CEOs Urge Lawmakers: Pump the Brakes on Regulations, Risk Economic Fallout

The heads of Wall Street's largest banks appeared on Capitol Hill on Wednesday to ask senators to stop the Biden administration's proposed changes to how banks are regulated, warning that the new proposals could harm the economy at a time of geopolitical turmoil and inflation.

Since the 2008 financial crisis, Wall Street's most senior bankers have routinely testified in front of Congress.

JPMorgan's Jamie Dimon, Bank of America's Brian Moynihan, Citigroup's Jane Fraser, and Goldman Sachs' David Solomon were among those who spoke before the Senate Banking Committee.

Caution Against Over-Regulation and Profitability Concerns

Previously, bank CEOs used the hearing to emphasize the industry's good actions; this year, they cautioned against the possible consequences of over-regulation.

The banks are vehemently opposed to a number of planned restrictions that might harm their profitability, including new Federal Reserve rules that would force large banks to retain more capital on their balance sheets. The sector claims that the new restrictions, dubbed the Basel Endgame, would reduce lending and undermine bank balance sheets at a time when the industry requires greater flexibility.

The Consumer Financial Protection Bureau is also considering ideas to limit overdraft fees, which have long been a source of revenue for consumer banks.

The other seven CEOs' prepared statements and responses to Senators' queries were all consistent.

Senate Dynamics and CEO Outreach: Navigating Perspectives and Legislative Agendas

Brown, a longstanding opponent of major banks, is unlikely to be convinced by the CEOs' remarks. Instead, the CEOs sought to reach out to more moderate Democratic members of the committee.

Only a few Democrats appeared to be in favor of the new regulations, while the majority of Republicans appeared to be against them.

Even Sen. Elizabeth Warren, D-Massachusetts, who is usually one of the most aggressive with Dimon and the other CEOs during these sessions, ignored the subject.

Warren sought the CEOs' backing for her bitcoin anti-money laundering legislation. The CEOs, who have long been opponents of cryptocurrency, were delighted to officially endorse her plan.

One Republican, in particular, was suspicious of the CEOs' statements. Sen. J.D. Vance of Ohio utilized the opportunity to question the CEOs about why their banks support public policy views such as gun control, voter ID legislation, and other initiatives, but then turn to the GOP for less regulation and lower taxes when it benefits them.

This year has been difficult for the banking industry, as high interest rates have prompted banks and consumers to seek fewer loans, while inflation has put financial strain on consumers. Signature Bank, Silicon Valley Bank, and First Republic Bank all failed this year as a result of a run on deposits and concerns about the soundness of their balance sheets.

Because of this year's bank runs at Silicon Valley Bank and First Republic, authorities have recommended stronger requirements for banks with assets exceeding $100 billion.