Matt Weinstock, Impact Analysis Intern, American
University
William Michael Cunningham, Editor
US House of Representatives. House Financial Services Committee. Oversight of America’s Largest Consumer Facing Banks. Wednesday, September 21, 2022 | 10:00 am| 2128 Rayburn House Office Building & WebEx. 117th Congress. Maxine Waters, California, Chairwoman
At 10:00 a.m., September 21st, 2022,
the House Financial Services Committee held one of their most significant
hearings of the year, entitled “Holding Megabanks Accountable: Oversight of
America’s Largest Consumer Facing Banks.” The hearing was described as:
In summary, CEOs of seven of America’s
largest banks described their current activities and strategy before the House
Financial Services Committee. Members of the Committee were given five minutes
apiece to engage directly with the heads of these megabanks. This goal of the hearing,
as the name suggests, was to hold megabanks accountable for their actions, as
well as to provide transparency concerning those actions to the public. The
hearing, fully accessible to the public through the HFSC’s website and
through YouTube, provided an excellent chance for the public to gain insight concerning
the inner workings of our nation's biggest banks and gave a glimpse into the
functioning of the most powerful banking entities in our country.
One upside to hearings like these is that the public gets to see the human side of their elected representatives. One downside is that the public gets to see the human side of their elected representatives. While the general public sentiment that our government operates behind closed doors isn’t entirely accurate, the belief among many Americans that our current Senators and Representatives aren’t an ideal group to helm the legislative branch is arguably actually grounded in reality. Meetings like these are effective in revealing our elected officials’ true colors, though those colors aren’t always pleasant to look at. Congress contains many altruistic, intelligent, hard working people who have dedicated their lives to making this country the best place it can be; but it also contains many individuals who are about as far from that description as humanly possible. We will dive into specific examples of legislators who fit each of these descriptions a bit later.
Jamie Dimon called out by Congresswoman Sylvia Garcia for embarrassing gaffe
• Jane Fraser, CEO, Citigroup
Based on nothing more than this hearing, it seems possible to conclude that Ms. Fraser was the kindest person testifying. Her passion for being at least moderately ethical was clear. She was also the most personable and enthusiastic witness by far. She seemed committed to treating clients and customers well. One question, however, is the depth of her understanding about the vital role her bank plays in the American economy, or her plan to maximize America's overall prosperity given her influence. That said, when the harshest criticism that can be alleged against someone in her position is that she is a little naive, and likely in the lower half in terms of intelligence on a witness panel containing some of the brightest minds in banking, it is hard to conclude that she isn’t a great person to be helming one of America’s largest banks.
• Brian Moynihan, Chairman and CEO, Bank of America
Brian Moynihan impressed me as a toned-down version of Jamie Dimon, in good and bad ways. He came across as one of the smarter, more primal, and more egotistical panelists. At various points he provided interesting insight on the functioning of economy. I learned a lot by listening to him. However, he was arguably in the bottom half of the CEOs to testify during the hearing in terms of morality. He was also argumentative in a way that, while refreshing, I found mildly irritating.
Mr. Moynihan was the second most interesting person to listen to, behind Mr. Dimon, and his views and responses seemed genuinely authentic no matter which Congressperson was asking the question or how the question was framed. Oftentimes he would be asked two questions by different politicians on the same issue, intended to elicit opposite replies. Mr. Moynihan never gave in. He gave consistent responses, and didn’t modify his answers to fit what he thought people wanted to hear.
• William Rogers Jr., Chairman and CEO, Truist Financial Corporation
Mr. Rogers was almost vehemently nondescript. However, unlike Mr. Demchak, this appeared to be unintentional. He was purely intellectual, and displayed minimal emotion throughout his testimony. He was also not questioned as much as some of the other witnesses, which contributed to his appearing less accessible to the public during the hearing.
