In the Banking Industry. This portion of the hearing is one hour and 25 minutes. [inaudible conversations] [inaudible conversations] the committee will come to order. The gentleman from missouri mr. Luetkemeyer is now recognize for five minutes. Thank you, madam chair. Welcome back to our witnesses. I would like to focus on a larger issue today that the facts ever u. S. Consumer and consumes all over the world, which is heavy investment in volatile and unfriendly countries such as russia and china. Ms. Frazier, mr. Dimon, after moynihan each either banks have significant investment in russia which you drew down after putins invasion of ukraine. While american sanctioned what impetus for those actions it should be said you did the right thing by shrinking or assets there. We learned to make important lessons. Number one, there was a largenc risk investing in volatile nations with dictatorial governments. And a vertigo investments place difficult role in supporting those nations economies. In recent months chinas continued to threaten our ally taiwan withme military exercises and violent rhetoric. Should the ccp follow through on his threat to invade taiwan, are your banks prepare to pull your investments out of china . Mr. Moynihan, do you want to start first . Sure. I think we will follow government guidance which has been for decades to work with china, and if they change of position we want we wily change as we did infi russia. Ms. Frazier . Yes, we would do likewise. We follow the government guidance on the trip we very much hope it doesnt happen. Mr. Dimon . We would absolutely salute and follow whatever the American Government said, which as you all, what you want us to do. I appreciate willingness of all u. S. Law and your banks statements in decisions that go along come well beyond but, but you may decision to go well beyond u. S. Law and enter the realm of moral judgments. For example, in 2018 city and bank of america announced lending restrictions to certain gun manufactures and retailers. Jpmorgan announced it will not fund private prisons. None of these decisions remain because of a a law passed by congress. Mr. Dimon, with an invasion of anan american ally be enough to make you stop doing business with china . If invasion of an american allyh would be enough for jp morgan to make the moral to commit to stop doing business with the Chinese Government party . We would have to decide when that happens. Ith the Chinese Communist party . We would have to decide when the happens. You are not going to commit to pulling us out of china if they invade taiwan . Is what you just said . The first thing i would do is call the American Government and ask for guidance. Thats what i would do. That is what they would expect me to do. Mr. Moynihan and miss fraser . Same, in terms of decision. But we always look at clients and risk and effect we would find it before the russia situation took place in ukraine, that we made a just missed or escalated all the time. In every country is volatile, regardless of their it would be driven by the government, and occasional we are talking about, there will be driven by government rules and regulations and laws in congress. Miss fraser . Similar to both mr. Dimon, and mr. Moynihan, my first colby the u. S. Government to understand what they would be expecting and wanting us to do. Suppose the government said it was up to you to make your own decision. It is a business decision on your part. What would you say . It is highly likely that we would have an extremely reduced presence, if any at all, and if the business was left up to you, you would pull out, probably . Or reduce some assets . It is a hypothetical question, but it is highly likely that we would have a reduced presence. Each of your banks have Public Statements pledging commitment to supporting human rights around the globe. According to the state for 2020 report, genocide and crimes against humanity occurred in china last year. Those crimes include arbitrary and unlawful killing by the government, imprisonment, forced sterilization, rape and torture of a large number of those mr. Moynihan, do you condemn the Chinese Communist party for those who are blacks that they committed . We look at any client would do business with to their operations in any matter, and we make that decision. So the government all is not the decision in terms of who we do business within china, it is the client would your be . That the question, is when we look at what we do in the countrys individual clients, it is not a theoretical concept. So we look at that client, if their clients mr. Moynihan, with all due respect, the government of chinas the communist party. The comings party is the government of china. If you are doing business in that country, you are doing it willingly with respect to them allowing you to be there. And you are doing under their laws. Which last time you are here, one of youth reaction made that comment. So if they are committing these atrocities, are you okay with that . Are you willing to continue to do business with people falling to sign a process . Whatever you say in the statements, that is a bad deal. We do not do business with companies that we believe are doing atrocities. Or Something Like that. I think your question thats my point. Miss frazier . We obviously take any accusations of human rights abuses very very seriously. Like mr. Moynihan, we cannot win the activities with companies that are very involved in forced labor but its okay to do business with the government . We do business with the government. Even though they commit those atrocities . Thank, you i yield back. The gentleman from colorado, mr. Promote, who is also the on Financial Institutions is now recognized thanks madam chair, minor gonna be a little simpler than that. Mr. Moynihan, think of america has some of the best economists in the world working for you. I had the chance to meet with a couple of them. I guess i am coming up things a