms. Fraser? Do you live near an
oil refinery?
Ms. Fraser. No, I do not.
Ms. Tlaib. Mr. Gorman, do you live near an oil refinery?
Mr. Gorman. No.
Ms. Tlaib. Mr. Moynihan, do you live near a refinery?
Mr. Moynihan. I do not.
Ms. Tlaib. How about you, Mr. Scharf? Do you have a
Marathon oil refinery in your backyard?
Mr. Scharf. No, I don't.
Ms. Tlaib. How about you, Mr. Solomon?
Mr. Solomon. No, I don't.
Ms. Tlaib. So, I need all of you to address racial equity.
What that means is understanding environmental racism and
reversing decades of it, and halting the damage that you all
continue to invest in. Please, I dare you all to come to my
district. I offer this even to my fellow Members of Congress.
Come and smell what my neighbors smell, breathe what they
breathe. Tell me then whether or not you will continue
financing for oil refineries, because right now, it is morally
unacceptable. If you truly believe in racial justice, then you
would make sure that you and your team understand environmental
racism in our country. That has been a term used by Black and
Brown communities since the 1970s and 1980s.
So with that, I just ask, again, Chairwoman Waters, let's
please follow up and make sure these folks have the information
they need to understand this term. That is critically important
to communities they are directly impacting in a negative way.
And with that, I yield back.
Chairwoman Waters. Thank you very much, Ms. Tlaib. The
gentleman from Georgia, Mr. Loudermilk, is now recognized for 5
minutes.
Mr. Loudermilk. Thank you, Madam Chairwoman. When all of
you testified to this committee in 2019, I asked questions
about cybersecurity. Since we had that hearing, we have
experienced the Colonial Pipeline data breach, which everyone
realizes shut down the gasoline supply for much of the country
for several days, and yet we have had another major Federal
Government data breach since that time as well called the
SolarWinds hack. Mr. Dimon, what is the latest on the
cybersecurity front, and is your bank using artificial
intelligence to help protect and address cybersecurity threats?
Mr. Dimon. I think all of the banks here have spent a
tremendous amount of time and money. In the financial services,
we have been worried. This is not new. Maybe the pipeline
problem is going to open other people's eyes. It is not opening
ours. As Brian Moynihan mentioned, we have a financial services
group that works with utilities to focus on this. We spend,
directly, $600 million or $700 million on cyber. I think the
financial companies are close to the defense companies. We are
probably way ahead a lot of other people. And also, someone had
mentioned before third parties. Most of us do a lot of
oversight of third parties and demand a lot from them about how
they run their affairs to try to minimize this.
Having said that, it is a huge risk to the system. Outside
nuclear proliferation, this is the biggest risk to the system.
It is not just what we do. It is what government entities do.
It is what we get exchanges to do. It is what communication
companies do, which I think are pretty good at it. It is what
the utilities do, which I think some are pretty good at it. And
it is what the government, and when Secretary Mnuchin was
there, he did an excellent job getting all of the government
together, from the security groups, the military, Homeland
Security, working with the banks and the regulators to have a
common view, and make sure we are partnering the way we can.
And there is still a lot more you can do with the government.
Mr. Loudermilk. What about artificial intelligence (AI)? Is
there any advancement made in using AI to address these issues?
Mr. Dimon. We use an extensive amount of AI, risk of fraud,
and outside vendors to capture as much as we can. As you know,
most of these companies will get attacked a million times a
day, but they have not been able to break through in any
material way. But honestly, the fear of that is very high.
Mr. Loudermilk. We appreciate the efforts there, and I
think the fear of it being high is what is going to keep us a
little more vigilant. But I do think Congress must enact
national data security and breach notification standard to help
address this problem across a multiple States and Territories.
Another issue is that demand for loans is incredibly weak
right now. In fact, the amount of loans as a share of deposits
across the banking industry is at record lows. Our economy is
expanding after an extreme contraction, so you would think
there would be a robust demand for credit. But the way I see
it, and several others do, is that the one of the main reasons
for the weak demand for loans is that we have put trillions of
dollars of taxpayers' money in stimulus payments into people's
pockets. So, everyday Americans are getting funds from the
government instead of through loans from the private sector.
Mr. Moynihan, why is the demand for loans so low, and what
needs to be done to return lending to the markets to normal?