At one point during the hearing, Congressman Al Green asked each CEO if a person of color would head their institution in the next ten years. Mr. Rogers did.. Knowing the nature of these institutions, many expected no affirmative answers to the question. The fact that 14% of the banks testifying expected to soon be headed by one of the 38% of Americans who aren’t white is certainly not worthy of a pat on the back, but given how ethnically homogenous this CEO grouping has been historically, that is genuine progress.
Mr. Rogers’ most personable moment was his subtle boasting about the recent success of the Atlanta Braves, the MLB team playing in Truist Park Stadium, named after his company as a part of a sponsorship deal. He was certainly knowledgeable, and might have impressed me as a very kind man in a less intellectual setting, but it was hard to get a gauge on him from this event alone.
• Charles Scharf, President and CEO, Wells Fargo & Company
Charlies Scharf was easily the least likable CEO to testify. He perfectly encapsulated his company. He was clearly very smart, as will be the case with anyone who has reached the CEO position, but he seemed to belong to the bottom half group. Mr. Scharf didn’t offer any of the fascinating insights into the economy that Mr. Moynihan or Mr. Dimon did. I expected someone in Mr. Scharf’s position to have exceptional knowledge of the economy and banking, yet I suspect that a typical economics geek would be able to go toe-to-toe with him.
He was also generally unable to give reassuring answers regarding basic ethical practices, and appeared more concerned with personal finance than any of the other CEOs. Being the CEO of a bank as large as his comes with responsibilities to the American people. Most of the CEOs appeared to understand, and take seriously, the fact that they have a substantial impact on the American economy. That was not the case with Mr. Scharf. He seemed to prioritize how his bank looked more than how it acted, and money was clearly a higher priority than ethics to him. Alarmingly, it seemed to be the Committee’s consensus that Mr. Sharf is actually a fairly admirable CEO, by Wells Fargo standards, and that he is moving his company in a positive direction. To give credit where credit is due, Mr. Scharf seems to be moving Wells Fargo from an atrocious and maddingly immoral corporation, to just a typically immoral corporation.
I think it’s important to understand what megabank CEOs hope to get out of hearings like this. Fewer regulations controlling how they are able to spend their money, and how much money they are able to spend at one time, is a financially preferable regulatory policy for the banks. The bank CEOs are looking to convince members of the House Financial Services Committee that fewer regulations are beneficial for the economy. This, while sometimes true, is not always optimal. Megabank CEOs are inherently powerful given the roles these banks play in our economy, and with that power comes influence over our politicians and our media. They have enough leverage to subtly encourage Congresspeople (through campaign donations, media and other means) to dictate that what is in the best interest of the banks is also in the best interest of the public. This tactic has enabled their messaging to permeate the public consciousness. The idea that lower bank regulation benefits the average American is popular in America, but the idea exists mainly because of the influence these individuals have over the information that the public hears. In reality, lower capital requirements, which increase profitability for banks, mean that in the case of a severe economic crisis, these institutions may not have enough liquidity to maintain the smooth functioning of the financial system, and may have to ask the government for a bail-out. Much bank regulation is designed to ensure that banks always have enough liquidity to prevent this from happening. Unfortunately, many of these regulations were removed during the aughts, and this lack of regulation helped enable the 2008 financial crisis. Bank regulation has increased in the time since, through legislation such as Dodd Frank.
It seems that much of the subject matter of the hearing is being discussed because both parties believe that finding the optimal regulatory solution is best for the public. Still, it is important to understand what each party’s ulterior motives might be. Congresspeople look to these bank CEOs for political support and monetary donations. These CEOs convince legislators to reduce regulations so that their banks are able to amass more significant profit.
While much of the hearing was fascinating, arguably nothing was more intriguing than consistently seeing members of the House try to appear tough on big banks to win support from their voters, while also subtly sucking up to the heads of these big banks. Many Representatives from both sides of the aisle asked questions that enabled the CEOs to appear more altruistic than they may be in reality, but some were more brazen than others.
