Top Wall Street bosses warned lawmakers that new financial rules that US regulators are considering could hurt lending and potentially damage the US economy.
Bank CEOs including JPMorgan’s Jamie Dimon and Goldman Sachs’ David Solomon argued at a congressional hearing on Wednesday that stricter legislation being floated — like increasing the amount of capital banks are required to hold — could create risk and hurt markets.
“Ironically, a proposal to mitigate risk will create even more risk in the financial system,” Dimon said in an opening testimony. It “will fundamentally alter the US economy in ways that the Federal Reserve has not studied or contemplated.”
Solomon added that new global policies — known as Basel III Endgame — “has a particularly negative impact to capital markets functioning.”
While the annual oversight of Wall Street firms happens every year, this year’s meeting comes following a string of regional bank failures earlier this year that resulted in well known institutions including Silicon Valley Bank and Signature bank going belly up.
JPMorgan stepped in to buy First Republic Bank after the smaller bank collapsed.
In response, new global banking standards known as the Basel III Endgame have been proposed in the hopes of providing more stability to the sector.
But the CEOs stressed the potential adverse impact on a range of products and services, from green lending, commodities hedging, and pension plan profits, to US Treasury market liquidity.
Other bank CEOs testifying at the hearing include Morgan Stanley’s James Gorman, Citi’s Jane Fraser, State Street’s Ronald O’Hanley, Bank of America’s Brian Moynihan and Wells Fargo’s Charles Scharf.
Gorman emphatically criticized Basel as “wholly unnecessary” and later making “no sense” for an industry already awash in cash and subject to a slew of strict regulations.
The CEOs are being grilled by lawmakers including progressive Sen. Elizabeth Warren (D-Mass.).
In 2021, Dimon was drawn into a fiery exchange with Warren about overdraft fees, while last year she grilled him over fraud on bank payment network Zelle.
Big banks subsequently reduced overdraft fees and expanded Zelle fraud protections.
Democrats like Sherrod Brown, who chairs the committee, voiced skepticism that banks are motivated by more than profits.
“Absolutely nothing in these rules would stop your banks from making loans to working families,” Committee Chair Sen. Sherrod Brown (D-Ohio) said. “What your banks want is to maximize quarterly profits, the cost of everything and everyone else be damned.”
The Republican Senator from South Carolina, Tim Scott, was more sympathetic and said the new policy framework would have a “devastating impact” on small business owners.
Senator Mike Rounds, a Republican from South Dakota, asked the CEOs if the regulations could hurt homebuyers, farmers, small business owners, prompting all eight to raise their hands.
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