Mr. Moynihan. I think when you look at the small
businesses, the PPP program, which was done well by the
government and by institutions on the screen here by delivering
$500 billion, $600 billion of what the total was, was very
important, but that also squeezed out private sector loan
demand, as you are saying. When you think about middle-market
companies--one of your colleagues earlier talked about the auto
dealers having 10 cars on the lot--we have auto dealer clients.
Their lines of credit are way down because they just don't have
cars to put on the lot.
So, I think there is a lot of demand there. It is building.
I think you will see the loan balances start to grow in this
part of the cycle. But because of the uniqueness of the
situation, I don't think we can equate it to other down drafts,
because the shutdown of the economy stopped all of the loan
demand overnight for a whole bunch of types of businesses. It
is now coming back, and I think as you see those move in the
second half of the year, you will see that start to come back
through. And the amount of cash was multiples of it before, so
the deposits went up faster.
Using the loan deposit balance, I think, is a marker from a
different era right now. It was handled completely differently,
but I think it will start to come back and sync over time.
Mr. Loudermilk. Okay. I think so as well, and I would like
to see the economy grow itself organically and get back to
where the free market is doing this and not dumping trillions
more dollars into the economy, just to shore up and to let it
grow.
On another topic, the new FDIC Chief Information Officer
recently stated that the best way to bank the underbanked is
through technology, and I agree with that, and I believe
policymakers should embrace FinTech. Ms. Fraser, what does
FinTech provide to consumers and businesses within credit
files? I am out of time, so I will just submit some questions
for the record, and with that, Madam Chairwoman, I yield back.
Chairwoman Waters. Thank you very much. The gentlewoman
from North Carolina, Ms. Adams, is now recognized for 5
minutes.
[no response]
Chairwoman Waters. Ms. Adams, can you hear me?
[no response]
Chairwoman Waters. Okay. We are going to move on. The
gentleman from Massachusetts, Mr. Lynch, is now recognized for
5 minutes.
[no response]
Chairwoman Waters. If not, the gentlewoman from
Pennsylvania, Ms. Dean, is now recognized for 5 minutes.
Ms. Dean. Thank you, Madam Chairwoman. Are you able to hear
me?
Chairwoman Waters. Yes, I can hear you very well.
Ms. Dean. Thank you very, very much. I, too, want to say to
all of the leaders here today testifying, thank you for your
work during this pandemic. And when I say that, I really
recognize as well your officers, your lenders, and your
employees, who worked tirelessly in partnership with us and the
legislation that we passed in the first year in a bipartisan
way, to make sure that we got capital and relief out to
customers, to businesses, to small businesses, and beyond. So,
I do thank you. I am particularly thinking of a lender in my
area, who was working around the clock to make sure that people
were getting PPP.
I would like to pivot to an area that I care desperately
about, and I bet all of you do, too. This year has started once
again with tragically heartbreaking and unacceptable amounts of
gun violence in our country. Reported by the New York Times,
there have been 232 mass shootings between January the 1st and
May 26th of this year, over 100 more than that same period in
2020. Yesterday, as you all saw, nine more dead in a mass
shooting in San Jose, California.
Financial institutions, your banks, are in the business of
profits, as you should be, for yourselves and for your
shareholders, but you are also in the business of managing
risk, so I would like to ask you a few questions about how your
banks are managing high-risk industries like gun manufacturers
and companies that are a threat to your reputation, to your
shareholders, to your investors, and to your customers and
employees.
First, let me commend Citigroup and Bank of America for
recognizing that ending gun violence in this country is, I
would suggest, a decision, but also a command of corporate
social responsibility.
Ms. Fraser, Citigroup's U.S. commercial firearms policy
requires retail sector clients to abide by several best
practices. Can you describe them briefly to us and what
difference your corporate policy has made in terms of your
corporate responsibility toward ending gun violence in our
country?
Ms. Fraser. Thank you very much. It was informed because a
number of our employees were directly affected by a number of
instances, including Parkland, and I spoke myself to 11
families of our employees who had children in the school there.
And so, we decided to put a part of our environmental and
social unrest policy. We asked the retail clients, the
retailers, to follow best practices in their sales practices
for selling guns. They are widely-followed practices, but they
include making sure that a background check is there at the
point of sale, that there are no sales to anyone under 21
without training, and there are no sales of bump stocks. We
felt very comfortable that those practices were ones that would
help keep guns out of the wrong hands, and that was the
thinking behind it.
