Transcripts For CSPAN2 Big 20240705 : vimarsana.com

Oversight of wall street. Topics included International Competitiveness of us banks, proposed regulations that increased Capital Requirements aexrand access to capital for Small Business owners,veterans and underserved communities. Piggy ■hauser affairs will come to order. Senator scott, thankyou for your work on this. Ceos appearing before us daithe biggest global systemically important bankswi in the United States of america. Thanks old nearly 15 trillion in assets, manage trillions in investments and retirement accounts from the Biggest Companies in our country. Youll old nearly half the nations deposits, 80 trillion in client assets. Your banks touch ever of our Financial System even if they are not your customers. All that makes you eight onof the most powerful people in the country complex, so interconnected that their distress or failure pose a threat to the Financial System. You may be private companies but the risks you take mistakes you make dont just affect you, they dont even just affect your customers, ust yoha not even just your workers. Mistakes you make affect the whole economy and as we remember from 2008 and 2009 caamerican taxpayers. That amount of power to come up with enormous ■5responsibility. A big part of that responsibility is to make sure investors not taxpayers are on the hook when risks your bank dont pay off fe Capital Requirements. Because of this committee we have financial watchdogs in place were serious abo. Common sense rules to make sure banks can withstand losses from the no value to the real economy. These rules protect against derivative activities on wall street, the same that led to the 2008 finan. They would close the loophole allowed acts like spd to hide behind accounting section to contribute to its failure and anyone who had any doubt about whether wall street could be trusted to use it our responsibility need only fight on this. If you watched the local news , youve probably seen ads urging people to stop basel endgame. You know your audience and youve even Gone National in that campaignpouring out ads for sunday night football. The campaign waged by your lobbyists watchdogs from puttin place these stronger requirements toprotect our Banking System and economy. Listening to these ads you your claims about how ill piraise the costs of mortgages and help Small Businesses from making loans. Wall street banks are saying cracking down on them wi hurt working families. Youre going to say cracking down on wall street the economic devastation in 2008 helped hurt working families. When Small Businesses in ohi and minnesota and california and rhode island and South Carolina across the country didnt know if they could get access to their money and make payroll and of course the claims in this ad campaign are not true. Your game too often is totry to confuse people. Many people olthink about banks capital as money stashed away in the fall somewhere but thats not what it means, you all knowthat. Capital is just a way to fund loans and investments risky act that can absorb losses if things go south. It means shareholders and investors are on theook what th tell you is your banks have been reducing your lending to Small Businesses for years now,ong Capital Requirements were proposed. These are proposals atthis point that havent even been mited. Nothing in these rules stops your banks from making oploans to working families, homeowners and Small Businesses. Absolutely nothing. Might make fewer loans is the same reason weve been seeing less and less productive banking activity for years,it doesnt make your banks as much money as the risky stuff. Business lending so even with this rule you can lend to Small Businesses, you just might not increaseyo profits quarter by quarter quite as much as you increased them last year but most americans feel that a tradeoff. More small emfirsttime homebuyers, less chance of bailouts. In exchange smaller executive bonuses and a tiny bit less profit from multitrillion dollar wall street banks. We know the Banking Industry doesnt give up without a fight. Oi wall street pours money lobbyists to fight any effort but the most basic guardrails on your abilwhat your banks wan maximize profits. Cost in everyone else be damned. En the harm yothe when i heard about this fee collapse my mind went to another crisis in East Palestine ohio. A fiacthe relevant affected and affected community in my state. They have one thing in comma÷oned for less oversight. They dont care about safety gets in the way of increasing profits. Working people pay the price. Thats why people ate wall street and eight washington cause these lobbying campaigns that youve engaged in usually. We saw it during the to pass dodd frank during the financial crisis. Now its taft time this time wall street was executives lobbied for watereddownrules to make it easier to change profits. They knew risks were building but they chose to ignore os a fair payout for executives at the top so we should be concerned when executives are doing the e. Working executives are tired of executives gambling with other peoples money in writing off into the sunset. Thats why we need a bipartisan recoup act Banking Sectors responsible for driving their banks into the ground. Its why we need strong capital. Those failures this year were reminded about how fragile our bank and as a result your banks only got more powerful so its fair to take stock of why youre using that power. I eciate the increase in benefits for many frontline employees, thankyou for that. At least one of your banks has made real efforts to get rid of Overdraft Fees but banks need to do better when it comes to recognizing their dignity of work. Should be cutti for consumers, increasing opportunities, increasing diversity with your executive ranks efforts if they so choose to unionize and you should stop pouring money into lobbying against efforts to protect taxpayers who subsidize your entire. The reason is to hold the biggest banks accountable to the americanliani thank each of you for being here. I appreciate your all coming together for this hearing and i want to hear what you will do to invest in the economy wall street to work for main street. Very long list of ceos who got to talk about how the impacts of our revelatory environment will affect are prepared based on what the chairman said, nothing in these proposals will stop your banks from lending to Small Businesses for first time homeowners because if the proposal , who in america knows about this, lets translatthat for averagerequiri capital on thesidelines. It means fewer dollars to dgfor some homebuyers so the actual impact of a higher rate standard is fewer dollars going to americans who need desperately to engage in a process of ghachieving the American Dream that is typically defined by having access to capital. If you work really hard, keep your life in order you can have a good quality life. If you want to experience wealth in america you have to experience benefits of profit or equity. Equity comes from having capital and nthaving capital means you have it because you are born with vision that will make your community or the station better and you go to a facility or bank or outside the market and you find that capital that allows you to start yourbusiness. You start your business and or appreciates and it creates a profit and that profit allows you to experience theamerican■1 if you have home which is the difference between the fold difference that is found in a profit so when we think about e proposals not of good regutions but of a nightmare proposal called ot■7 basel 3m, how does that translate for the average heck. That makes the American Dreams harder to achieve for some fks swhere i started virtually. I think if you think about that perspective i want to talk aboutbriefings. Number two is the burdensome regulations that hopefully hamper Consumer Choice and be doing and the workplaces out start as i did with basel 3m. The fact is this one proposal that has a devastating impact on Small Businesses i would like for you all to address that. Last month i wrote a letter toto withdraw this misguided proposal because American Families mostly bear the burden of thisegulation. That they simply cant afford b percent of my republican colleagues that spanned the spectrum. Nearly every Single Person who signed a letter agreed the costly harmful impacts on our constituents, businesses and their families is somethmply if banking regulators would listen to common sense. And frankly last fall the regulators spoke. Even my colleagues agreed with our concerns on the negative impact by a burdensome regulatory requirement. Let me be clear, this proposal will lor housing, severely restrict lending for Small Businesses that are rebounding from the pandemic and cut into the Retirement Savings for ushardworking americans by teachers, police officers, firefighters dealing with highe and runaway policies brought by the radical left these are serious concerns but americans shouldnt just hear about the concerns from those ofs should hear from those who run the institutions that they have to trust and have confidence. As a former Business Owner i believe you all sh■nas the daytoday operators of these businesses, not elected officials have abetter sense of what the communities are facing, the challenges the vice chair says the new basel iii endgame will only impact about 40 banks in our country. Two thirds of all the loans processed will be negatively impacted by the endgame proposal s 60 billion in smal Business Loans in 2021, 250 billion negatively impacted, the definition of negatively Interest Rates were fewer loans. In South Carolina that translates into five 50 million in business is having fewer loans and 3 billion in h origination. That regulation inses by providing alone and i fear banks will increase lending not only in my home state but try. Decreased lending means increased Financial Hardship and increased financial thats my ultimate concern. In but you see opportunity for Everyday Americans. Consequences will create a ceiling for low income americans. It will be made of concrete. We simply cant let that happen. The second item i want to discuss with you today concerns the onslaught of rules itargeting your institutions and the Banking System written large. In recent months weve seen proposals for final rules all the way from Climate Risk Management to the Community Reinvestment. It is vital this committee get with each of you about the overall impact on the health and in particular