None stood out more than Texan Congressman Pete Sessions, who opted to spend his entire time lavishing the CEOs with praise, calling them “The Capitalist Leaders of our Country” without ever asking a question or giving the CEOs a chance to speak. Sessions went on about how thoughtful the seven panelists were, while rambling about how tragic it is that these CEOs are subject to criticism. It is entirely possible that Sessions was being genuine, and just wanted to show love to people that many would perceive as not being the worthiest recipients of it. If this is the case, I offer my apologies, but it appears far more likely that his spiel was a shameless effort to suck up to people wealthier and more powerful than himself.
Another example of disingenuous behavior came from Ranking Member Patrick McHenry, from North Carolina. While less notable, his behavior was arguably even more morally egregious. Following Chairwoman Maxime Waters’ opening statement, McHenry, who, as GOP ranking member, essentially functions as second in command on the committee, was allowed to speak. Mr. McHenry was two words into his statement when he disagreed with the premise of the meeting. Those two words were “and” and “um.” It is worth noting that this meeting is titled “Holding Megabanks Accountable,” and that Mr. McHenry receives more funding in campaign contributions from the megabanks testifying than anyone else in the House of Representatives. Not only is Mr. McHenry the House’s leading recipient in funding from commercial banks so far this election cycle, he ran away with the honor during the 2020 election cycle. To make matters worse, across American history, no House candidate has received more money from commercial banks than Patrick McHenry. (If you wish to fact check this claim, or you hope to learn more information on campaign funding, experiment with this link: Commercial Banks: Money to Congress | OpenSecrets )
|
Commercial
Banks: Money to Congress in 2022 Top
10 |
|
|
Member/Candidate |
Amount |
|
McHenry, Patrick (R-NC) |
$270,790 |
|
Hill, French (R-AR) |
$191,050 |
|
Luetkemeyer, Blaine (R-MO) |
$189,493 |
|
Barr, Andy (R-KY) |
$151,000 |
|
Wagner, Ann (R-MO) |
$138,933 |
|
Beatty, Joyce (D-OH) |
$135,750 |
|
Emmer, Tom (R-MN) |
$127,606 |
|
Huizenga, Bill (R-MI) |
$122,155 |
|
Gottheimer, Josh (D-NJ) |
$114,072 |
|
Steil, Bryan (R-WI) |
$112,810 |
At a later point, McHenry claimed to favor oversight, and disapproves of the hearing because it doesn’t do enough to provide oversight. His other statements, as well as the money received from banks, make it clear that this is almost certainly untrue. McHenry stated that the hearing should be focused on “reducing regulatory barriers.” This, as any economist, regardless of where they fall on the political spectrum, will tell you, is more beneficial to the banks than to anyone else. A more sinister and left-wing economic interpretation of his statement would be that this is code for “give banks the leeway to operate as dangerously as they wish to, at the expense of the clients and the economy.” However you choose to interpret it, McHenry is advocating for what is best for the banks, and he may be doing this because the banks fund his campaign. This is the exact messaging that the megabank CEOs want McHenry to convey to the public, and he knows it. Mr. McHenry will say that other members of the Committee are putting on an act of disingenuous theater, yet ironically, these claims themselves are theater. He may be the epitome of a compromised politician, in bed with big businesses.