Ms. Dean. I commend you for that, and I ask you to consider
other policies that Citi could enlist that would have an even
greater impact, but thank you for being a leader there.
Mr. Dimon, in our hearing in 2019, I remember you telling
Congresswoman Maloney that JPMorgan would consider a similar
policy to Citigroup and Bank of America, but I don't think any
such change has been made. What is your organization doing to
prevent gun violence?
Mr. Dimon. I don't think it is that different, to tell you
the truth, and I would have to go through the detail to go
through it. But obviously, any retailer who sells a gun has to
follow the law of the land, ATF, local laws, filing. They have
to file them when someone buys a gun, so we try to do all of
those same things. We do not finance manufacturers of military-
style weapons for civilian use, though we do finance that for
military use, because we obviously support and love the
American military. So, I don't think it is that different. I
would submit to you that there are a lot of laws that are on
the books, and there are a lot of laws that could be changed
that are on the books that could immediately fix this
situation.
Ms. Dean. I would call upon you and JPMorgan to call upon
the Senate to pass the two bills that we have sent over for
universal background checks for the closing of the Charleston
loophole, and maybe you, JPMorgan, could message your strong
commitment to ending gun violence in our country.
Mr. Scharf, Wells Fargo is the National Rifle Association's
(NRA's) bank, a relationship you said in April of 2022 to
investors was declining. What is the status of that
relationship, and when you say, ``declining,'' that is rather
passive. Have you considered actively severing that
relationship? And I would ask, Madam Chairwoman, if the
gentleman would be able to briefly answer?
Chairwoman Waters. The question has been directed to you,
Mr. Scharf.
Mr. Scharf. I actually have to see where we are with the
NRA. I believe we have exited it--if not in total, we are very
close to the end, but I can certainly get back to you.
Chairwoman Waters. Please get back to Ms. Dean with that
information.
Thank you very much. The gentleman from Minnesota, Mr.
Emmer, is now recognized for 5 minutes.
Mr. Emmer. Thank you, Madam Chairwoman. I appreciate it. In
the past year, urgently-expanding access to credit was more
important than ever, especially for the unbanked, underbanked,
and those living in the margins. As Americans moved out of
urban areas, and government-mandated shutdowns forced people
into their homes, financial technology companies were able to
extend financial services to any and all Americans with a cell
phone, which increased financial inclusion and further
democratized access to credit.
Mr. Scharf, briefly, how did Wells Fargo partner with
FinTech companies to prepare for and to adapt to the digital
migration we have experienced in the past year, and how did you
extend your services to those previously unreached, the
unbanked?
Mr. Scharf. Congressman, we partner with FinTechs on a
whole range of things that are predominantly our digital
offerings these days. When the pandemic hit, and we tried to
keep as many branches open as we possibly could, we kept at
least 70 percent of them open, but there was a significant
migration on the service side, especially to use our digital
offerings. It is something that we certainly talk very actively
to our customers about because we thought it was a smart and
safe way for them to continue to do business with us. We saw
the digital activity depending on the month during the pandemic
either be up 50 percent or be double what it was in prior
periods. And so, the adoption has grown significantly, and a
series of those underlying services are built with some of the
power of FinTechs in the background.
Mr. Emmer. Great. I would like to open this question up to
the other two witnesses and ask you to briefly describe what
activities related to cryptocurrency your firms are engaged in.
Why don't I start with Mr. Solomon?
Mr. Solomon. Thank you, Congressman. We are restricted by
the regulatory structure to act as a principal trader or to own
most cryptocurrencies. We do clear bitcoin futures. We provide
advice to clients, particularly institutions and high-net-worth
individuals that have an interest in gaining exposure, although
often they go to other places to gain those exposures.
Mr. Emmer. Great. Mr. Dimon?
Mr. Dimon. Exactly where Mr. Solomon is, and I don't give
personal financial advice, but if you did ask me, in this case,
I would tell you to stay clear of bitcoin.
[laughter]
Mr. Emmer. Mr. Gorman?
Mr. Gorman. Same position, and we allow clients to invest
in funds that are focused on crypto.
Mr. Emmer. Great. Ms. Fraser?
Ms. Fraser. Similarly. We are proceeding with great caution
here and are taking some tentative steps.
Mr. Emmer. Mr. Moynihan, it's good to see you.