i am deeply concerned i the continued attempts by this administration to advance their climate goals by any means necessary ■ycludg through our bankingsystem with the riskmanagement guidance. Have you been considering other risks for decades and you should. It is called common sense loand it remains incumbent on n each of you to base your lending decisions on risks you can assess like are credit risk, not how perceived political rhetorical or reputational standards beyond the explicit costs ofthese proposals which are passed i fear the only accomplishment will be to push more regulation outside the Financial System where we have the impacts on consumers. Finally we must emphasize and turn our attention to the performance of our regulators and their core mission. Supervision of your banks and the stability of our financial accounting. Spring we saw the failure of these banks. Since then theres been nonstop fingerpointing by our regulators and in the aftermath of the failure i was critical to executives that thats where the dollar should stop. But you cant see that in a vacuum. Q you have to ask yourself the question, what did they see and how did they respond to that. Your institutions oon the regulatory agencies in your offices every day and i can tell from your faces you are excited to see them show up but the reality is the American People understand the complexity that exis and makes the headwinds real, lending money so we can be entrepreneurs for firsttime homebuyers. Were not on the same page on a lot of issues and there are times whenbanks go too far and getinvolved in things. When it comes to your objective crating access to resources for the American People and the American Dream thats where i our attention today. To work on an environment that is easier for the average american experiencing ■■ the American Dream or make harder the challenges brought to them. Senator scott. Im going to ask you each to stand and raise your right hand. Charles scharf, president of wells fargo, brian moynihan, welcome. Jamie dimon, welcome. Jay frazier, ceo of citigroup. Thank you for joining us, David Solomon Goldman Sachs ceo and james gorman, please stand for amoment and be we swear or affirm the testimony youre about to give is the truth old truthor nothing but the truth. Thank you, make sure you take your seat mister scharf and begin chairman brown, members of the committee, thank you for the opportunity to be we look forward to talking with you about the contributions wells fargo is making to communities, employees and to ensure the Banking System is strong. In march of this year we all saw the failure of several of the banking center. While the faults were specific to the institutions coerned to choose broader and in response wells fargo stood as a choice ofstrength and stability. This strength allowed us to lend to a smaller bank at the tif need. These stabilize the Banking System, these concerns and keep the challenge becoming a much broader crisis. Im proud of the role we were able to pay. Wells fargo strength comes from disciplined financial risk ment and a commitment to run our business to high standards. Our top priority is to run a well controlled company over th have simplified our Business Model and exited or downsized several businesses. We are primarily a Domestic Bank and do not have many complexities that run in pranks. Our footprint is far simpler than many competitors. Approximately 90 percent of our revenues come from the united ss. We proudly serve one inthree us households, one in 10 scpercent of Small Businesses , we were ad middlemarket Bank Provider and we maintain one of the largest efforts in the nation and we have more rural n any large bank. 30 percent of our branches are in low or moderate income sectors. How we serve our customers and investing in our branches, rolling digital capabilities to complement our physical presence and investing in the products we offer to our customers. Since 2019 we have taken numerous steps to simplify fees which as of yearend 2022 resulted in average consumer deposit accounts paying 25 percent less in fees per year. We give customers the choice of an account that offers overt Overdraft Fees. We eliminated transfer fees for customers enrolled in introduced early payday which makes eligible direct deposits available on todays early. Extra day grace which gives sto business day to make deposits to avoid Overdraft Fees and flex loan, a new digital only. Im proud of the role we play in our communities where we seek to have a broad impact. Last year people who work at wells fargo contributed 7000 hours of volunteer service ,. Ive spoken in the past of oucimake the fees we received and donating them to Small Businesses in need. The first half of 2023 these funds help support 203,000 majority of them diverse esowned and helped reserve nearly 254,000 jobs. Finally we believe our employees are our t greatest asset. We invest in them and listen to them. Si20d wages by nearly 20 percent and increased the average pay rate for tellers by 34 percent. In 2022 we increased minimum base pay more than 40,000 employees and invested 200 million in employee development. We offered ways for employees to share concerns, their voice matters. We take their feedback sey act their comments. For example 4000 improvement ideas our employees ve been implemented or are in the process of future implementation ■. Engaging with our employees in this way iscritical to improving the Work Experience of wells fargo. I want to thank by thanking our employees. I am thankful for all theydo■ and remain committed to leading wells fargo to becoming one of the most respected nc mister moynihan. Chairman brown, ranking to represent my 212,000 us back america teammates. Today i will provide an update on how we deliver responsive growth to our clients, teammates and shareholders every day. Response continues to deliver strong results during times of relative calm as well as during challenging environments. We saw turbulence as a limited number of institutions ng with their unique Business Model. Bank america along with my colleagues served as a source of strength and stability for customers during these times and we did this all while strengthening our Balance Sheet. We accepted aurcs. And while we have declared we have to the proposed new capital rules in recent years we have shown how important it is to have these institutions balance their sheets to help in times of stress. Thats why we play an active role to help in this industry including comments on the basel iii rule. We believe capital should serve americas economy, not a theoretical model. Access should be used to grow to t Business Plan small and mediumsized businesses and help consumers recognize american industry. Not to be used as a specific example of progress e. 60 million American Consumers and tens of thousands of commercial clients. We focus on livering across our physical network, 5000 atms. We renovated 784 more and thousands of tvs servinglocal markets around the country. Over the next few years we expand until birmingham, new orleans, and this will enable us to ge of services to better serve clients and help local communities. We also developed low to moderate Income Customers including 9 million in loans to Small Businesses since 2022 and in addition we pr to more than 10,000 units of Affordable Housing and committed 15 billion to our home50,000 American Families ensure the American Dream. Weve invested 24 minority institutions billion dollars in and we helped 150 private equity funds run by entrepres. Our clients continue to achieve a transition to a low Carbon Economy tens of trillions of dollars investment th t creates significant opportunities for our clients and our e companies. This transition has to be led by the private sector. We continue invt in our teammates Financial Health including taking steps to move to a 25 per hour minimum wage which increase and for the 12 year rope we invested 50 million without an and for the sixth year in a row are teammates included bonuses generating equity to 200,000 teammates. We are a great plac. Our Employee Satisfaction scores running at alltime highs and our current rate is approaching an alltime low. In 2022 we made 360 million in philanthropic investments and are teammates reported 200 million for the year. We continue opportunity in Community Employment and we are in the second place of teammate hiring to work in our company and similarly v15,000 veterans the last eight years and importantly responsive growth for our shareholders. We have delivered stronger an teand we continue to increase our common dividend and return capital shares. This is american capitalismat work. Mister diamond, welcome. Thank you chairman brown and members of the committee, i appreciate the opportunity to talk about one onomy. United states has the best system in the world sellnvestor banks that servethe american economy. Covering all corners of our country. Im proud of tcoand one of the 300,000 employees worldwide. We serve 80 million customers, or the 0 branches in 48 states and washington dc of the population. We are a top lender in every state, circuit serving governments, farms and manufacturers providing 100 million of credit and capital in rural small towns. J. P. Morgan chase extended 1. 