Adam Smith’s free market concept of the invisible hand describing the unseen market forces at work was challenged in the Banking committee’s testimony with Major Bank Chief Executive Officers (CEO/s). Layoffs, credit default swaps, purchase of residential property by businesses; all market forces influenced by actions from businesses or banks not by the market inferred by one senator. Many senator’s wanted proof that the economy works for everyone and change in the Wall Street system.
Bankers and Senators remarked how the financial system was resiliant against the pandemic. Activists trying to make change through financial system not democratic system. The government was able to establish the Payment Protection Program (PPP) administered through banking system by the various banks.
Stakeholder capitalism, encourages corporations to pursue political agenda. Once owner’s shareholder’s rights are reduced in comparison to other stakeholders. Further the senator encourages articulation from banks when a tax issue impacts their tax or financial industry, but charged social issues or policies with competing values such as between Voting Access and Election Security; should be left to lawmakers who are accountable to American People.
David Solomon now on Goldman Sachs (GS) 2018
Charles Sharf now CEO of Wells Fargo since 2019
Jane Fraiser now CEO of Citi Group 2021
Jamie Diamond CEO JP Morgan Chase 2005
Brian Monahan CEO of Bank of America since 2010
James Gorman CEO since 2010 Morgan Stanley
CEO’s Report on Activity through Pandemic
Charles Sharf now CEO of Wells Fargo since 2019 informed that Wells Fargo deferred payments to customers, waived fees 3.7 million consumer and small business accounts, provided 1 million mortgage forbearances, suspended residential evictions and foreclosures, 13.7 billion aid funded for PPP, 47% provided to businesses in the tracts of low income, or majority-minority owned business. 50 million commitment to CDIs providing grants. Banking Inclusion Initiative for unbanked or underbanked individuals to have banking services. Net zero greenhouse gas emissions by 2050 goal was measured as well.
David Solomon now on Goldman Sachs (GS) 2018 starts on how the FED’s two 2008 crisis born stress tests proved effective, and Goldman Sachs remain well capitalized. The company provided to their employees 10 days Paid Family Leave, free telemedicine, continued to pay on site staff, including mail-room staff. For their customers, they provided to digital bank customers allowed to defer credit card payments for 6 months, loan payments for 4 months at no cost. Not being a SBA lender, GS did not participate in PPP loan funding, but through other channels provided $1.25 Billion in capital to community development financial institutions and mission driven lenders who facilitated PPP loans across country, with average loan size of 43,000 and median employee count being 2. GS has been Carbon neutral since 2015. An initiative’s research infers that black women were most marginalized group when it came through income gap, if gap could be reduced, Gross Domestic Product (GDP) could increase by $300 billion. GS has outlined to give 10 billion over next 10 years to narrow opportunity gaps for at least 1 million of these women. The newest Director class includes 6/13 directors whom are women, and is 62% diverse by gender race or sexual orientation.
Jamie Diamond CEO of JP Morgan Chase since 2005 informs Chase in 2020 extended credit and raised capital totaling $2.3 trillion for consumers and businesses of all sides to support operations. Delayed payments for 2 million mortgage, auto and credit card accounts, and refunded $120 million in fees refunded for more than 1 million customers. Funded over 400k PPP loans funded, supporting over 3 million jobs, total funding amounting to $40 billion. 90% went to businesses with fewer than 20 employees, 1/3 went to businesses in communities of color. Outside of PPP an additional $18 billion provided in new credit for small businesses. Committed $250 million in business and philanthropic initiatives. For their employees they continued to pay regularly scheduled hours even if reduced or none. Committed 30 billion over 5 years expanding affordable housing and ownership growing black and Latin businesses. For the third time in five years Chase increased entry level wages to $20/hr, annual benefit packages, 70% of employees who started before 2017 with salary of less than $40,000 are still with company.
Brian Monahan CEO of Bank of America since 2010 informs of 2 million consumers and small businesses deferred payments on credit cars, home and car loans, provided PPP loans to half a million businesses 80% with less than 10 employees. Balance assist low cost payday type loans. 40% to majority-minority communities. Processed $73 billion stimulus payments, expanded mental help, offered $100 a day for a total of 4 million days for teammates with kids or elders for child or senior care, 2020 no layoffs. Last year minimum wage increase to $20 an hour a year earlier than planned. By 2025 will be $25 an hour, since 2012 medical premiums for teammates earning less than $50k have not increased, 50% half of global workforce are women, and 45% of U.S. teammates are people of color.