Mr. Moynihan. It's good to see you, too. We clear futures,
and we are looking at some of the other things my colleagues
do, but that is basically all we do is clear futures at this
point.
Mr. Emmer. Okay. Now that I have gone through the group,
Mr. Scharf, how about you?
Mr. Scharf. We are looking at a whole series of things and
proceeding very, very cautiously.
Mr. Emmer. That seems to be a theme. Again, thank you all
for being here. I am going to make it brief because I know you
have been here for a long time today. Madam Chairwoman, I will
yield back.
Chairwoman Waters. Thank you very much. The gentleman from
Illinois, Mr. Garcia, is now recognized for 5 minutes.
Mr. Garcia of Illinois. Thank you, Madam Chairwoman, and to
all of our panelists. I am in Chicago, and I represent a
working-class district, and many of my constituents are Latino
immigrants, as am I. In neighborhoods like mine, it is very
clear that environmental justice and racial justice are linked.
Black and Latino communities suffer disproportionately from
polluted air and dirty water, and we are barely consulted about
issues and projects in our communities. All too often,
Indigenous communities face the exact same issues, as pipelines
are being built on their historic land despite their
opposition.
Mr. Dimon, your bank has made a public commitment to racial
justice and to reaching net zero carbon emissions by 2050,
which is commendable, a target that would require no new oil
and gas fields. Yet, JPMorgan Chase continues to do business
with Enbridge, which is building its Line 3 pipeline over
significant opposition from Indigenous communities. Will your
bank commit to respecting treaty rights and protecting our
climate by committing to stop funding Enbridge and the Line 3
pipeline?
Mr. Dimon. First of all, we did not commit to net zero like
you just said. We are trying to be a rational player here. Oil
and gas is not going to go away. You can actually get to net
zero and still produce some oil and gas, just have it offset
with other technologies, et cetera, and I think that is the
more likely outcome, even by 2050. And I don't know about
Enbridge, in particular. I would have to get back to you on
that.
Mr. Garcia of Illinois. I would appreciate it, sir. And my
follow-up question is, how do you square your commitment to
oppose racism and reach net zero emissions, but we can pick
that up when you provide that answer.
Following up with Mr. Scharf, this January the OCC lifted
one of its consent orders regarding Wells Fargo's compliance
with anti-money laundering and the Bank Secrecy Act
requirements. Many of the bank's legal issues boil down to a
toxic, high-pressure culture that blamed frontline workers for
decisions that senior management made. Since you became CEO,
what new measures has Wells Fargo adopted to ensure that
frontline bank workers do not fear retaliation for reporting
inappropriate or unethical conduct by management?
Mr. Scharf. Congressman, we have made a significant number
of changes to the company in both our processes and our
procedures, but also in our culture. Just to give you a sense,
from the senior management, we have hired 11 people from the
outside of the company to fill seats on our 18-member operating
committee. Almost 100 hundred of the top 200 people are new to
the company. We have put in a substantial amount of
infrastructure around customer feedback, and employee feedback.
Independent investigations occur, and there has been a dramatic
series of changes inside the company as well as the cultural
change that is necessary for these things to really take root.
In addition, we have changed compensation plans.
Significant numbers of people--management people, that is--have
exited the company. And so, while there is still more work to
do--there is always more work to do on these things--it is a
very different company today than it was.
Mr. Garcia of Illinois. And since you are not a unionized
workplace, without union representation or just-cause
protections, how can you reassure frontline employees and
regulators that bank workers can do their jobs without fear?
Mr. Scharf. We have a no-retribution policy. If people
believe that there is retribution, those things are looked at.
We have multiple ways for employees to provide feedback,
including a new process we are in the process of rolling out to
the entire company. This information is reviewed by the
operating committee on a regular basis and by the board of
directors.
Mr. Garcia of Illinois. Okay. Thank you very much, Madam
Chairwoman. I yield back.
Chairwoman Waters. Thank you very much. The gentlewoman
from North Carolina, Ms. Adams, is now recognized for 5
minutes.
Ms. Adams. Thank you, Madam Chairwoman. Can you hear me?
Chairwoman Waters. Yes, I can hear you.
Ms. Adams. Okay. I apologize for the problem I had before.