7 trillion in credits to consumers and corporations in 2023 10 trillion around the world every day hundred 60 countries daily and served 20 trillion assets. Credit unions of all sizes serve all corners and we must acknowledge theres something that can only be done by large andcomplex banks. While we are a large Mainstream Bank large banks serve american futures ov. Bank of americas largest Multinational Corporation we make other banks and institutions such as large finance companies ■ithe world bank, imf, community banks, tdf i, large american banks supporting the most liquid Capital Markets in the world. We underwrite large and complex municipal bonds, ovdges, schools and airports and help american Small Businesses manage money and finance their dreams. Our collective work is important in good times but essential in troubled times. Thanks americans invest and save and grow. Creates investments for retirees and raise money for companies and new business development. As guardians of the Financial System we support our National Security to carry out complex corporations. We are a force for good for the country. In troubled times large banks provide market stability to protect omerand employees alike. They demonstrated recently during the spring of 2022 regional turmoil artifacts sent in to provide more liquidity protecting consumers and employers d and w banks provide significant support and tens of billions of dollars in credit to large and Small Businesses, local governments, universities and hospitals time when they needed it most. Nks ived fees postpone loan payments. Despite evidence us banks were decapitalized today, the rule 10 years in the making and acted increased percent for the largest banks and none of these changes would affect Silicon Valley. The rule would have predictable and adverse effects on american households the Federal Reserve has not studor. Small Business Loans would be more expensive particularly for low to moderate income borrowers as costs originate. It will yield lower returns as costs rise for assetmanagement funds. Vernnt Infrastructure Projects become more expensive with capital required for market activitio higher cost of build hospitals. When Beverage Companies manage costs to the need to protect against environmental risks s the cost of heading these risks increases the cost of sanything from a can of soda to being ts. It would actually increase risks. This will result in a shift to a less regulated market which was not studied by the way. ■ regulators are unable to see the next crisis brewing. I feel that pose now and study later has been a troubling newthing in washington. The cost of interchange has no Economic Analysis ■k perforngr consumers, lower income families, markets or the economy. The debate should always be about more or less regulation but the right regulators. I urge lawmakers e more careful about the effect of regulatory proposals and imct■. Good regulation is critical e to maintain our Banking System. I think secretary jan for their complicated work and we continue to work on russias invasion of ukraine the steps they took during their bank turmoil this spring. This is inan example of bankers working collaboratively, shg qycountry. To close i would like to our employees and mai am proud of the work they do every day in hundreds of communities around the world serving consumers, businesses large and small,farms, cities, school, hospitals around the clock 24 seven. Thank you for the great work you do for this country. Miss fraser welcome. Chairman brown, members of the committee for to leave a 207yearold institution to support the clients and nearly 160 around the world and we have 240,000 employees with whom i could not be more proud to lead and were grateful to. Through decades of geopolitical ships technology we have seen how the us Banking System is truly unmatched. The spring may have tested the confidence of our industry but i am proud of how our industry including my peers sitting around today how we came together and fought with the government to affirm the underlying strength of the system. As we chart a path forward we need to make sure we dont inadvertently and the system l envy of others because it is underpinned by the most competitive Banking System at the us Capital Market. We are home to banks of all sizes, each with anImportant Role to play. Llour practice serves as the engines of growth, supporting household and promoting access to Financial Services in order to reach communities. For american multinationals global banks such as ours ofe size and scale to help each overseas. Without having to rely on foreign banks. Refinance the supply chain with American Companies to bring products, services to American Consumers and affordable prices. We use our robust mana t onal projects. Last year alone city worked with state and local governments to raise or finance 1 billion in infrastructure. That included financing 35,000 Affordable Housing units. Across 32 states, that saw our 13th year as the countrys number one Affordable Housing unit and inde a variety of products to drive Financial Inclusion and work with pdf eyes to reach underserved. Participant of the project reach we are focused initiatives to increase we access to credit and reduce the number of americans who are credit invisible. The strength of our Financial System becomes most critical when our economy weekends. History suggests that a recession is possible given that macroeconomicfactors at play and they include inflation services, rising debt, the slowdown in Global Growth as w t and we are beginning to see concerning signs in the lower segment of our continent and this isunfortunately the same route that feels a tightening of credit. Raising Capital Requirements by as much as 20 percent uyon an industry that all participants believe is wellcapitalized is a bad idea. In any environment. It becomes even more problematic with Economic Uncertainty ahead. Almost every element of the and game proposal would make an financial activities more expensive especially for Smaller Companies and consumers. The most likely result is increasing the cost of banks to offer a variety of products is that it would move more actively into the less regulated sector. Which carries its only but can see most instability. Would also diminish our industrys ability to compete internationally especially with our european n counterparts. I raise these nci know he share the same goal of maintaining a strong and competitive Banking System that supports a resilient economy. We do not serve individual customers directly and we have no retaile are is highly focusen two lines of business. Investment servicing and investing servicing business which includes custody and relatedt services enables our clients to invest and execute transactions daily in markets across the glo safe and efficient the manner. Our Investment Management division is a pioneer quantitative investing, creator of first etfs and forty largest asset manager. Our products are the b blocks of savings and investments aroundth the world. Both business lines have the same corporate purpose, to create better investment outcomes for the worlds Institutional Investors and the people they serve. Our direct clients our institutions acrossfunds, mutua, central banks, sovereign wealth funds, endowments, insurance mpanies, holders of assets for the benefit of individuals such as retirees, savers or students. I would like to focus a bit today on very strong view of the valund of custody banks. Quite simply, strong effective custody combined with invasion the backbone of ourent industry democratized market and provider secure and costeffective manner to the inves pro retirement and othercu financial goals. The safekeeping custody banks provide ensures where and how they should be. This has not always been the case. From the collapse of Investment Trust in the 1930s to the stude scandal uncovered. Investors are put at risk when theres no proper custody of con such as act of enormous investments in technology by todays custody banks has produced modern time near perfect track safekeeping records. Demonstrate that more remains to be done to protend the financia. In the emerging Digital Finance space, a comprehensive effective regulatoryt framework is not yt in place and thequ are clear. State street is subject to highest level of regulation and supervision. We are well both stressed and unstressed. Our Balance Sheet is conservatively positioned, uedeliver liquidity when our clients needed. We are subject to extensive resolution planses and proven source of stability. Despite there cd banking stresss year ag banks before you have done jobs exceedingly well ngid and sbb publiculators crisis and providing stability toes our Financial System. Im proud of strong performance. Looking forward the geopolitical environment is complex and unpredictable. The u. S. And the Global Economic recovery is uncertain as navigate higher Interest Rates an debt levels. In the Financial Service regulator environment in the lund in many cases with unclear goals from the street perspective im concerned with the u. S. Banking regulators capital proposal which i fear could negatively iimiting bank t extension and impairing the ability of u. S. Banks like sate Asset Management services. I amic also concerned by the ses proposed safekeeping rule which with no clear u challenge foundational elements of custody banking and in effect destroy low cost near Perfect Service now provided tos. I hope these proposals can be adjusted for if they not they create risk of negative economic market and individual outcomes Going Forward. State street and the otherks here are most well capitalized Financial Service firms in the world. They are essential to americas competitiveness and prosperetod. Thanks. I had the the honor of serves as ceo for just over a year. I ty seriously as a company we work for strong competitive the Banking System that serve customers and communities. As a for a strong, competitive inand communities. We support the economy and preserve u. S. Economic leadership. My appreciation for this role has only grown as i get to know our history, our client and our we start with who we are. We are the nations founded by Alexander Hamilton in 1784. Today, we are a global fincy th 50,000 employees. Our client base is varied ranging from governs n fu r to corporations and financial funds. These clients will have different needs and roles in the economy. We provide the services to put their money work, keeping it safe, moving it, and managing it. While we are proud of our historyr leading market positions we do not take them for granted. They are constant reminders to earn trust and plan for the ng we know that the economy will face challenges. Its not a matter of if, but when and for how long. it is critical that we are prepared to operate through these different conditions being prepared to prevent, respond, and recover. This is what we by resiliency. It is a basic concept and a shared goal amongst our clients, regulators, d in our strategy. One part of being prepared is whether an expected market stress. We have a strong track record and customers consistently look to us market disruptions. We aim to manage our Balance Sheet conservatively with a high portionof cash and liquid assets to adjust for changing market conditions. Another part of being prepared is operational resiliency having the technology, people, and processes in place to respond to events that could disrupt operations. I am very proud of the hard work outo keep markets running smoothly for record volatility and volumes during the pandemic, wars, and market stresses. This work happens behind the scenes and i want to commend our people who have made we have a long legacy of first as a company to solve problems and help move the country