Dems challenge bank CEOs on post-crisis reforms

House Democrats sparred with the most powerful bankers in the U.S. on Wednesday as the chief executives of the country's largest financial firms defended their industry’s reforms since the 2007 financial crisis.

The CEOs of seven of the nation’s largest banks appeared before Congress on Wednesday as a group for the first time since 2009, testifying before the House Financial Services Committee.

The bankers insisted that their firms have become safer, smaller and better corporate citizens in the decade since taxpayers bailed out the crumbling financial system, due in part to strict post-crisis regulations and capital standards enacted by former President Obama.


Michael Corbat, president and CEO of Citigroup, called the financial crisis “a searing experience” for the country and his bank, which holds $1.9 trillion in assets.

“The experience also made it a mission for us never to be in that position again,” said Corbat. “As we learned, rebuilding trust is much harder than rebuilding our balance sheet.”

But Democrats were reluctant to allow the Wall Street titans to turn the page on the financial crisis. They countered that major U.S. banks had more work to do to repair the damage caused by the crisis and cease abusive customer practices that continued long after the federal government rescued their firms.

“I’m concerned that several of these institutions are simply too big to manage their own operations, too big to serve their communities and too big to care about the harm they have caused,” said Rep. Maxine WatersMaxine Moore WatersMaxine Waters blasts Trump as 'mafia boss' over Stone case Democrats highlight lack of diversity at major banks in new report Fed chief issues stark warning to Congress on deficits MORE (D-Calif.), chairwoman of the Financial Services panel.

Democrats sought to highlight how the banks of the executives testifying have had numerous run-ins with federal regulators and paid steep fines since the crisis.

Lawmakers grilled the chief executives of Citigroup, JPMorgan Chase, Bank of America, Morgan Stanley, Goldman Sachs, State Street and Bank of New York-Mellon. While Democrats spoke, the committee displayed a slideshow of the various penalties the banks had paid over the past decade and their salaries.

Wells Fargo, which is among those banks in asset size and is facing unprecedented federal penalties for a slew of scandals, was not included. The Financial Services Committee grilled former Wells Fargo chief Timothy Sloan last month, and he resigned under political and regulatory pressure two weeks later.

The bank chiefs testifying Wednesday faced much lower stakes, but still treaded carefully.

Republicans aggressively jumped to their defense, focusing their questions on how banks are preparing for looming risks.

“This is a hearing in search of a headline,” said Rep. Patrick McHenryPatrick Timothy McHenryFed chief issues stark warning to Congress on deficits Fed chairman warns of economic damage from coronavirus House passes legislation to overhaul consumer credit reporting MORE (N.C.), the top Republican on the Financial Services Committee.

The hearing was also a preview of the criticism to come. Democrats have been tough critics of the financial sector, and a number of the party's 2020 presidential candidates have made taking on Wall Street a centerpiece of their campaigns.

After facing a financial and political reckoning during the recession, the banking sector has reeled in record profits and benefited from legislation and regulatory rollbacks spearheaded by Republicans.

The Republican tax-cut bill helped banks score an addition $28 billion in profits in 2018, according to federal data. Trump-appointed regulators have also begun loosening Dodd-Frank Act safeguards and oversight imposed after the crisis.

Waters and fellow Democrats have fiercely opposed those decisions, calling them unfair and dangerous to consumers.

“These misguided actions come at the expense of financial stability while leaving hard-working Americans to shoulder the tax burdens,” Waters said.

Democrats used the hearing to press the top bankers over a host of issues, including tough questions over the large pay gaps between executives and their employees.

Rep. Nydia Velázquez (D-N.Y.) pressed Corbat on the fact that he made 486 times more than the average Citigroup employee.

“If you were an employee and you saw your boss making $486 for every dollar you made, how you feel about that situation?” Velázquez asked.

“I would be hopeful that there’s opportunity to advance within the firm,” Corbat responded.

Velázquez called his response “just unbelievable."

“This is why people who live in a bubble or ivory tower cannot understand why there is so much anger out there,” she added, “especially among students and millennials who graduate with student debt in one hand and a diploma in the other.”

Rep. Alexandria Ocasio-CortezAlexandria Ocasio-CortezOcasio-Cortez defends Sanders running as a Democrat: It's 'more than what you call yourself' House Oversight accuses Border Patrol of blocking investigation into secret Facebook group Company to provide free clothing to any female candidate MORE (D-N.Y.) asked if more bankers should have gone to prison for the financial crisis.

"I represent kids that go to jail for jumping a turnstile because they can't afford a MetroCard,” Ocasio-Cortez asked JPMorgan Chase CEO Jamie Dimon. “Do you think that more folks should have gone to jail for their role in a financial crisis that led to 7.8 million foreclosures in the 10 years between 2007 and 2016?"

"I don't think people should go to jail for jumping a subway. I think we put too many people into jail," Dimon said. "And I think if people broke the law they should go to jail."

He added that lawmakers would need to talk to "legal experts" to understand why more people were not prosecuted.

Rep. Al GreenAlexander (Al) N. GreenChinatown restaurants, shops say business is down due to coronavirus fears Democrats highlight lack of diversity at major banks in new report House passes supplemental disaster relief for Puerto Rico MORE (D-Texas) pressed the bankers on improving diversity.

"If you believe that your likely successor will be a woman or a person of color, would you kindly extend a hand into the air?" Green asked the panel.

None of the CEOs, all white men, raised their hands.

Many of the bank chiefs responded to criticism at the hearing by highlighting investments they’ve made in low-income communities, expansions in small business lending and attempts to diversify their staffs.

“We work every day to earn the trust and confidence of the customers and communities we serve,” said Dimon.

Democrats also keyed in on several banks that finance gun companies, an issue that resonates with the party's liberal base.

Dimon defended his firm providing financial services to gunmakers under questioning from Rep. Carolyn MaloneyCarolyn Bosher MaloneyHouse Oversight accuses Border Patrol of blocking investigation into secret Facebook group Lawmakers grill Census Bureau officials after report on cybersecurity issues Booker, Merkley propose federal facial recognition moratorium MORE (D-N.Y.).

“Every single one that we do business with, we do a thorough review,” Dimon said. “If we think they’re doing something wrong, our risk committee stops doing business with them.”

On the other side of the issue, Bank of America President and CEO Brian Moynihan took heat from Republican lawmakers who criticized his bank and Citigroup for pulling back from working with the gun industry.

Moynihan explained that the bank decided to stop servicing certain clients over concerns for dozens of employees who were affected by the mass shootings in Las Vegas and Orlando, Fla.

Democrats made it clear the top banks could expect more scrutiny ahead from the House.

“As policymakers, we must evaluate what it will take to rein in chronic lawbreaking by the biggest banks,” Waters said.

Updated at 4:43 p.m.