But let me thank you for convening the hearing, and I want to
welcome Ms. Fraser as the first woman ever to lead one of our
megabanks, and hopefully, one day, we will truly have diversity
that represents our country. But for all of the witnesses,
many, if not all of you, have probably made public commitments
and pledges to diversity, equity, and inclusion (DEI). You have
made statements about the importance of cultivating,
recruiting, and hiring, and promoting diverse talent in your
companies. So, in particular, I want to focus on how you are
cultivating diverse talent for your corporate officers in the
C-suite. As you may know, I am a firm believer that
Historically Black Colleges and Universities (HBCUs) must be a
part of any corporation's DEI strategy. So, can each of you
tell me as succinctly as possible what you have done recently,
within the past week, month, or year to support, to invest in,
and to cultivate talent at HBCUs, and specifically, how do
HBCUs and their graduates play a direct role in your DEI
strategies? That is for each of the witnesses.
Mr. Dimon. I will go first. This is Jamie Dimon, JPMorgan
Chase. I have been going to Howard and Spelman for the better
part of 30 years. We hire--I know the Howard number is more
than 20 kids every single year, and I think we recruited at 15
HBCUs. So, we are bringing in a lot more people at the bottom
level, and providing a lot more training. We have special
programs. We just started a program to hire and train 300 Black
financial advisors, to increase representation in financial
advisors, and we have a lot of senior Black executives. We are
up 40 or 50 percent in Black executive directors and managing
directors in the last 3 years.
And unfortunately, we lost one of our top--part of my
management team, top female Black leaders of the company, but
it is bittersweet because we lost a wonderful shining light.
She became CEO of another company, so we are also very proud of
her, and we are making a lot of progress, and we are doing a
lot.
Ms. Adams. Okay. Thank you, Mr. Dimon.
Mr. Gorman. I am happy to go next, Congresswoman. We
actually recently initiated a program of scholarships for 60,
4-year, full-time scholarships specifically for college kids at
Spelman, Morehouse, and Howard, and combined with the
scholarship is training for entering the workforce, dealing
with recruiting interviews, and the like. So, very recently,
that was initiated.
Mr. Scharf. Congresswoman, I will go next. This is Charlie
Scharf with Wells Fargo. One of the things that we have come to
recognize is that there are many HBCUs in this country that
have wonderful talent at them. Since 2007, we have actually
provided almost $40 million through scholarship funds. Most
recently, in Charlotte, we announced a series of community
grants, including one to Johnson C. Smith University, which
included a million-dollar grant for minority scholarships. And
so, we are very, very firm believers in what HBCUs do for this
country, and we will continue to support them.
Mr. Solomon. Congressman, this is David Solomon. We recruit
from over 100 HBCUs. We have set a goal to double the number of
people that we actually bring in over the course of the next 5
years. We just committed $25 million to a program we call HBCU
Market Madness. It is a case study training program, a
competition that provides scholarship aid that we think is
highly successful. It includes eight HBCUs, including North
Carolina A&T State University, and so we continue to invest in
that program and expand it.
Mr. Moynihan. Go ahead, Jane.
Ms. Fraser. Oh, thanks, Brian. From the Citi end, our CFO
is a proud graduate of Howard, and he is the vice chair there,
and he has been a wonderful advocate for the work that we are
doing, similar to the other banks, with the HBCUs. We fund
them, we recruit there, and we are very active around it. And
they are such talented people. It is exciting to have them as
part of the firm.
Mr. Moynihan. I would just add a couple of things. Number
one, happy birthday. But number two, one of the perceptions we
had as we all expand our efforts to HBCUs is that they needed
more help on their career development, career pathways work.
So, we gave a grant to 11 of them in the last year of a million
dollars each so they could expand their capacity of graduates
into all of the programs, especially outside the financial
services industry.
The other neat thing that I think we did is we started an
entrepreneurship center between Spelman and Morehouse with the
Black Executive Alliance that will create an entrepreneur
center, which would be the first of its kind among HBCU
universities. And also, like Mr. Scharf and Wells Fargo, we are
working with Mayor Lyles on trying to figure out the future
role of Johnson C. Smith University in Charlotte, and have made
grants, and are trying to support that HBCU and its progress
forward.
Chairwoman Waters. Thank you very much. The gentlewoman's
time has expired. Now, we will hear from the gentlewoman from
Georgia, Ms. Williams. You are recognized for 5 minutes.
Ms. Williams of Georgia. Thank you, Madam Chairwoman. To
build an inclusive economy where everyone has a chance at
success, we all need access to responsible financial services.