forward. We provided the first loan to the United States and we were the first stock listed on the new york stock exchange. These actionstaken for granted today were financial innovations at the time. We cannot be complacent. Markets are uncertain. We and address new risks as we plan and prepare for the future. U. S. Leadership on technology includindistribut technology, and Artificial Intelligence is important for diligence and innovation by the public and private sectors to address them in a responsible way. Nall i wou with an emphasis on a more than 50,000 employees who do hard company and Global Markets running. Our goal is to drive a spirit of ownership, shared responsibility and mutual success. Equity ownership in the company is an important part of this. I am particularly proud of bk shares program to grant equity to employees who otherwise would not receive stock. This has benefited more than 45,000 employees and allowed many of them to become first time participants in the Capital Markets they help to serve. This is just one example of our culture and commitment to invest in our people and the companys longterm success. Thank you for your time■j and i happy to answer any questions you may have. Thank you. Thank you chairman brown, ofthe committee, thank you for giving me the opportunity to testify. I am proud to serve as the chairmand lented team of people around the world as they worked tirelessly to serve our clients. We have a deep ana global leade Investment Management. Our size, will reach and capabilitiesallows us to provide tailored services and products aiding institutions, businesses of all sizes and individuals in achieving financial goals. We set the center of the u. S. Capital market which forms the bedrock of the Financial System and help drive innovation. 75 financing u. S. Businesses is conducted through Capital Markets. Our people and commitment on buying and selling businesses g serves as a risk advisor the raisin fluctuations and commodity price volatility for interestrate risks and various forms of credits. Local governments connect with schools and hospitals and road. Reconnect with clients on jobs that can be created and economies to span. We facilitate these activities because of the strength an of t. Our capital has nearly tripled. Liquidity hacrea 5 times and leverage has increased by half. The Federal Reserves stress test consistently confirms that all of us have sufficient capital to withstand a severe globec the scenario has included a 50 decline of equity prices within a year als features dramatic instantaneous declines in prices. We have the finest and most represented here today. We all serve as a source of strength for the economy throughout the pandemic with the korean war and region banks. The Federal Reserve chairman powell and treasury secretary and many officials of both parties across the administrations have repeatedly stated that e are strong and well capitalized. In the wake of significant interestrate hikes, i believe be more resilient than expected. The trances of recession have n conditions. It becomes more expensive to finance. The geopolitical stressors as2bso and the middle east could impact Economic Growth and stability around the world. Against this backdrop, one headwind is thfi the new capital. These rules were conceiveto create a common set of International Capital standards without raising the aggregate amount of capital. U. S. Proposal does exactly the opposite. It is significantly more stringent than any ot jurisdiction and would increase our capital. Although this is the result of a mb of over calibration throughout the proposal i want to highlight just one of the many issues that is particularly punitive to Capital Markets activities. This proposal nearly doubles the capital activity. This is simply layered on top of the local market shock i discussed moments ago without any consideration. As a result banks will need to hold piny of risks associated with those market activities. As of the third quarter, the institutions most impacted amount to two thirds of lending and Capital Market activity in the u. S. In adonsince 2010, these punitiveu. Regulator measures run the risk of harming Capital Market strength globally. As wellastside of the regulated Banking Sector. We believe that this in an increased cost for airlines, manufacturers, food producers, pensions and mutual funds, for Capital Requirements and clean energy uity pr oj that would increase our capital eight times friend grant transactions we enter into. Systemic Financial Stability t the u. S. Economy. We should ensure we are only taking actions to support our economy. Thank you. I would be happy to take any quti thank you. I am noto represent our employees today and for the last 14 years as the chairman and ceo. In 2021, we were still battling an extraordinary Public Health crisis. The economy was supportive with monetary and fiscal stimulus and inflation low. While inflation has receded, the macroeconomic environment continues to be very complex. We also have substantial geopolitical challenges today. ■s for their financing needs. That includes raising equity and debt capital to fund agribusinesses, invest in infrastructure with Pension Funds, mutual funds, and trade many assets around the globe. We manage nearly 6. 2 trillion in assets for individuals as well as institutions like endowments, Pension Funds that manage the retirement and public employees. Our services help families save money for retirement an and for build homeownership. ■o not china, not the uka system remotely. Large u. S. Banks have undergone a dramatic change in the capital liquidity ile since the financial crisis 15 years ago when the u. S. Government acted decisively and quickly in implementing these reforms. As we saw earlier this year there was a crisis among some regional banks. It was not a banking crisis. It was a crisis of three banks. It was in the spring and was quickly averted by prompt regulatory action. With the strength and support from these large banks, we along with three other banks will provide 30 billion in uninsured deposits to assist the regulators so they can manage this solution. After being part of the problem of have the financial strength and stability to be part of the solution. Current proposals to put as today on all the largest banks this socalled basil three endgame need to consider the impact to the u. S. Economy and what it will mean for business and consumers. Regulations are only effective when they find that balance. Increasing capital will already undergo annual rigorous testing anto maintain are wholly unnecessary. This will make it less successful consumers and businesses wellrengths of the u economy and Banking System. As it stands, the proposal will increase the cost on the economy not ju corporations, but to pensions, municipalities, and endowments. We hope this will be open to the changes of reviewing the industrys comments. As the Global Leader in Financial Services, a responsibility to all of the communities that we operate. Many of those communities continue to experience social and financial challenges and we use our rey, your letter dated november 6, you asked me to provide this information. Thank you to the members of the committee. We look forward to ■■dyothank y we are happy to return stock buybacks. We heard statements about how you will continue to manage businesses to deliver value to what we did not hear was any concern that your firms would not be able to make the sed cap levels. If i am mistaken, i would like you to set the record straight for the public and the investors. Do any of you have any ason to believe that your firm would not be able to achieve the increased Capital Requirements that was adopted as proposed . If you think you cannot achieve these raise your hand if you think you cannot. Thank you. I thk will be able to meet the Capital Requirements. That leads me to conclude that this proposed capital standards are not american support for unions, as we discussed is at a half century high. Unio■ ns ensure that workers sharing Company Success for better pay and benefits for greater stability to personal and professional lives. Workers at two wells fargo branches will be voting to unionize this month. Dozens of other Union Organizing drives are in the works. Wells fargoss recent scandals highlight the pressure that overworked and underpaid workers at branches face. They would not have to deal with the consequences of these decisions but we deal. I appreciate your willingness to talk oneonone about this you remain concerned about unfair labor practices and reports that have geared up spo you remain neutral for these employees. I agree about the workers employees and as you know we have done a tremendous amount to support them and will continue to do its best we have a direct relationship with those employees and we intend to exercise our right to speak with them and make sure they thank you. It was an opportunity to show s fargo. I am sorry that you failed to show that real change is afoot at your bank. Co failure to invoke the servicemembers civil relief act Interest Rate reductioz[costs servicemembers 100 million between 2007 and 2018. You can unilaterally act to ensure servicemembers receive benefits. Fits, your bank proactively checks authorized military databases to identify accounts that maybe eligible for escrow protections. Chairman, we have huge respect for those atmilitary. Specifically to your question i am not sure but we will chec thank you. We follow these provisions as retroactively looking back. About 180 a year we sent back to the servicemembers will so i will check to make sure we look at all available means. We have an opportunity to say our 18,000 veterans the last couple of years we support our military and mili100 behind th we hold them in the highest regard. Thank you. To employ many veterans and we are incredibly grateful for everything they do for our country. We make extensive investments and ensuring we comply with the lawsaninto the database. Thank you. Thank you for your candor about that. I urge you to proactively check whether customers are eligible for these benefits. It is the type of work you doing. The answers were helpful and we will be back with all four of you about how we can do that for lack of lee. There is plenty we dont agree on i want to focus on where we do agree. Nearly 1 million americans living with disabilities. The problem is the ssi eligibility roles have not been up aided by ngress. They lock people in poverty with bipartisan policies calling