|
Commercial Banks - Top Contributors,
2021-2022 |
Amount |
|
Amalgamated Bank |
$5,086,112 |
|
Woodforest
National Bank |
$2,344,287 |
|
Wells Fargo |
$2,009,400 |
|
American
Bankers Assn |
$1,814,766 |
|
JPMorgan
Chase & Co |
$1,176,876 |
|
First Premier
Bank |
$1,015,320 |
|
Independent
Community Bankers of America |
$909,316 |
|
PNC Financial
Services |
$864,613 |
|
1st Financial
Bank USA |
$863,371 |
|
Citigroup Inc |
$794,995 |
|
Regions
Financial |
$775,404 |
|
Bank of
America |
$745,130 |
|
Citizens
First Bank |
$625,979 |
|
US Bancorp |
$555,754 |
|
Truist
Financial |
$481,457 |
|
First
Republic Bank |
$439,374 |
|
Arvest Bank
Group |
$342,021 |
|
Ally
Financial |
$341,910 |
|
Huntington
Bancshares |
$303,261 |
On a more partisan note, Mr. McHenry railed against the Committee for its tendency towards “talking about social issues.” He railed against the left for its partisanship and its ‘woke agenda’ while exclusively promoting a partisan agenda throughout the hearing. His childishly bold statements included almost nothing of substance to back them up, like his statement that “Democrats continue to dump jet fuel on their economic dumpster fire. It’s offensive to all the senses.” People like Patrick McHenry may be part of the reason Americans have so little trust in their government, and leads to disdain for many other hard working, altruistic Congresspeople as mere participants in a corrupt process. (If you know anyone from the 10th Congressional district of North Carolina, you could do your country a real solid by encouraging them to campaign for Mr. McHenry’s opponents in the next election cycle.)
Staying on the theme of disheartening things to come out of this hearing, there was also Congressman Norman. During his spiel, Mr. Norman brought up a prior question asked by Congressman Al Green concerning if any of the CEOs expected to be succeeded by a person of color. Mr. Norman then decided to criticize the CEOs, not for the fact that only one of them raised their hands, but because they were apparently not openly critical enough of the question. “I don’t understand, the boldness is just not there to flap back at these people and what they're asking. Why wouldn’t the answer to that question be ‘Mr. or Ms. Politician, we don’t look at color, we look at achievement. We look at past history.’”
The lack of intelligence displayed by the actual member of Congress making this statement is stupefying. The reason for the initial question is that, if the most qualified people were actually being hired, you might expect to see a number of ethnic minorities in these positions somewhat proportional to the American population, assuming intelligence and ambition are normally distributed. Obviously white people are not naturally more intelligent, so if a disproportionate number of white people are being hired for these prestigious positions, the only sensible explanation for the lack of minority representation is racism. When liberals call for equal hiring regardless of race, they’re not asking for charity. They’re not asking that non-white people be looked at more favorably for their minority status. They’re asking to not be discriminated against in the hiring process. They’re asking for equal hiring across races because that is what is sensible from a business standpoint. If a Congressman thinks it is to be expected that white people get hired for positions like these at a higher clip, and that said hirings are based on merit, then that Congressperson is, by definition, a racist, since they believe non-white applicants will always be less qualified on average. Unless the jobs in question are sought after to varying degrees by different cultures, to imply that hiring a relatively equal number of qualified people across races for a position is an unsound business strategy is racist. Hiring mostly white people may not be inappropriate if you’re trying to assemble a bobsledding team. The same is not true if you’re hiring someone to head a bank.
Possibly the single most refreshing moment of the hearing came about halfway through, when Congressman Foster spent the majority of his five minutes calling out the agenda of the CEOs. Foster reminded witnesses that CEOs come in every year with an elaborate line of logic as to why they should be allowed to take more risk and make the American taxpayer the insurer of last resort, rather than the banks. It was extremely refreshing not just to see a politician call out the people with power, but to do so rather eloquently. His speech was on par with that of the executives, and in a hearing that generally demonstrated a lack of intelligence, this was extremely encouraging. This monologue, as well as the dialogue between Congressman Himes and Mr. Moynihan that came less than ten minutes before, were two of the most fascinating parts of the hearing
One thing that was clear throughout the hearing, regardless of the Representative speaking, was that Congresspeople seem to have a hard time holding their own in conversations with the CEOs. Many liberal Representatives would confidently ask pointed questions, and become discombobulated when they were met with a competent response. Many conservative Representatives asked questions that were rhetorical, and seemed more like an excuse to criticize President Biden than an actual question. Some of these questions were so long and rant-filled that the CEOs barely had time for a response, which didn’t even seem to bother the Congressmen who asked the questions. Many conservative Representatives spent more time trying to get on the good side of the CEOs, while many liberal Representatives tried to fight them, ineffectively I might add. Representatives were rarely able to hold their own in these debates, and it was clear that they just weren’t as knowledgeable as the CEOs. The only thing they could hope for was to recount a corporate action so morally atrocious that the only justification a CEO could offer would be ‘I did it because I knew I would get away with it.’