little differently than has been expressed by my republican colleagues, and some of you. Looking at the last few months, from may on, prices have been steady or dropped. University of michigan anticipates prices to drop over the course of the next year. So in conversations with your economists, what do they predict . What do they think is going to happen . Archivists have 2022 is a positive gdp. Negative for the Fourth Quarter of this year. Negative for the First Quarter of next year. And negative for the Second Quarter of next year. And then moving positive, and ending up in a 2 you through your First Quarter as a go through. Thats the yes i would say. I dealt with at the beginning of covid, i dont know if you recall your analysis. Your expecting covid due to the economy if we did nothing, if we just held steady, everything, when we didnt do ppp, we didnt do unemployment, we didnt do any of that. We just, said well, were gonna have trouble. Thank goodness for my point of view, we did a lot to keep the economy moving. Obviously there is a year over year increase in prices, but if we go forward on an annualized basis, just based on august, its 1. 2 for the next year. And if you look at the whole summer, it is less than that. So what i am worried about is an overreaction from the Federal Reserve, and the last time we saw him increase Interest Rates like this was back in the 80s and early 90s. And i can tell, you colorado got clobbered. I wasnt market just stopped, as did everything else. So mr. Demchak, im gonna turn to you. Because they had a pretty large subsidiary called a kiss accompany back in those days. I dont know if youre familiar with it. But it suffered a lot of foreclosures back in the 80s and 90s. As dates some predecessors to u. S. Bank, certainly jpmorgan city had the same some issues. What did you see . What did your bank see on the horizon in terms of foreclosures . If mr. Dimon is correct and we get hit hard because of ukraine into this into that, i think most of what we are facing is supply changes, threatens caused by covid, and thats what weve seen some prices go up. Are as your bank prepares, are you prepared, to handle a lot of foreclosures of the bottom falls out and there is a potential problem here . Thank you for the question. I would suggest i think inflation is going to be a little bit stickier than we would like. I think as a result of that Interest Rates are going to be a little bit higher than we would like for longer, then we would like. The impact of that on housing is clearly already felt and that creation of new homes in the sale of homes impacts of that an existing homeowners in all of my communities and their inability to make payments absorbing the greater percentage of their income is a real issue. We work with the government funded programs, state funded programs, p and c funded programs to make sure we stay in their homes. Have you seen delinquency rise . We have not. Not at this. Point of any of the banks seen delinquency rises on home mortgages . Mr. Dimon and i disagreed over the years about the number of capital that should be repaid. On the bank of a predecessor bank he was operating on an mou during these years when the fed took the Interest Rate up dramatically, back in the 80s and early 90s. Mr. Dimon, if you get your worstcase scenario that we outlined, is jpmorgan capitalized to take such an economy . Absolutely. Everybody else feel you are well capitalized . Yes. Wells fargo . Yes. Even if mr. Dimon worst prediction comes true . I mean he wasnt saying it is a production, just naming a possibility. I think the four diamonds productions. Think of america . Yes. Not to take our word for. Look at the stress test for ten years in a row. Theyve been stressed testing under other scenarios, worse when it has occurred. Highest realistic prices, highest unemployment, highest stock market. Look at the result. Turn back to the chair. Thank you. The gentleman from texas, mr. Williams, my now recognized for five. Minutes thank you mrs. Sharon thank you average being here today. Appreciate it. A new merchant category is approved for a gun and ammunition sellers. My republican colleagues and i have expressed concerns that this will make it easier to track expose and limit the Constitutional Rights of millions of lawabiding gun owners. Progressives are already hearing that this will be a huge step forward and monitoring suspicious gun purchases. Nevertheless they claim have been dragged into the political arena. And it reads, we cannot believe that private companies should service moral arbitrators. Asking private companies to decide what legal products or services can and cannot be bought, and from what story gets sets a dangerous precedent. Further, it could be an invasion of privacy for banks and Payment Networks to know each for most personally trusting habits. We said is firmly against this. So even though i think the Critical Committee should disregard the new code i do agree with the Statement Released by visa. The problem with these new classification codes is a determining what is suspicious is a subjective exercise and anyone who is against the rights of gun owners will want your institutions to fly every single transaction with the gun and cc to law enforcement. So before i continue to quickly get used anointed each of you from two things. First, if you agree with implemented this new mcc for guns and seconddegree with pieces Public Statement. We can start with you, mister scharf. Please repeat the public. Statement read the Public Statement that i just read . Yes, could you repeated. Well, i can read it but it will cut into our time. Just as they dont seem to be political business. And they want to get out of it. So, joins your question, we dont set the marching category codes. So the ico association sets them and we are instructed to follow so what we think is not really relevant at this point. Mr. Rogers . Certainly follow the rules set on a Credit Card Company and