them most regressive antisavings provision and federal law. I have a bipartisan bill to t l punishing people for working and saving. Mr. Diamond, i know j. P. Morgan chase is in support of raising the asset level. Tell us how this affects j. P. Morgan and why you are so supportive. I would like to ask all of you if you would join in the support. Thank you. We have employs increase their salary because of it goes over a certain amount they cannot get that benefit or they cant have assets over 10,000. Thank do you agree to support this position . It sounds like something we would be willing to support. I would like to take a look at it. Fully and wholeheartedly. We do support it. We do support it. We do support it. Yes. Thank you all. Thank you, mr. Chairman. The chairman asked a question about can you increase the Capital Requirements . My question is can you and achieve the requirements without negative consequences to the economy and the lending. Senator, we do have concerns that some items in the proposal will lead us to either increase the price or to reduce the amount that we lend. There is a chart in the npr that looks exceedingly simple. It says here it is before the proposal and here it is after the proposal. A 24 increase. Thats a reduction of capacity in the industry to serve clients, no questions asked. This has to be used to sustain the same activities with no risk the day before after of what the enterprise does. That is the point we are trying to make is that this is about using capital whether we have it or not and whether we can meet those requirements to support additional activity. Ations you hear from this group is this question should have been asked before it would happen. We have to hold 30 more capital than International Banks in the United States. Loans have fallen or become unprofitable. A lot of the los the company anymore. Small business, cfi, solar, wind, middlemarket loans, certain traits you doion plans this work should have been done beforehand. By law this should have been done beforehand. We have 10 years and it is shocking to me that after 10 years we are talking about what to do for Small Business a today. We have hundreds of thousands of pages responding in and every detailed way to every one of these thingsbut im not sure if it was shared fully among all the regulators. My assumption is that everybody is going to say with consequences that will be negative. Let me ask a different question to you ms. Frazier. The unintended impact customers we so often talk about the American Consumer as if there is just one generic consumer. For a state like South Carolina with a lot of farmers, the impact on farmers and access to not only credit but liquidity during the hard times, give me a 30 seconds reaction to will this have a negative impact on these Rural Communities . Certainly. Thank you very much for your to your point this will increase the cost of borrowing for farmers in Rural Communities. It could impact them in terms of mortgages, credit card, it could also important the impact the cost of any borrowing that they do. Let me give you an example. For a farmer, an absolutely fundamental piece for providing stability and inability to sleep at night. Under this proposal,this is the cost of the derivatives that would increase client materially and have an impact on ability to do fundamental component of risk management. It could also impact the access to credit. Its the cost of borrowing, the access to credit and some of the fundamental tools they need to manage stability of income. You said something earlier that i thought was really important. As we discussed this proposal and its impact on lending on folks like me that come from povertyare looking for the ability to achieve the American Dream, some would say contrary to what im talking about, ■mae that are missing in my thought process like will this make our Financial System safer . Have we not done enough work since the financial crisis in 2007 to 2009 to make sure that Financial Institutions are able to meet these obligations and der even a worstcase scenario. Your opening comments reflected that yes we can make it through a more disastrous crisis. Can you walk us through how this woulbusiness lenders and borrowers but not necessarily make the economy safer . Suquestion. I tried to highlight in my opening comments and mr. Gorman highlighted itclearly. The stress tests are very significant. They look at very severe shocks to the Balance Sheets. I highlighted a 50 deine equity prices over one year on top of that is simultaneously equity equity market shock with as much as of simultaneous equity decline. That puts buffers in place that protect the system. Now of course a sound and secure system is imperative for the Capital Markets. We could always have debates at the margin as to whetr there are things that we can do to strengthen the system but a wholesale increase of 25 f largest banks of individual positions that affect different activities, i think that is ultimately punitive to Economic Growth and does not strike the right cost benefit analysis. Of course we need to make the system secure. It is in good shape. That does not meannothing can be done but this is a wholesale change that leads to problems. Ms. Frazier highlighted one example, talking about farmers. Airlines, jet fuel, other derivatives getting passed on to consumers. These utilities obviously get passed on. You can look at other transactions like under sft lik ours to borrow securities for Pension Plans and give them cash. That increases their returns and Capital Increase by eight times over those types of transactions which would make them unattr■ ve the ability for pensions to access that. Thank you very much, mr. Chairman. Let me thank you for th militar women. Their spouses also thank you. With respect to the legislation military lending act i think the key aspect is the interest. I think it is such a critical part that it should not be just a province of military personnel, but for every american. I think essentially your banks collectively have made about 219 billion in profit this year. I believe it is not beyond 30 . That 6 Interest Rate seems to be very so, mr. Scharff, would you support this . I think we would be concerned about setting a understanding what the impact would be and different inflationary environments. Mr. Senator, thats not really relevant to us. We dont engage in private lending. I thin what would push outside the system and make it not available. For us. I guess in a general sense it is relevant because of the people who use this are payday lenders and ratherdubious operators that will induce borrowers into arrangements yo even tolerate. I think after several years of questioning, im not picking on you, to come to a conclusion. We do not engage in that. I think there should be a focus on payday lenders and check cashers and certain things like that. I would look to have the resilience that comes with it with consequences. Some people make very small loans we stop them from doing that that would push people into payday lending. Senator, thank you for the question. Of what you are trying to do. As large banks we are very mindful of our responsibilities and protecting from abuses. Experience has shown that caps diminish access to credit in reserve has studies to show that. I think similar to my colleagues wod are other ways t intent, but we would be supportive of following up. Mr. O hanley. Senator, not engage in Consumer Lending but we do support that. Thank you. Senator, we are also not in the consumer business but we support the intent. Thank you. We have very Small Business in the consumer area, but we support the intent. Inc. You. I support it, senator, for what i consid norm economic times. This country borrowed at 24 so not quite 36. I cannot particularly heinous but it turned. I think anybody that is forced to borrow at 36 , it is unforgivable. I was borrowing at 24 . We repealed legislation because it was 21 . Because i think it is very important causing disruptions you might anticipate. The other thing, and i know many of you are doing it, is to allow people to use banks. One of the reasons they found ■ unscrupulous characters is they do not understand that it is relatively easy and much more appropriate than some of these others. Thank you. We will continue to workuld app it. Thank you. Mr. Routes from south dakota is recognized. Thank you. We do things occasionally on a bipartisan basis even in the baking committee but we also have an opportunity once a while to disagree and sometimes that means we can participate today you will hear us talk a lot about consumers as they are the latest victim of heavy handed washington bureaucrats. In the last three months financial regulators have put forth our finalized regulation and guidance■j threpresent the biggest banking regulations and the passage of we sing resolutions on bank capita the reinvestment act just to name a few. However, we know that none of these regulations exist in the vice chair said himself that this endgame proposal is and i quote, projected to raise capital for large banks. This may result in higher funding costs. This is only half the story. I want you to help tell the i was originally just going to ask this of one of you, but since the chairman has set the example of asking folks to think folks hate to be put in that position. I think it is critical that you get to tell the her half of that story. None of you raised your hands when you said that it would be a case where you could not meet the Capital Requirements. The issue is what damage it are expected to raise that and the folks that need that. Here is my question. I will ask you to raise your s. If you agree with these assessments would you please raise your hands. Do you believe in current form cut these regulations negatively impact firsttime homebuyers. Do you believe cut these regul negatively impact those saving for retirement . Do you believe these regulations could negatively impact farmers and ranchers. Do you believe that these regulations could negatively impact Small Business owners. This is the rest of the story. Sometimes we think we are just beating up on the big banks. The bottom line is it hits the American Consumer were this is at a time where they try to go after the big guys it is the American Consumer that will suffer. You can already see the signs of consumers struggling as they utilize the buy now pay later approach to products making late yments on credit cards, this is because americans are paying more per month just to get by since President Biden took office. Bidenomics has led to a family four and south dakota needing to get by for living expenses. The regulation does not exist in a vacuum. The Federal Reserve must take this into account as they work i will not embarrass you by. ■g asking you to raise your hands anymore but it is important that americans see the rest of the story and she will really pay the bill for is without finding out the rest of the story about these types of regulations and who rely in recent years the annual interest is slated to reach trillion 1. 