Big bank CEOs warn that new regulations might severely impact economy

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The heads of the nation’s biggest banks say there are reasons to be concerned about the health of U.S. consumers—particularly poor and low-income borrowers—in their annual appearance in front of Congress on Wednesday.

The CEOs of JPMorgan Chase, Bank of America, Wells Fargo and five other large firms also took the opportunity to impress upon senators that the Biden Administration’s new proposed regulations for the industry could hurt the U.S. economy going into an election year and at a time when a recession is possible.

Wall Street’s most powerful bankers have regularly appeared in front of Congress going back to the 2008 financial crisis. Among those testifying before the Senate Banking Committee include JPMorgan’s Jamie Dimon, Bank of America’s Brian Moynihan, Jane Fraser of Citigroup and Goldman Sachs’ David Solomon.

When both houses of Congress were controlled by Democrats, the CEOs would appear in front of both the House Financial Services Committee and the Senate banking panel. Now that Republicans control the House, only the Senate is holding a hearing this year.

The CEOs are using their appearance in front of the Senate differently this year. Whereas in previous years they used the hearing to highlight the industry’s good deeds, this year they are warning about the potential dangers of overregulating the industry.

The banks are adamantly against new regulations proposed by the Biden Administration that could hit their profitability hard, including new rules from the Federal Reserve that would required big banks to hold additional capital on their balance sheets. The industry says the new regulations, known as the Basel Endgame, would hurt lending and bank balance sheets at a time when the industry needs more flexibility.

“Almost every element of the Basel III Endgame proposal would make lending and other financial activities more expensive, especially for smaller companies and consumers,” Fraser said in her written remarks.

The other seven CEOs were uniform in their comments in their prepared remarks.

The industry’s opposition has saturated the Washington media market over the last several weeks, which came up in senators’ remarks during the hearing.

“If you’ve watched the local news in Washington, if you’ve waited at a bus stop in Washington, if you’ve flown out of Washington national airport, you’ve probably seen ads urging people to, quote, ‘Stop Basel Endgame,’” said Sen. Sherrod Brown, the committee chairman.

“You should stop pouring money into lobbying against efforts to protect the taxpayers who subsidize your entire industry,” Brown later said.

There are also proposals coming from the Consumer Financial Protection Bureau that would rein in overdraft fees, which have also been a longtime source of revenue for the consumer banks.

This year has been a tough one for the banking industry, as high interest rates have caused banks and consumers to seek fewer loans and consumers are facing financial pressure from inflation. Three larger banks failed this year—Signature Bank, Silicon Valley Bank and First Republic Bank—after the banks experienced a run on deposits and questions about the health of their balance sheets.

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2 thoughts on “Big bank CEOs warn that new regulations might severely impact economy

  1. I watched as the economy crumpled in the 2008 bank induced mortgage crisis. I watched in horror as the reforms enacted in the wake of that disaster were rolled back under the last administration. I’m pretty sure if the banks want less regulation, then it’s going to hurt all of us in the long run.

    Kudo’s to the banks for all of the free lobbying the AP has given them by not doing a little more research before printing a hand picked headline.

  2. All I can say is as long as interest rates for mortgages are above 5% and interest rates for new vehicles for any time period remain above 3%, the economy will continue to stifle buying and any hopes for any recovery. How about those gas prices too? Right now, at $2.50 and $2.60/ gallon, pricing isn’t too bad. I’m betting after the first of the year, gas will shoot back up for no apparent reason. There will always be demand, so hey dumb-o-crats, face the facts and start big-time domestic drilling and refining to keep the costs on gas at below $3.00/ gallon. Watch what happens to inflation………………uhhh, it will diminish and watch the economy take off.

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