James Gorman CEO since 2010 Morgan Stanley (MS) informs of $50 billion dollars of capital raised for those impacted and 60 students given 4 year full time scholarships to 3 colleges Howard, Spellman, Morehouse colleges being largely diverse colleges. Gorman continues that no reduction in workforce occurred during pandemic and $25 billion in buybacks and 14% small business lending.
Questions from the Senators to Bank’s CEOs
Concerns raised by Senators to CEOs were varied and far between. The Pay gap between CEOs and lowest paid workers positions; CEOs make 800 – 900 times more. When asked about pledging to remain neutral if union formation is attempted; All CEO’s fell behind Sharf’s best answer that they will allow their voices to be heard, (did not support unionization, but supported banks speaking with employees attempting unionization about their concerns) except with Diamond who said simply answered, no. No banks disagreed that Capitalism is best to produce most benefit to most people; asked because some of CEO’s actions recently supported stakeholder-capitalism. Concerns regarding prohibition on financing for certain companies involved in non-green technologies such as oil or gas companies were raised; later the CEO’s were asked about whether fossil fuels should be used in the future. Responses included that if the technology exists and is reliable to use less or no fossil fuels, then yes; otherwise whatever technology supports the energy needs of businesses and consumers should be used. Support legislation to extend 36% interest rate limit on Payday loans. What are these banks doing to make sure the forbearance continues, where banks had mentioned they would continue to work with clients. Outlook for inflation, and the role of public spending, and monetary policy. Next 30 years of competition would be with China. Economy will be strong this year, could last into the next and even to 2023. Inflation is expected to go higher than 1.6%. Any money spent, needs to be spent wisely. The importance of success for American banks was raised as Four of the largest banks in the world are state-owned in China and the 5th being in Japan.
Hong Kong has a National Security Law that prevents equality and ability to cast balance. Some of the CEO’s made statement on a state legislature voting legislation, but did not make statement regarding protests in Hong Kong, where one individual was arrested and will not sit before a jury but a 3 judge tribunal; the senator asked for consistency on statements. Chase CEO said it is important that what is disclosed is important and that it accomplishes what you are trying to do. Senator Scott asked the CEOs what part of the Georgia Election law was restrictive or discriminatory. CEO of Bank of America had replied the decision to sign came out of the Environmental, Social, Governance (ESG) teammates. Senator Warner from Virginia replied that the provision preventing people giving out water to voters in line was one example. The amount of money made from the Saudi Aramco deal was raised as Goldman Sachs, Bank of America, Wells Fargo, Citi Group, JP Morgan Chase and Morgan Stanley were underwriters of Saudi Aramco.
One senator insisted that firms out to be taxed where they conduct their business. About 63% of multinational profits are booked in countries where they only have 15% of their employees. shifting profits to tax havens. Partially changed after 2017 tax legislation.
Other concerns regarding the PPP loan, PPP loan fraud, digital platform construction, other forgiveness programs. Input on repurposing the PPP loan for future emergencies, or create something better based on pandemic data. Needs of other risk-based system to price and distribute insurance, how can private sector partner with government to better prepare from an insurance perspective. State of art, world class infrastructure, how congress could invest in that. All the senators agree that America with a stronger infrastructure helps jobs, growth and global competitiveness. Opportunities to unlock private capital for necessary infrastructure,
important to try to reach public capital for investment specifically into infrastructure.
One CEO begs senators to focus on output not input, that too much time is spent on how much are we going to spend on this, and too little time spent on who is responsible, what is it going to cost, and what is it worth. Regulations slowing infrastructure projects was an issue raised. Concerns between the Federal Debt rising over GDP estimations from the Congressional Budget Office and it’s trend from over 100% to 200%. Chase CEO insisted the U.S. economy needs to grow, the debt to GDP, an issue in 2030 or 2040, but should be solved now. MS CEO reminded solutions include reduce spending, raise the taxes, or make corporations more profitable, finding the balance till the issue was resolved would be the challenge.