4 trillion in the next decade outpacing all discretionary spending. Im concerned about what risk this poses to the economy. The treasury will conservatively need to issue 20 trillion of debt. I am not only concerned about who will purchase this massive issue but with the federal funds rate of 5 of federal government will be paying even more to borrow as treasuries mr. Solomon, how could sustained high levels of debt have adverse effectsetreasury this is a significant issue that i tried to highlight on top of opening remarks. This growth has beengrowth over the past 15 years. It will continue to grow the cost of financing. With this cost to refinance the debt certain scenarios could be higher. This cost obviously hampers our ability to invest another things as a nation that we need. There is a lot of attention to y future generations based on decisions we have made which is something we would have to get focused on. This can certainly create volatility and funding can create volatility in the market. One thing i am also concerned about is one of the impacts to a business called prim. This enhances the Asset Management platforms that trade in the market and providing quiddityli that would go up with this proposal and would potentially impact liquidity. Ct that we need to look at. Thank you, mr. Chairman. The senators recognized from montana. The chairman and for your testimony and for being here today. I also want to echo the comments on your support for veduty and veterans. Them and their families. It is very important. I served as the chair of thfens committee. I spent a fair amount of time thinking about National Security and how to handle terrorist organizations and foreign adversaries. You have a responsibility to make sure that you it iran that see the u. S. Not exist from and through your institution. This would be a question not for any particular reason of me so your institutions do not end up financing. Senator, thank you for the . Obviously it is critical as a good player in this country. There are two things that i call the cyber cu coming into the Financial System. Spending about 50 million on closely with all the intelligence agencies ensuring that we have a proper command to keep the Financial System safe. Secondly, specific individuals, bad actors and governments,this get in by verifying the source of where the funds come from. Obviously we deal with not as many client as some of the institutions here, but we still have individual clients and many tens of thousandof institutional client. Its an extraordinary effort with several hundred employees constantly working. Interestingly, advances in ai will be a real strategic weapon. Anybody have anything different to add . Onsame lines with the Money Laundering protections and safeguards,we talked about cyber security. Mr. Solomon, would you like to add anything in regards to anti Money Laundering protections . I do not have anything to add that is materially different. With an enormous focus. This Financial Crime team working every day but zxno e focus for the focus. Earlier this year, mr. Scharff was paid nearly 100 million to the violating sanctions against iran, syria, sudan. I think we can l s not a good thing. What is your big doing to make sure these sanction violations never happen again. Sure. Preventing bad actors from using our services is a top priority. We have extensive systems we are constantly using to make sure they are as complete as they can possibly be. We worked with Industry Groups and the government and are doing everything we possibly can to prevent that abuse. Talked about the fact, that this will force basel money go outside the traditional Banking System. Ms. Frazier, take can you talk about what kind l you see that having, i dont y that you will see going into the nonBanking System, it will be interesting. In 08 that was one of the prlems yes, senator, we all w about the migration of financial activities into the nonBanking Sector, particularly in a. There technological innovation. Making sure that we maintain the safeguards, we all invest millions of dollars a year be it antiMoney Laundering, be it cyber to texan, all of these consumer and protect the saver, they safeguard the system and also the Critical Role that all of our banks playinthe Financial System as a Strategic Asset of the u. S. We are very concerned that this will undermine some of the reof the unique american Financial System. Thank you all think you, mr. Chairman. Senator tillis from north carolina. Thank you thank you all for being here i am praise, ought t annual flogging and people are asking some serious questions and im glad to hear this. I have a few for you all. Number one, i want to start by saying thank goodness you are not the head of an organization that has had an expose culture of sexualharassment and workplace hostility. If you were every person up here would be asking for resignation, including me. We have a top financial regulator that will get it past. The same financial regulator has implemented a sec cyber , n evidence that the ransom where companies are exploiting. This is a mandatory ing requirement that now a ransom where company has gone on record as reported. I do not want you all to respond , but we have detailed questions, we are going to ask a four the reporting requirement and a National Security waiver that you have to reapply for every 30 days and it has to be approved by the attorney general. These people are out of control we this. I am putting on my first one next week and hopefully the c e burden. Thats all on that. I want to go back to the Operational Risk question. I think the senator did a good job of saying, this basel iii endgame is bad. It is not well looks differently before its obligated. Who would like to speak for this group around the impact on Operational Risk one mr. Gorman if you could do that in 30 seconds, i appreciate it. It makes money does not know cents. I served on the new york board for years, i have seen a lot of rules. This does not make se you should not punish institutions. Is there any evidence that work has been done to fully understand the fully burdened cost and the impact of this rule on the industry . More importantly people like my dad who y notes to fund a construction job that always i used to work on. Is there any thing that shows that they are doing the downstream impact . Are you right of aware something ive not read . I am not. Thank you. I think you mentioned the Security Financial transaction. Can you talk about why people i about 30 seconds . Sure. Security Financial Transactions are Financial Institutions like ours aro stoc pay them cash. They can invest that cash■ and earn returns. The capital in basel iii goes up by eight times. We make the transactions uneconomical for businesses like us so we will exit that business and will prevent the pensions from having that ability to increase the returns. Anyone sitting on top of Pension Management ould understand if we implement this in its current form number there returns are likely to go down. The enduser would be impacted. Okay. S talk more about actually, i have to get of doin may have noticed. I understand that you are a gamingsee card. That you can game stress test and thats what im hearing from regulators, give me an idea about this. I thought this was a regimen provided by supervisor and examiner and you got executed and have to measure it. Is that how it works . Does anyone want to share with me . I used to work at price porterhouse, we did nohave a, stress testing at the time. Have you all cracked that code . Absurd that you can game a stress test . Okay. How many are ye you spending more time and money to require stress test requirements at the expense of looking at unique issues at institutions. This test is 230 pages long and most of us do 10, 20, 30 pages a week. It is a big black box. We agree stress testing, that thing is out of control. Anclosing, Silicon Valley was a disaster. It was a ■un[th was a failure, in my opinion, one thing i hope we have over the next year is a hearing of everyone in the loop who failed to protect the investors and depositors in Silicon Valley. T for over a decade the cf has set up for Everyday Americans and fought back against abusive and unlawful practices, including some of the banks in this room. Mr. Diamond, how much money has j. P. Morgan chase returned to customers in the form of re addresses and payments . I do not know the number. 360 billn. Mr. Mona hansen question. I do not know the number. 819 million periods. I do not know the number of handprints 1 billion announcer mr. Sharp i do not know the number announcer just over 2 billion. Just a four of you tha over 4 billion. Is amazing you do not know the number because it is not small in nature. Over 4 billion returned to hardworking consumers in the past dozen years. This critic a by my republican colleagues, a lawsuit before the Supreme Court is threatening it existence and time and time again we see why it is so necessary and why i intend to continue to fight for it. Otherwise that is 4 billion u. Consumers. While some banks have either decreased or eliminated Overdraft Fees a large part, due to increased scrutiny and oversight, still collected an estimated 7. 