U.S. bank hearing, disparity and tax increase plan shadows CEO politics

U.S. bank hearing, disparity and tax increase plan shadows CEO politics
CEO of Citi Fraser attending the hearing (27th)

[New York] The US financial world is under pressure from the US ruling and opposition parties. At a hearing held by the US House of Representatives on the 26th to 27th, the tops of six major banks such as JP Morgan Chase were called. Questions were struck over the controversial themes between the Democratic Party and the Republican Party, such as inequality correction, climate change issues, and tax increases. The influence of “political division” was great, and discussions on important issues did not deepen.

The US House of Representatives Financial Services Commission held an online hearing on the 27th, with JP Morgan as CEO of Bank of America, Citigroup, Wells Fargo, Goldman Sachs and Morgan Stanley. (CEO) was invited. The day before, the Senate Banking Commission held a hearing in a similar fashion. It is the first time in about two years since April 2019 that the top executives of each bank have been invited to the US Congress.

At the two-day hearing, a strong partisan question stood out. Democrats have repeatedly asked each bank’s efforts to reduce disparities.

“Your bank values ​​the interests of the business rather than providing a little help to a struggling family.” Democratic Senator Elizabeth Warren, a representative of Anti-Wall Street, has severely criticized JP Morgan CEO Jamie Dimon on the 26th. The spearhead is the “overdraft fee” that banks collect from users.

Congressman Warren severely criticized JP Morgan CEO Dimon

In the United States, if the user’s account funds are insufficient due to some payment, the bank will collect a fee instead of reimbursing the excess. High fees have long been criticized. US officials have urged banks to stop collecting fees as a consumer support measure during the spread of the new coronavirus. However, JP Morgan continued to collect tax.

In August 2019, the management organization “Business Roundtable”, to which the CEOs of US companies such as Mr. Dimon belong, reviewed the conventional “shareholder interests first principle” and broadened the stakeholders (interests) such as employees and local communities. ) Declared to be considerate. In fact, the US banks have come up with measures to raise the minimum wage and support racial minorities such as blacks and Hispanics.

Leftists within the ruling and Democratic parties are skeptical of the US bank’s “declaration.” It seems that the problems that have been criticized for some time, such as the compensation gap between the CEO and employees, active lobbying, and large share buybacks, have not been resolved. Citi CEO Jane Fraser explained yesterday that she was asked that her former CEO’s compensation was more than 400 times the average employee, and that she “provides additional benefits and family support to her employees.” ..

Anti-Wall Street sentiment is deep-rooted among Americans. As the 22nd midterm elections gradually approach, questions tend to be more publicly conscious. At the beginning of the hearing, Senator Sherrod Brown, the head of the Democratic Party of the U.S. Senate Banking Commission, said that while the U.S. bank received tax relief during the 2008 Lehman crisis, the people were not saved and took further action. I asked.

On the other hand, the opposition and Republicans have turned their criticisms on stakeholder-oriented and ESG (environmental, social and corporate governance) -oriented management. This is because it is in the form of supporting the Democratic Party’s inequality correction and decarbonization policies. Rep. Pat Toomey, Republican leader of the Senate Banking Commission, emphasized that “the responsibility of management is to maximize shareholder interests,” and there was also a scene to ask the management of each bank whether they supported capitalism. It was.

Republicans were particularly particular about bank lending to energy companies such as coal and oil at the hearing.

At the request of environmental groups aiming for a carbon-free society and institutional investors who place importance on ESG, the US bank has stopped or reduced lending to related companies. On the other hand, the Republican Party’s support base is the energy industry, which has been trying to put an end to this movement since the time of the Trump administration. Bank of America CEO Brian Moynahan emphasized at a hearing on the 27th that he would “support the conversion to renewable energy.”

Talks between the two parties are ongoing over the Biden administration’s infrastructure development bill. The Democratic Party insists on raising the corporate tax rate as a financial resource. Republicans sought to elicit statements from CEOs at hearings about the negative effects of the tax increase. JP Morgan CEO Dimon described the tax increase as a “mistake” and called for a tax system that would not diminish international competitiveness.

While partisan questions stood out, discussions on important issues did not deepen. Financial institutions in the US, Europe and Japan have suffered huge losses due to excessive risk taking by US investment company Archegos Capital Management, and it is required to rebuild the supervisory system. There were many issues such as preparation for cyber attacks and regulation of crypto assets (virtual currency), but there were few questions.

The Senate is rivaling the seats of the ruling and opposition parties, and even if the Democratic Party tries to pass a bill against the bank, it will require the support of at least 10 people from the Senate Republican Party. At the hearing, the gap between the two parties became clear again, and analysts said it was “difficult to pass the bill” (Investment Bank Cowen’s Jarrett Saberg). It is bipartisan and lacks the momentum to tackle important issues, which may delay the response.

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