Another difficulty comes into play in considering how to evaluate conflicts between the CEOs and Representatives. This usually didn’t take the form of an outright fight. A Congressperson, usually a pretty far left one, would ask a pointed question, requesting a yes or no answer. Unsurprisingly, there were very few yes or no answers given in this hearing. Many disagreements broke out when a CEO would try to explain something in a way that could be interpreted as dodging the question. The Congressperson would then say something along the lines of ‘it’s a simple yes or no question,’ to which the CEO would respond by saying ‘no it isn’t. I can’t give you an answer in fewer than sixty words.’ In these instances, it is really hard to know if the CEO is trying to get out of answering a question that the public wouldn’t like the answer to, or if the Congresspeople were genuinely asking bad questions, and didn’t understand some of the nuance around the issue.
There were also instances of Representatives repeating their questions in an agitated tone, only to be met by the CEOs with a response along the lines of ‘wait, that’s not the same as the question you asked before, there’s this subtle difference, which question do you want me to answer.’ Most of these interactions would happen with young, far left members of the House. Though it is likely a pipe dream, a fact-checker would certainly be a welcomed addition for hearings such as this one.
Throughout the hearing, the number of partisan,
entirely non-economics related questions was weirdly high. For example,
witnesses were asked both what they would do to reduce gun violence, and what
they would do to protect the 2nd Amendment. They were asked if they would
consider tracking their clients’ spending to check for suspicious activity, and
were asked if they would halt loans and payments to people who were using money
to buy something that a particular Congressperson didn’t like. The answer, of
course, was always no, yet the questions kept coming. The CEOs stated
repeatedly that they were not in the business of telling the American people
what they should and shouldn’t buy with their money, yet the Congresspeople,
mostly liberal ones, seemed to think they could get a different answer if they
kept asking the same questions. The CEOs were often questioned, by right wing
politicians, about ‘President Biden and the left’s Socialist woke agenda that’s
destroying this country.’ After queries like these, the CEOs usually appeared
confused. Both sides made partisan requests that anyone could confidently
predict a ‘no’ answer to. It seemed perplexing that so many Congresspeople
would waste their time with such questions.
Public Relations
This hearing, like many public hearings, showed our government’s dedication to being accessible to the public. Our politicians were not subtle in demonstrating their character. Many of the most influential people in this country laid out how they plan to legislate going forward, or how they plan to run their banks going forward. Events like this make it all the more perplexing that the public’s general sentiment seems to be that our government keeps most things secret from their citizens.
Perhaps the best example of this disconnect relates to government spending. The majority of Americans seem to believe that our government is not transparent, or is even outright secretive, about how our tax dollars are spent. Many Americans want our government to release a detailed database that shows where our tax dollars are being spent. The odd thing about this wish, though, is that it’s already been granted. The Website USAspending is a free tool that any American can use to see where tax dollars are being spent. It is an incredibly useful website, yet few Americans are aware it exists. (My personal favorite tool is the one that lays out spending by Budget Function. This tool can be used by anyone at any time here: Government Spending Explorer | USAspending ).
This is one of many instances of the public demanding transparency from the government regarding something the government is already transparent about. The reality is that, while our government has emphasized transparency, they either haven’t emphasized connecting with the public, or have failed in trying to do so. Transparency in messaging is irrelevant if no one is able to understand the messages. Part of this disconnect might be rest on citizens not being informed about accessing this information. Our current system legally necessitates that lots of raw data be shared with the public, but it doesn’t necessitate that a digestible version of this information also be accessible.