7 billion in 2022 in overdraffund ms. Fraser your bank eliminated Overdraft Fees last year, isnt th yes, senator. Is is still to say you are a Profitable Bank . Yes, senator did Overdraft Fees up and yoursil . No, senator. We work hard to protect our customers and make re they do not fall into overdraft. The rest of the banks here who have Retail Operations continue to charge Overdraft Fees. Mr. Moynahan, mr. Sharp, mr. Diamond, you are all black and hispanic households this proportionately occur Overdraft Fees, correct . Yes . Could you give me a verbal answer. I believe so. ■ if that is your statistic, do not have a reason to challenge it. Same for me. E reality is, it is amazing that you do not know that. Study after study have shown that the answer is yes to that question■. I suggest you call ms. Fraser after this hearing and figure out how you can still be able to eliminate the fees and is entirety and still run a Profitable Bank. Charging the fees is a choice t harms black and brown communities and it is something that you can do the course of events for a significant part of the consumer base. The lawsuit currently before the Supreme Court over the potential to up and every rule, guidance and order that they have issued tossing over a decade of Consumer Protection over the window. Thats not just harmful but it is dangerous to the Financial System. The sea of pp does not just issue regulations, they also provide safe harbor positions like the mortgage rule that protects lenders from certain lawsuits. Mr. Sharp, mr. Moynahan, mr. Diamond and ms. Fraser, if you were to lose this, would it impayo lending . I dont think it would make a difference. We did lend mortgage lending before this and we will do it a it depends on the actual detail of the ruling. I would like to know the specifics to draw a conclusion. The same of my colleagues i need the specifics. I am saying if you lose it, if you lose it totally it seems on previous testimony of how important the safe harbor provisions would be to lending abilities that you would suggest that it would have no effect whatsoever. We are in the midst of an Affordable Housing crisis and eliminating thecfpb would have a disaster effect on the mortgage market. Finally, the number of physical branches in the u. S. Have been trending downward for some time. This has left more more in banking deserts, facing difficulties and carrying out basic tasks such as paying bills and depositing checks. A report found Bank Closures during the pandemic resulted in a number of banking deserts in oa part of this is global and online banking, but there e ability to do that. What are some ways that we can ensure communities continue to have access to basic Ranking Services . Gs. I think if you look at the people at big branch systems, we maintain apc . Proxour branches that mr. Sharp said earlier in neighborhoods. We are up to 97 of customers ■2e Digital Banking which is more convenient and more safe. We manage that carefully to make sure that we cover every market and make the calculation to see that in the statistics. If you look at what we do is a grou maintain the presence and we have driven the types of accounts that are more appreciated. Thats why we bring 2 Million People into Banking System. I will close by saying i commend all of you that you look at how you particularly minority communities, including on this issue. You have a disproportionate effect and there something you can do about the largest growing parts of the American Society that would be beneficial to you and to them. Thank you senator kenn , i d you are crooks. In fact, you are all mpanies an. I thank you for supporting the most sophistid economy in all of human history. And the jobs you create for americans in doing it. Mr. Diamond, since the last time the federal government raised bank Capital Requirements with doddfrank and otherwise, have you had a your bank . We have not. Have you . We have never failed a stress test, no. Have you ever reached the point where your liabilities were greater then your assets . Absolutely not. , we have had three banks this year that went broke. You know Silicon Valley and First Republic. In my judgment they went broke because the management did really stupid stuff. Because the fdic, and who were in charge of keeping them from doing stupid stuff sat there like bumps on a log sucking on the teeth and watch them do stupid stuff. In nmany cases they had to turn to you to clean up the mess. Inirness to the fdic, it may have been that the people in charge of watching those bank at the fdic were too busy urinating off the top of a hotel. Or abusing young women who went to work for the fdic. The fdic chairman told us recently, yes, he knew it happe the chairman yet and did not have the authority mr. Diamond, dont you find it ironic, the fdic is turning to and saying, you know our track record, which is blemished at the fdic. Your bank is not broken, but we are going to tell you how to fix it. Do you find that ironicto fix i based on standards put together by bureaucrats in basel switzerland. Do you find it ironic . Isnt that kind of like a given a gun safetyalec baldwin . Should i answer the major risk of those banks was hiding in plain sight it was known to most people who could read a Balance Sheet and read their financial statements. The fdic said they did not know they were busy doing whatever else they were doing at their carnal abuse. You did make a good point, some of these rules were put in place and some folks mentioned outside of the Banking System and to point out what that is, it is almost 80 more Business Today, it is the Business Today and a bunch of other things that people do not actually see about the system. I do think it is risk about transparency. Let me stop you because i will run out of time. How is this legal under West Virginiavepa . You have Bank Regulators without clear directstandards from regulators in basel, switzerland they imposed their view without directn under the doctrine, why does this not violate West Virginia versus epa . You do not need a law birder book to see that. Why does this not violate the law . Anybody . Senator kennedy, your time ms. Frazier was about to answer. I thought you gave her time. Proceed. View on this topic and i think any of us will concur. Violations of law, it is things that we will debate as a last resort, we will be prepared to do so because it is important that there is clarity in the laan thank you. Senator warren. I find it is aninbtthe yin a whether it is the source of all challenges or the regulator. Somehow ■ii donot believe eithe presentation represents the truth. My questions on basel iii have been raised , as indicated. I think the timing at this moment is very problematic with Interest Rates as high as they are and members of the Civil Rights Community have raised this as well. Before anyone smiles too much, i also ca frustrated that any time there is any proposed new regulation, or rule, the reaction is the g and the same response is you do this it will limit access main street and i think senator menendez is presentation in terms of dollars return was pretty good. I want to go to an issue that i have raised with many of in the past, i do believe that before we add new regulatory tools about the safety and soundness of our system, one thing that we ought toting tools. The very beginning when the fed was stood up, the most important tool was the discount window of that. And yet, we saw with the banks that failed this year, particularly in terms of seb and signature, they did not have procedures in place to know how to utilize that tool. I think i will start with mr. Moynahan on this one. I know that there was guidance given out this past july to say together. I do not have a lot of sympathy because of the concern that many of u and other colleagues have raised, i go to the discount window that will raise a stigma with the market. You cannot complain about new regulations if you ekt beyond the guidance that was given, why shouldnt we have some kind of random basis a mandatory use of the discount window so that we can start erasing that stigma■f and make sure every bank, large or small, know how to use it at least this would be the most powerf ol all. Two things, one readiness to use it i think you would find the institutions here becaus■ of the amount of regulation we have are ready to use it but the second question is a statement, we could not agree more whether it is number 2020 or last spring, every time a crisis hits one of the core roles and the federal is to provide liquidity in times of stress every time are 100 reluctant to use it as an industry because it looks like we are weak. That is again where you see folks of the aisle complain that if youre not using the existing tools then look into new tools. I am going to put legislation forward that would require mandatory usage and how we do that on an episodic basis. Just saying, we know ther probl have a plan to address it means somebody might be sympathetic we agree. Artificial intelligence has been touched. I personally ■h■o greater concern about ai in terms of its ability disrupt faith in the public markets. To me it feels like if there was ever a time in a tool that has such wide reaching implications that, which i know the record has been somewhat mixed, i strongly believe that they would take on the responsibility looking at Artificial Intelligence in terms of safety and soundness. We have talked about this, what you are raising a very important issue that has all of when we look at Artificial Intelligence it is an opportunity and a threat and we to improve the strength of the Financial System. The threats are also quite considerable. A place right now that works well to safeguard our Financial System. We think that should continue to be used. I know my time is up. I do think that it is a tool and i would make the case and others have made the case about underserved communities and some of you up to spitting in the Economic Opportunity coalition, it is still a tool. Those of you who are not participating this is bipartisan led by you have no time. Thank you, mr. Chairman. To all of you, i know how much you must look forward to these meetings that we have here. Today my colleagues have focused a great deal on the basel iii tendgame. It is something i am concerned about. What we have here in washington, regretfully, are in a competition, bureaucrats in other jurisdictions. They seem to be regulating for regulation sake. I have a when massive bodies of regulation are put forward in bureaucrats heretell us the impact will be minimal. I would like to quote specifically from vice chair michael barr who is leading the efforts on the bal endgame. He says the impacts are to be minimal and specifically he says quote, the phase in will allow apple times sheets and build capital overtime. In fact, most banks already have enough capital today to me the message that the public is getting is that these massive theyre putting forward with basel iii will have a minimal impact on your banks. I want to go back to the term everyone else is using, this anyone here believe that this will be minimal . Raise your hand. I would like the record to reflect that no onraised no one believes that this will be minimal. In fact, one of the most infuriating patterns of behavior that i see in the