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U.S. bank CEOs back Fed hikes during congressional grilling on economy, China ties

Stock Markets Sep 21, 2022 06:57PM ET
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By Pete Schroeder, Lananh Nguyen and Saeed Azhar

WASHINGTON (Reuters) -The country's top bank chiefs endorsed U.S. Federal Reserve rate hikes as a means to tame soaring inflation, while acknowledging there will be pain ahead, when appearing before Congress during a wide-ranging and mostly sedate hearing on Wednesday.

The line-up before the House of Representatives Financial Services Committee included CEOs of the four largest U.S. banks: JPMorgan Chase & Co (NYSE:JPM)'s Jamie Dimon, Wells Fargo (NYSE:WFC)'s Charles Scharf, Bank of America (NYSE:BAC)'s Brian Moynihan and Citigroup (NYSE:C)'s Jane Fraser. They were joined by the CEOs of the country's largest regional lenders, US Bancorp (NYSE:USB), PNC Financial (NYSE:PNC) and Truist.

While such hearings rarely result in legislative action, they are risky for the CEOs, who were forced to defend their banks on thorny issues including their ties to Russia and China, and stances on firearms purchases and employee unionization at a time when lawmakers are looking to boost their profiles ahead of November elections in which control of Congress is at stake.

Top of mind for Republicans and Democrats alike, however, was the impact of soaring inflation on the economy and banks' customers.

Dimon and Moynihan said consumers continue to be in good shape, with spending holding up well, and both said interest rate hikes were necessary to get a grip on inflation.

The central bank announced it was raising rates again by 75 basis points on Wednesday afternoon. [L1N30R1F1]

When asked later to raise their hands if they had confidence in the Fed's resolve to tackle rising prices, each CEO did.

Still, they recognized the rate hikes could spell tough times for consumers and potentially tip the country into a recession.

As interest rates rise, Fraser said she expected people with lower credit scores to experience greater financial stress. Savings rates, which soared during the COVID-10 pandemic as Americans stayed at home, will probably decline, she added.

“We’re going to be in for tougher times ahead,” Fraser said.

Moynihan noted that hikes meant higher borrowing costs on key consumer products like mortgages, but added that "the reality is it needs to be done."

Dimon said there is a chance of a mild U.S. recession which could be worse depending on the course of Russia's war in the Ukraine, which has created uncertainty over global energy and food supplies.

When pressed on risks to the U.S. financial system, Fraser later added that energy supply shocks in Europe could affect the U.S. economy by reducing demand for American goods and services.

Dimon said the Ukraine conflict, which Russia calls a special military operation, and growing tensions with China, were the biggest vulnerability for global financial stability.

RUSSIA, CHINA TIES

While the hearing was generally cordial, some lawmakers challenged the CEOs over their institutions' operations in Russia as well as China, whose increasingly bellicose stance on neighboring Taiwan is causing growing tension with Washington.

Democratic representative Brad Sherman pressed Dimon and Fraser about their Russian clients, sparking a brief, contentious exchange in which Dimon - known for his blunt and forthright style - attempted to interject while Sherman was speaking.

China also loomed large. In an unusual line of questioning for a Republican congressman generally supportive of the industry, Blaine Luetkemeyer pressed Dimon, Fraser and Moynihan on how they would respond were China to invade Taiwan, which Beijing views as sovereign Chinese territory.

Should that happen, the CEOs said they would do as the U.S. government instructed, even if that meant ceasing business in the world's second largest economy. Moynihan warned that the competitiveness of China's banks was the "real issue" for concern. "They could acquire any of us without much problem."

When asked later by Republican Lance Gooden if she would condemn "ongoing human rights abuses in China," Fraser struggled to respond. "Condemn is a strong word," she said. "We certainly are very distressed to see it."

The CEOs also faced criticism from Republicans frustrated with what they see as Wall Street's increasingly liberal leanings on the environment and firearms. Banks dispute that characterization.

Some Republicans pressed the executives on how they would handle gun transactions days after an international standards body approved a new merchant code for gun retailers.

"I fear this is one step closer to a backdoor gun registry," said Rep. Alex Mooney, a Republican from West Virginia.

U.S. bank CEOs back Fed hikes during congressional grilling on economy, China ties
 

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Comments (6)
ROB Stone
ROB Stone Sep 22, 2022 1:13AM ET
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Let's take a bet, which two banks go down first? lol1st B of A, 2nd Wells Fargo
John Laurens
John Laurens Sep 21, 2022 4:28PM ET
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What a joke - pure theater - these bank people give generously to the dems - pure hypocrisy!
Ernie Keebler
Ernie Keebler Sep 21, 2022 11:06AM ET
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Yes they did so well distributing $billions of our tax dollars to their favorite buddies, got a percentage for doing it, and grabbed a bunch  for themselves that's what I call free 'grab as much as you can' enterprise. Give me a break
Yellow Owl
Mystic_Owl Sep 21, 2022 11:01AM ET
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Its all acting you know, just like Hollywood to make it look like there is credibility & accountability. More than that they want public to think they got some mathematical model of inflation which they can rely & can identify when Fed didn't adhere to it & then bring them to justice. Its just a farce.
Ernie Keebler
Ernie Keebler Sep 21, 2022 10:59AM ET
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Yeah, let's listen to these high living crooks on how the economy should run, NOT!
Cody Hawkins
Cody Hawkins Sep 21, 2022 6:54AM ET
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This is just theater.
Yellow Owl
Mystic_Owl Sep 21, 2022 6:54AM ET
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That's what I thought too.
 
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