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Banks are playing for $ 23 billion in profits, while Congress scolds CEOs

(Bloomberg) – Wall Street CEOs spent two days getting grilled by lawmakers. Their companies gained a market value of more than $ 23 billion. The heads of the six largest US banks picked up the shocks from the Democrats about the treatment of consumers, climate change, and for not doing enough to promote racial justice. Republicans also stepped in and beat up lenders for avoiding politically unpopular companies in the US while funding Chinese companies. As the hits continued, bank stocks continued to rise – indicating that executives had largely achieved what they were planning to do before this week’s Congress hearings: Avoid embarrassing moments or clashes that could deeply shadow their industry. While the breadth of questions served as a reminder of the vast reach of megabanks, the lack of fireworks underscored how well businesses performed during the economic turmoil that sparked the pandemic. It was a far cry from what happened after the 2008 financial crisis, when Wall Street was the bad guy and Washington aggressively tightened its leash. “The goal of the CEOs at these hearings was to get through without anything that would lead to tighter regulation or anything that would cause them problems with shareholders,” said Ian Katz, an analyst at Capital Alpha Partners in Washington. “You did it for the most part.” Satisfied lobbyists The trial began Wednesday with Jamie Dimon of JPMorgan Chase & Co., David Solomon of Goldman Sachs Group Inc., James Gorman of Morgan Stanley, Brian Moynihan of Bank of America Corp., Citigroup Inc. Jane Fraser and Charlie Scharf of Wells Fargo & Co. appear before the Senate Banking Committee. The second round took place on Thursday before the House Financial Services Committee. Some bank lobbyists expressed their satisfaction in private and stated that there were no missteps in public relations. Diversity and racial inclusion were recurring themes for Democrats, who asked if banks should be independently screened to see if their policies are adversely affecting minority communities. “We’re looking at this again,” said Fraser of Citigroup, which at its most recent annual meeting rejected a shareholder proposal calling for such a review. Read more: Citi Reconsiders Racial Tests Dimon Rejects However, BureaucracyDimon dismissed the tests as “Bureaucracy and BS” adding that the bank is “fully dedicated to assisting colored people”. Workforce Return The JPMorgan CEO was the most outspoken of the executives. He also attracted attention when he theorized that some Americans may not want to return to the workforce immediately after the Covid-19 crisis. Republicans spent a lot of time telling CEOs that banks should stay out of politics and warn against corporate activism in areas like climate change harming their businesses. “I’m very concerned about the pressure all of you are getting as CEOs,” said Michigan Republican Bill Huizenga. “All of your companies have pledged to abide by this whole thought of bowing to the vigilance that is going on.” Legislators of both parties intermittently sought advice from senior executives on a number of tricky political issues, including the need to monitor cryptocurrencies and the government’s adequate response to the rise of blank check companies and the bubble in so-called meme stocks like GameStop Corp. Crypto CautionDimon and Solomon said they personally continue to be doubtful about investing in crypto, calling it a product that buyers should be careful of. And they said Washington should work to set rules on the largely unregulated digital tokens. Even so, Dimon and Solomon found that their companies were thinking about how to make coins available to customers in a safe manner, especially as the demand for them has increased. “This goes back to the way you have to run a business,” the JPMorgan boss said, noting that his personal views were largely irrelevant. “I don’t smoke marijuana, but if you make it nationally legal, I won’t stop our people from banking it.” Read more: Dimon sharpens criticism of Biden’s proposal to increase tax acquisition companies, or SPACs, Solomon said that this was a good one Idea would be. The Goldman CEO also weighed on the collapse of Bill Hwang’s Archegos Capital Management, saying that while there are a number of institutional investors buying total return swaps, what made Hwang an outlier was his extremely focused position. Solomon said he supported regulators considering a “more modern disclosure structure” for the derivatives that Hwang used to shield its massive stake. “Having some focus is probably a good thing,” said Solomon. ProgressScharf von Scharf, whose bank has been involved in several scandals and continues to hold orders from the Federal Reserve that limit its growth, said its top priority is convincing regulators that Wells Fargo is established. “We believe we are making progress, but we are also very, very clear that this is a problem of multi-year travel just given the amount of work that needs to be done,” he said. You can find more stories like this on bloomberg.com. Sign up now to stay up to date with the most trusted business news source. © 2021 Bloomberg LP

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