Primary source material can be difficult to comprehend. While America has people whose job it is to document raw facts, we would benefit greatly from having additional people translate those documents into language that is understandable and digestible by the average American. Ideally, the public should have access to both raw documentation and access to a digestible version of the same information. In general, Americans have not had the specialized education and training needed to interpret dense primary source material. This renders publicly available information effectively incomprehensible. I believe it is worth the time and energy it would take to hire people to translate this data into language that the public can comprehend. People without law degrees can’t be expected to understand ‘legalese.” If the people in power don’t want their messages and actions twisted by certain media outlets, they need to convey information to the public in a way directly digestible manner.
Our current system has relied on media outlets to make information digestible. Unfortunately, many media outlets manipulate the truth in the process. It is in the government’s best interest to remove media middlemen by making them less vital than they are now by communicating directly and effectively with the public. The vitriol many Americans have toward the people who run our country is largely a product of a lack of understanding. This allows unhelpful, dishonest figures like Tucker Carlson, Lawrence O’Donnell, and Sean Hannity to convince Americans that their government consists primarily of people trying to steal from them. This vitriol, and these public sentiments are a roadblock to a healthy country. This lack of effective communication also allows harmful conspiracy theories, like Qanon, to rise and plays a key role in fomenting the disdain that led to January 6th.
The US government, well-intentioned in its efforts to be transparent, has done an atrocious job making events, websites, and resources understandable and available to the public. More objective, easy to understand resources might improve public perception of the government if people knew they existed. It is in both the government’s best interest and the people’s best interest for the government to market their events and websites the way that a businessperson, musician or author would market a product: imagine the barriers that would be broken if someone like LeBron James was paid to say in a commercial that the government had posted all the details regarding its spending, and how the viewer can access that information themselves. Social media pages run largely by young people to keep people in the loop with government events may lead to greater public engagement. A well-run White House Tik Tok page that effectively connects with the average citizen could do wonders for improving Americans’ understanding of their government. Television ads for major Congressional hearings, or to promote important websites, could also do the trick. Many Americans would be shocked to hear that their local Congressional Representative actually wants to hear from them, and wants to know what issues they are most passionate about. Members of the House usually have a way for you to contact their office and tell them your thoughts, but I believe most people are unaware of this.
Returning to the House Financial Services Committee, this hearing is currently available on YouTube, and serves as an example of our government’s dedication to providing the public with an opportunity to view both the culture and the functionality of our legislative branch. If any are looking to deepen their understanding of how government works, skimming the six-and-a-half-hour video of this hearing might be a good way to start.
Summary
Perhaps the most notable positive takeaway from this hearing is how encouraging it was to see that this batch of CEOs was an immensely intelligent group, who are at least moderately invested in America's economic prosperity. It was evident that the least intelligent of the CEOs were still, in my opinion, dramatically smarter than the average Congressperson who spoke during the hearing. The overwhelming majority of disheartening moments came from politicians, not the CEOs. Additionally, even in what is intended as a non-partisan report of the event, it is impossible not to note the disparity in intelligence and intention between the Democratic and Republican members of the House. While there were certainly intelligent and well-meaning Republicans, as well as corrupt, obnoxious Democrats, the bulk of the Democrats seemed focused on important issues pertaining to the economy and the world of banking, while many of the Republicans seemed more concerned with currying favor with the CEOs, and railing against the opposition without proposing a solution to what they perceive as a problem. Additionally, virtually every comment that was above the most basic comprehension level came during an interaction between a CEO and a Democrat or centrist-leaning Republican. While the gap between the Democratic and Republican Representatives in terms of apparent intelligence was wide, it was no wider than the gap in intellect between the CEOs and the Democratic representatives. The CEOs clearly came across as the smartest people in the room. All in all, while many aspects of this hearing weren’t pretty, it is still commendable that our government holds events like these, and makes them public so that we as voters are able to more adequately hold our elected officials accountable.