Unfortunately, today, as we have discussed, we see disparities
in assessing even the most fundamental of financial services.
For instance, according to a 2019 FDIC survey, 13.8 percent of
Black households were unbanked, while only 2.5 percent of White
households were. We have to break down these barriers to
banking, especially for those who are most marginalized.
According to the 2019 FDIC survey I referenced, nearly half
of the unbanked said that they didn't have enough money to
start a bank account. I would like to pose the following,
``yes'' or ``no'' question to the group: Has your institution
adopted any policy changes in the last year that have made it
easier or more affordable for individuals with low bank
balances to maintain bank accounts? Mr. Dimon?
Mr. Dimon. Yes, we have a great product, I don't know if it
was in the last year, called the Secure Account. It is $4.95 a
month, but you get bill pay online, direct deposit, access to
ATMs, access to branches, no overdraft, et cetera. We hope to
do a million more, so that can reach out to a lot more of the
unbanked.
Ms. Williams of Georgia. Thank you, Mr. Dimon. Ms. Fraser?
Ms. Fraser. Thank you very much. Yes, we have a product
called the Access Account that we launched back in 2014. It is
now about 20 percent of our accounts in America. It is no fee.
There is no overdraft. It is very easy to use and digitally
available as part of it. We also provide our ATMs to 28
different partners and community banks and give them free
access to the ATM machines to, again, drive access into areas
that we don't have a presence in. And that has been successful
in reaching more of the unbanked and making it easier for them
to bank.
Ms. Williams of Georgia. Thank you, Ms. Fraser. Mr.
Moynihan?
Mr. Moynihan. Yes, as was stated earlier, the SafeBalance
account, which is a Bank On product, which a lot of us have,
and Jamie talked about his and Jane talked about hers, now has
about 2\1/2\ accounts in it, about 30 percent of new sales. It
is $5 a month, no overdraft, et cetera, and if someone has
direct deposits of more than $250 a month, we offer it free.
And it is also offered free to people under the age of 24,
college kids and high school kids, et cetera, and that is a
growing product. And I think you will find out from this group,
along with the VPI, which is the 25 banks, has really been
driving this Bank On product really in conjunction with the
FDIC, I think, starting 5, 7 years ago. So, you are going to
find all of the core banks here doing the same thing and trying
to push that unbanked number down. And you have seen it fall in
the last few surveys.
Ms. Williams of Georgia. And Mr. Scharf?
Mr. Scharf. Yes, we as well have announced a Bank On
product called Clear Access with the same features that you
have heard. I think many of us on the call, if not all of us,
have invested in MDIs, which is another source of serving the
unbanked or underbanked population. And we, and, again, I know
others as well, have started a financial inclusion initiative--
ours is over 10 years--to really try and get to the unbanked
population in multiple ways.
Ms. Williams of Georgia. Thank you. And in the same survey,
about one-third of the unbanked cited both high bank fees,
which we have addressed, and unpredictable bank fees as
barriers to getting banked. I would like to ask the same
witnesses another, ``yes'' or ``no'' question. We are running
out of time. Has your institution adopted any policy changes in
the past year to eliminate, lower, or give customers more
warning in the banking fees that you assess? Mr. Dimon, yes or
no?
Mr. Dimon. Yes, that product does exactly that.
Ms. Williams of Georgia. Thank you. Ms. Fraser, yes or no?
Ms. Fraser. Yes.
Ms. Williams of Georgia. Mr. Moynihan?
Mr. Moynihan. Yes.
Ms. Williams of Georgia. And Mr. Scharf?
Mr. Scharf. Yes.
Ms. Williams of Georgia. And I would ask that each of you
please follow up and give me more details on what those notices
are so that we are more aware as we are talking with our
constituents and trying to do more in our communities.
And last, we have heard a little bit about what you have
done, and now I would like each of you to share just one goal
that you have to address barriers to getting individuals of
diverse demographic and economic backgrounds banked. What are
your plans for the future to continue to reduce this number?
And we are running out of time, so, Madam Chairwoman, I would
ask that this information be followed up with me so that I have
the additional details on what we are looking towards for the
future to continue to reduce this disparity in the unbanked
numbers in the Black community.
Chairwoman Waters. Thank you very much, Ms. Williams, and I
think that our witnesses heard what you said, and we would
expect them to get that information to you. With that, I now
recognize the gentleman from Massachusetts, Mr. Auchincloss,
for 5 minutes.
