An attack on JPMorgan chief executive Jamie Dimon by senator Elizabeth Warren drew most of the headlines after a Congressional hearing on May 26.
Warren accused Dimon of being “the star of the overdraft show” for allowing JPMorgan to charge $1.46 billion of fees during the 2020 pandemic and asked whether or not he would return these charges and settle for $27.6 billion of profit for last year.
“No,” replied Dimon, who was performing his usual role of acting as a human shield for the other five heads of the biggest US banking groups.
The episode where Warren and Dimon talked over each other provided the only real drama in the three-hour hearing, but the bank heads were reminded that they will remain in the political spotlight despite a consensus that they acquitted themselves well during the pandemic.
Senate banking committee chair Sherrod Brown opened the hearing by telling the bankers that “you are the six most powerful businesspeople in America” and closed proceedings by saying “you are the most powerful economic actors in this country.”
That is a bit of a stretch. Amazon head Jeff Bezos or Apple chief Tim Cook might disagree.
Tesla founder Elon Musk would certainly have a different view. Even within finance, BlackRock’s Larry Fink or Blackstone’s Stephen Schwarzman could argue that they have more impact than a bank chief executive.
The bank heads were reminded that they will remain in the political spotlight despite a consensus that they acquitted themselves well during the pandemic
And the current US bank CEOs don’t all command the same attention as Dimon.
Wells Fargo head Charlie Scharf (a former Dimon lieutenant) spent much of the hearing looking like he was trying to remember where he had left his car keys.
The bank heads are nevertheless the public face of finance for much of the US.
New risks
The slow move towards a banking model that is more socially and environmentally aware accordingly brings new risks for chief executives, as they risk attacks from both ends of the political spectrum.
Jane Fraser, Citigroup’s new chief executive, was reminded of this as she was given credit by Democratic senators for Citi’s commitment to phase out financing of coal power, before being ushered laboriously towards a trap by a Republican politician.
Senator Pat Toomey, the ranking Republican on the banking committee, asked if Citi has similar plans to stop financing oil or natural gas.
Toomey is a former banker who once traded foreign exchange derivatives for Chemical Bank, one of the predecessors of the modern JPMorgan, so he has a better grasp of finance than some of his colleagues on the banking committee.
Fraser was ready for Toomey’s attempt to lure her into condemnation of Citi’s oil and natural gas customers.
“Our goal is to support our clients responsibly,” she replied. “We don’t plan to have a prohibition, we intend to help our clients as they transition [away from carbon-intensive energy].”
Toomey had made clear his support for natural gas producers in his home state of Pennsylvania, but he had a broader point to make about the direction of banking and capitalism.
“Some of you have endorsed so-called stakeholder capitalism… and I ask you to reconsider this,” Toomey said early in the hearing, in an apparent jab at Dimon, the highest-profile financial supporter of the move to broaden corporate responsibility from a focus on duties towards shareholders.
Toomey did not follow Warren’s example of confronting Dimon, instead asking if he and other banks heads agreed that capitalism was the best system available.
“Absolutely,” said Dimon, who seemed to have decided that terse answers were the only way to ensure that the hearing would not run into the New York evening.
Justifications
Another Republican politician reminded the bankers that their tentative engagement with social issues is not simply a matter of doing enough to assuage their own employees and clients.
The bank heads all had talking points to hand about initiatives to combat inequality with extra lending and financing, but the ones who have been drawn into the current US debate over voting law reform struggled to justify their positions.
Senator Tim Scott asked the heads of the four banks that joined hundreds of other corporations and business leaders in signing an April statement condemning “discriminatory legislation or measures” to restrict ballot access if they could explain their stance.
“What part of the law is discriminatory?” he asked, in reference to proposed changes to voting in Georgia that have been the focus of protest.
The heads of the four banks that signed up to a statement that was proposed by former American Express chief executive Ken Chenault and Merck CEO Ken Frazier were not keen to speak up.
BofA’s Brian Moynihan, Citi’s Fraser, Goldman’s David Solomon and Wells Fargo’s Scharf sat in silence.
“I’m dumbfounded,” Scott said, grandstanding for effect. “The woke capitalism seems to be running amok… you can’t articulate a position on why these laws are discrimination.”
Group think
The bank heads who were persuaded to sign the statement probably took some comfort at the time from a feeling that they were part of a group of capitalist leaders.
Warren Buffett was a signatory, and the list of corporates to agree was led by Alphabet, Amazon and Apple.
JPMorgan decided to stick to a previous bland statement by Dimon supporting the right to vote, however. So, the bankers put in the spotlight by Scott at the committee hearing could not rely on the leader of their own convoy for support.
Dimon won’t be around for ever, despite the efforts of JPMorgan to promote the idea that he exists in a state of perpetual motion where he is always a few years away from retirement.
The other US bank heads will have to start getting used to articulating their policies more clearly and answering difficult questions in public, without relying on Dimon to soak up the pressure.
They can turn this into an opportunity, as well as a challenge.
The big six US banks are now widely viewed as a monolithic bloc.
Other US bank heads will have to start getting used to articulating their policies more clearly and answering difficult questions in public without relying on Dimon to soak up the pressure
Goldman and Morgan Stanley provided a reminder at the committee hearing that their background is in investment banking, with its relentless fawning over clients, however.
Goldman’s Solomon concluded his remarks on the recovery from the pandemic by noting that he would be “remiss” if he didn’t mention the role of Moderna and Pfizer – two important investment banking clients.
And Morgan Stanley head James Gorman managed to one-up Solomon by not only name-checking the same two pharmaceutical industry clients but also noting that his firm issued the first sustainable bond for Pfizer.
Gorman’s victory in the game of client bingo showed that it can be good to talk, even when you have to choose your words carefully.