intermediaries. What well also look at all for the privacy of our clients. Do you agree with lisas Public Statement . We will protect the privacy of our clients according to the law. Mr. Moynihan . As my two colleagues have said, the rules of the association and of the is not our doing we just have to implement them but well believe in the privacy of our Customer Data and we felt that true for many years. Im not sure i agree with lisas public stream is all but it is their statement. Im not sure i dont agree with. And i just dont really reflect on other peoples statements. Miss fraser . Similar to mr. Moynihan, i can only speak for my own bank. We cannot use for sale farms for individual car holders. You said you do . Not we do not intend to limit the use of firearms borrowing individual cardholders as a result of the coat. Mr. Dimon . I actually dont know what they use it for and we do not want to be in the business of telling american citizens what they can do with their money. We understand your concerns over the issue. Okay. Thanks. Next. Mr. Demchak, i nothing new to add. I think everybody is covered it. Okay. Consistent. We will abide by the rules and protect the privacy of customers. Miss fraser, what are the criteria that citibank well use if they find suspicious Transactions Associated with this new code . We will follow the regulatory requirements in terms of the filing sars as we always do but is first blush looking at this we do not think it will be a factor in filing a mr. Moynihan, on a similar note how well bank of america determine customer s are filing or is it something but he recently came into money . Again, as my colleague just said, if they buy or purchase a gun at a shop, the fact they purchase it has nothing to do with the sorrow file. My last question, real quick. When i talk to Business Owners in texas where i am from there does not seem to be any debate that we are in a recession. And they are concerned about it. I would like with this question. Mr. Dimon, you said the summer that there was a high probability of a recession and much worse. Can you describe an economic hurricane that we have seen if you think we can avoid further economic damage . The American Economy has consumer set by high rates circulation and more which weve never had before. They are meeting as we speak and they are meeting for the next six or nine months. We do not know like. You only. Back thank you the gentleman from connecticut. Science is also the chair of the subcommittee on National International development and Monetary Policy which is now recognized for five minutes. Thank you madam chair and thank you all for being here. Iverson the room in the First Quarter 2009 when the economy was contracting at a rate of 10 . I really did wear the number here institutions were not going to survive a week. We came a long way. Mr. , david thank you for acknowledging i think you said credit where credit is due the doddfrank was a big part of that. I was a short at the time by people in my seat of the aisle that doddfrank would crumble like a sandcastle in a hurricane. I was assured my friends on the other sides of the aisle it would eliminate the bank and none of those things proved anywhere close to being correct. Credit workers do we got through the stress just in the last few years because of dot frankly also because of those institutions that you run. Thank you for that not just not for creating systemic problems with actually getting the ppp which were so important to so many businesses in my district. I say all of that just because i want to focus on risk. And they have the three questions of risk about 70 plus of the market has migrated of a banking environment. With a lot less visibility. Take a minute to talk about whether we should be focused on that risk. Mr. Moynihan, i would ask in a minute or so about whether there are nonobvious risks that mister dimon has not covered. And miss fraser, im gonna close on you because of your global footprint, what risks do we have out there that women have jurisdiction. Over whether asia or europe, could be transmitted to our system here . Mr. Dimon, the mobilization. Market i would not call it systemic. It is riskier because companies do not advance funds during a crisis. We could. We do need to reform and for the sake of the industry, and we could get mortgages and all times. Mr. , moynihan, what are the risk for not thinking about . Now what are the bullets were not seeing where . Now are you talking about mark businesses . Generally. Incidents are the banking. Second as i worry just as much of what is happening on the outside of the making second of what is happening inside. When you think about economy where it goes to create those versus and leverage, and honestly there is more of that side of the Banking System and inside, that is something that i think we know there should be carefully watching now, in terms of funds, private lending funds, private lending funds have leverage in. Them high leverage multiples. Our industry, because of the examination practices and frankly the way the companies are run, is not participated in. So thats what i would say a risk is. But its always good to move about the economy and demand dusky was something a little more specific. When we talk about private lending friends were doing was cfos or the what would be focused . On all of them. The amount of private tether credit not only in mortgage but every single class insider outside the industry. If you look at where lovers multiples individual deals ardent have been done, there are multiple regulatory youve also this point that you feel youre institutions inadequate the capitalize or perhaps over capitalize. So are you saying that there are private non banks that are under capitalized relative to yes. But they will have net asset values and other words their liabilities or interested in that fund market to market. So you will have that same kind of stress. But liquidating those companies