Mr. Auchincloss. Thank you, Madam Chairwoman, for
organizing this hearing. I have found this conversation to be
edifying, and I took only a small leave of absence, and that
was to meet with the Black Economic Council of Massachusetts
(BECMA) formed 6 years ago to help support Black entrepreneurs
and Black-owned businesses in Massachusetts. They have made
tremendous progress, and we talked about the work that they are
doing to advance their mission now really throughout the
Commonwealth. According to the Kauffman Foundation, about
three-quarters of new businesses struggle to find financing to
fund their businesses, and the rate of small business startups,
as opposed to high-tech growth startups, has actually fallen
off precipitously in the last 25 years, leading to a less
dynamic economy with greater concentrations of power amongst
big business.
We also know that according to the Federal Reserve Bank of
Boston, Black and Latino entrepreneurs hire residents in local
communities at much higher rates than non-minority-owned
businesses do. So, investing in Black entrepreneurs and Black-
owned businesses is good for small businesses and gateway
cities generally, as well as for the communities in which they
work.
Mr. Moynihan, I have had the opportunity to speak with the
president of your Massachusetts operation, who is a constituent
of mine, about the great work that Bank of America has been
doing in Massachusetts to support Black-owned businesses. I
wonder if you would be willing to commit to working with me and
with BECMA to advance the work that they are doing, whether it
is a public bank or other options, to support Black
entrepreneurs and Black-owned businesses?
Mr. Moynihan. Congressman, I would be happy to have Miceal
Chamberlain, whom you are referring to, meet and figure out if
we can help. We have invested a lot of private equity funds in
Massachusetts recently, along with other parts of the country,
to help bridge that capital gap, which then makes the companies
have the kind of equity that gets them into the mainstream
lending practices of the local competitive banks. So, we would
be happy to work you.
Mr. Auchincloss. That is great to hear. I am looking
forward to working with you and with BECMA on this important
mission. And they are my constituents, so I will know where to
find you.
I would like to change gears here from small businesses to
the ultra-wealthy, and talk about a bill that I co-sponsored,
along with Representative Ro Khanna, the Stop CHEATERS Act. And
this is about addressing the fact that the IRS has calculated
that the tax gap, which is the expected gap between revenue and
actual tax revenue, is about $400 billion a year. And the
proposal at its core on the Stop CHEATERS Act is to require
banks, for individuals who make more than $400,000 a year, to
issue adjusted 1099s, functionally, that tracks the income in
and the withdrawals out so that the IRS can better verify
people's actual income, and to close that tax gap and ensure
that everybody is paying their fair share of taxes.
There has been some pushback from the banking community
about this bill. If directed by Congress, and, Mr. Dimon, I
will start with you here, could your banks produce these new
1099 forms to help the IRS verify income?
Mr. Dimon. Yes, it would take about 18 months, but I urge
you, if you're going to do it, do it right. Banks are worried
about the litigation, the cost, and also you would have to
include, to be fair, cryptocurrency, investment accounts, all
of the other people who hold and move money.
Mr. Auchincloss. Thank you.
Mr. Dimon. Otherwise, you are just putting the burden on
one industry and not the rest.
Mr. Auchincloss. Mr. Moynihan?
Mr. Moynihan. I think, for the same cautions that Jamie
spoke about. If it is the law of the land, we will implement
it. It will take time to get it right, but I think the caution
would be to make sure that you think through squeezing money
out of the core financial system into other parts of the
economy, as one of the things that has happened traditionally
when only one part of the industry is asked to do something.
Mr. Auchincloss. To be respectful of time, I will just ask
if any of the other CEOs disagree with the statements made by
these two previous ones, to just raise your hand. Otherwise, I
will assume it is in the same vein.
[no response]
Mr. Auchincloss. Seeing no other hands raised, Madam
Chairwoman, I will yield back the remainder of my time.
Chairwoman Waters. Thank you very much. The gentlewoman
from New York, Ms. Ocasio-Cortez, is now recognized for 5
minutes.
Ms. Ocasio-Cortez. Thank you so much, Chairwoman Waters,
and thank you to all of our witnesses who are here today for
sharing your experience and expertise. I wanted to take today
to focus in on an issue that I think it is concerning to
everyone, and that is climate change. And I really want to kind
of narrow in a little bit more on how we can take a collective
approach to making sure that we get to where we need to be on
carbon emissions.
And so for each of you, I just kind of want to start off
and recognize that each of your firms have made a commitment to
achieve net zero financed emissions by 2050, which is a key
milestone for the Paris Climate Agreement. Just last week, the
International Energy Agency (IEA) announced that all new fossil
fuel projects must be stopped immediately in order to meet the
Paris goal of limiting warming to 1.5 degrees Centigrade. I
just wanted to pose a couple of questions to kind of discern a
little bit about the details of each of your firm's
commitments. So, for each of you, if we could just kind of go
down the line and get a, ``yes'' or a ``no.'' Are each of your
firms still financing new oil and gas production? And we can
start with Ms. Fraser.
Ms. Fraser. Yes, we also are financing some new ones.
Ms. Ocasio-Cortez. Okay. And for Mr. Moynihan?
Mr. Moynihan. We finance oil companies, and we will
continue to do so to help them make the transition that we have
all talked about. And at the end of the day, we will get there
with a private sector-driven innovation and investing in some
new technologies. And some of these companies have intellectual
property that is superior for carbon capture storage, things
that we are going to need to make this happen. And so, we will
continue to work with it.
Ms. Ocasio-Cortez. Is anyone who has not answered, not
financing new oil and gas production?
[no response]
Ms. Ocasio-Cortez. Okay. I will take that as a, ``no.''
Let's move on. Are any of the banks represented here today
cutting their bank's financed emissions in half by 2030?
[no response]
Ms. Ocasio-Cortez. Okay. None. Have any of you set specific
targets or significant reductions in financed emissions in
absolute terms in terms of carbon emissions?
Mr. Dimon. We are working with clients to have targets for
absolute returns in emissions, and we are doing it by industry.
We haven't done all of the industries yet. We have done oil,
utility, auto, but there are other industries, of course, pulp,
paper, a whole bunch of other ones, and it is going to take a
lot of hard work to do it. The clients actually want to do it.
Mr. Moynihan. Yes, we are doing the same. I think that
everybody here has a similar thing. We have made commitments
now where you are literally going industry by industry to
figure out those participants in that industry, what you can do
to help them make the transition and what is their rational
timeframe. And then behind, with the small and medium-sized
clients, we are out educating them about what, ``net zero''
means, how they are going to have to commit to it, because
their customers, their people who are their vendors, too, and
others are making similar commitments.
So, the whole infrastructure has to come in line, and that
takes education. All of these banks have tremendous capacity to
educate their clients and help the small and medium-sized
business make the same transition that these large companies
have to make. And we are literally going industry by industry
to figure it out. That is where the hard work is going on.
Ms. Ocasio-Cortez. Thank you so much, Mr. Moynihan. And,
Mr. Dimon, you said that effort has been put in in defining
absolute emission targets. Have those been released yet, or are
those currently underway, and if so, is there an estimated time
in which we can see those absolute commitments?
Mr. Dimon. They are not public yet, and we are also working
with the clients on it, and I don't remember the exact
timeframe, but that is not a 2050 number. It much earlier than
that. I don't remember if it is 10 years or 15 years, et
cetera.
Ms. Ocasio-Cortez. Okay. Wonderful. And I believe that
those are all of my questions today, so thank you so much,
Madam Chairwoman. I yield back.
Chairwoman Waters. Thank you very much. Let me take this
moment to thank all of our distinguished witnesses for their
testimony today, and I would like to thank all of the Members
for the questions that they raised, and for the research that
they have done to help engage our witnesses here today.
We at the Financial Services Committee take our
responsibilities seriously, and we want to make sure that there
are available banking services for everybody, and that those
services are fair. And we want to make sure that people of
color and women are not excluded from jobs and career
opportunities in the banking community. And you can see from
some of the questions you were asked today that we have Members
who are very serious about this responsibility.
So, again, I am very pleased that you were all able to
spend time with us today. I know it has been 2 days, on the
Senate side and on this side, and knowing that you would be
grilled in some areas. We had a lot of areas of concern that we
were able to talk with you about today, and we are going to be
doing serious follow-up.
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.
Again, my sincere thanks to you. This hearing is now
adjourned.
[Whereupon, at 5:11 p.m., the hearing was adjourned.]
A P P E N D I X
May 27, 2021
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