regulatory class in washington is the unwillingness or refusal to take into account the effects of regulations diamond, your bank stated that the basel endgame would increase 50 billion. There are real costs associated with this proposal. I would like to get your ■uperswould im not only your bank but the markets and the economy broadly. Inside a bank you try toery every relationship and every client and country and you want to do a good job, in the long it would take a lot of loans i ■l mortgages and i told our people that mortgages should not be on the Balance Sheet. Do neither have not passed the law but it would diminish mortgages, particularly diminish mortgages for lower income people. Much h for a 150,000 mortgage than a 2 million mortgage. Cdf i, financial companies, farmers, we mentioned the extreme effect on Market Making which is a critical function to help finance companies around the world and help people manage money for retirees and veterans and state Pension Plans to matheir money. It is hard to figure out the full extent and i think it may cause issues. All of these are negative. Ms. Frazier not your bank in particular, can you comment on how this impacts u. S. Banking system competitiveness on basis. This will diminish u. S. Banks , competitiveness on an international basis as we have reflectedu. S. Financial system is the envy of the world. U. S. Banks play and a court Important Role supporting the western Financial System. It is a Strategic Asset of the u. S. Indeed i think it incredible competitive advantage. Regulators who focus on basel iii seem to be hiding behind a claim that this is harmonization of Capital Requirements. When you think of that elite you to believe that u. S. Banking capital is below that of if that were the case this might allow regulators to race to the spirit this is not the case this is a quote from the p exceeds what is required by the basel agreement and it exceeds what has been done. Solomon i would like to come to you great you represented in your testimony the disadvantage that thiscreate for Financial Institutions for the economy more broadly. Which you mind on commenting how this proposal went and d compare us to other jurisdictions, how it would make our competitiveness and Capital Markets versus other nations. Thank you for that question. As you stated the Capital Requirements in the mobilization in uk what is being proposed here. If you look at activities comp particularly in Market Banking and those types of activities u. S. Capital market is the strongest in the world it is one of our big competitive advantages that everyone comes our Capital Markets. You think about ipo activity and debt Capital Raising it is, in our Capital Marks a regular basis spirit this would shift the balance it would push more activity into other jurisdictions. It would make banks more competitive and u. S. Position. And the u. S. Banking system less competitive prethank you. The senator from nevada is thank you, mr. Chairman. Last time talked about Affordable Housing and i want to continue that. Not just in nevada but silly people across the country are struggling to afford homes. One way to do that is by investing in Affordable Housing through the Home Loan Bank system. As we know the federal home loan enjoy federal benefits that no other bank has access to, for supporting Affordable Housing and Community Development across the united ating finance agency published two reports exploring whether the federal home loan that hundreds of thousands of taxpayer dollars are being used for development and the answer wa l Home Loan Banks provide 10 of income to Affordable Housing. My question to all of you, do you think the federal Home Loan Banks should provide 20 or more of their net revenue for Affordable Housing or really, does anyone not support greater Affordable Housing investments by the federal Home Loan Banks . Let me ask you this, for the dont think there should be more investment. Is 20 should be fine. Does everyone agree with that . Does anyone not agree . Good start. Im trying to do this so you dont have to raise your hands, the federal Housing Finance agency is proposing to adjust dividends to advance rates to better reflect the banks of Affordable Housing and Community Development. This anyone not support having the federal Home Loan Banks dividends and advances tied to admission activities. Financial institutions . Is that a good start for us . Does anyone have any comments g am seeing . Great. Fh fa recommended 10 of all Institution Assets be held in housing assets. 96 of Credit Unions would meet the test, but not some biggest banks. Under the proposed new policy, with any of your institutions invest more in housing to retain access to federal Home Loan Bank funding . Questions, thoughts . Have you ever thought about it . Still need to think about it . I think, senator, the trk is, if some of these rules change we have to shrink our mortgage on balance sh eligible less able to live up to the principles you are doing which is how much housing we can help drive. A lot of us meet that test today becausof constitution. The concern is changes in the rules might have a negative impact and what we are trying to achieve. Mortgage e tricky to hold if you make the more capitalintensive they will be less profitable if we hold less ■4than 8 of the activity that goes on outside the Financial Institutions. These rules may frustrate your intentions of what youre trying to do we think more Affordable Housing but you might be frustrated that is the kind of thing we worry about. ■ . I want to jump one other item around Affordable Housing. Currently in southern nevada, in clark county, the most in o they are looking at ways to build more Affordable Housing. One of those is really looking , federal land trust. The challenge theyre having is they are not able to get any banks to write the ■ans or mortgages for these land trusts. Heres what i know, this is what i want to talk to you about, for decades banks have invested in buildings that are required for affordable rent, in clark county not a single bank has been willing to meet to discuss providing mortgages for deed restricted standalone homes on federal land. The key is the federal rk hard federal land is available for housing, it is frustrating to see that and banks refuse to offer■h mortgages to new homes federal land. The clark county land trust has been looking for mortgages for 240 home since august, clark county has 3. 4 Million People, the county has a double a what are we missing here from all of you that we need to be aware of why we cannot get a wo i would love to get a team working the detail. I do not understand unless there are legal things about collateral or ownek you. My tim senatoryour recognized. Thank you to the ceos for being here. I admire all of you. One of the things that i expressed in private and public is my concern that the american political system is infecting the financial and the Financial System is affecting the american political system. This is a graphic compiled by my staff which lists the ways in which your Financial Institutions have gotten involved in Major Political debates of the last few years. Identification law, things like whether to lend to fossil fuel based companies on the things like guns an■ i should say, we all have our opinions on matters of Public Policy, the difference between senar cortez and i and all of you is the people of our state selected us to do Public Policy. Nobody elected you. My cosel anof question will be focused on this issue, stay at a Public Policy unless it affects your core business interestif you dont, it is a lot harder for us to see you guys as neutral arbiters and neutral actors in the american Financial System and it ismz us as political actors. I want to focus on a couple of issues becathat will lead me to my questions. Georgia in 2021 passed a moderate voter identification law, six of the eight of you meatements criticizing the state of georgia to that effect, or at least your institutions issued statements. I should point out, new york has a voter identification law, much more stringent voter identification law than the state of georgia, did any of you issue statements criticizing the state of new york for the voter identification law . Show of hands. ■e let the record show none of you criticize new york for a more stringent law, but she jumped in a culture war in georgia and i cannot understand why. Something more concerning because it affects my constituents in the state of ohio, your approach on Energy Policy. We have seen the the consequences of reducing American Energy independence and how it empowers bad people over the world and it impoverishes some of my constituents and destroys their job. Im not picking on you, mr. Moynahan, you are the only bank that has a red x on every single issue. This is true for most of you, i want to ask about Energy Policy. In 2015 bank of america committed to cut of lending by 2025 two Companies Earning 25 or more of their revenue from thermal coal mining. That decision, and some of the decisions that have been made are raising the price of energy on ohio consumers and ■ perili in the energy sector. Why you doing this . That the government make you wax if not why are you just to be specific, that was a statement about mountaintop removal policy. I grew up in southern ohio d wa my nextdoor neighbor was engaged in the business statement we made is we will not continue to fun people who continue to take the tops off the Appalachian Mountains and turn them into mines. That was based on our assessment of the risk at the time. Other Energy Policy decisions that raise the cost of energy on American Consumers. You have committed to a net zero standard which effectively there are no net zero Carbon Emissions and you have held your clients to atto be alarmed with net zero and we advise our clients in this transition. V3 it is not just that particular decision. And it is not just bank of america. My point here is pretty straightforward and simple. Whether we achieve net zero when we achieve net zero is a debate for the American People. What kind of photo identificati law is a decision for the American People. Every time you guys get involved in this cultural war battles, it makes it ha■ you as neutral Financial Institutions and frankly it makes it harder for us to do the same. I will leave this thought. You have heard some good line of questioning on basel iii, i agree with senator haggerty on badont know what they are talking about doing , it does not make sense. Oftenbank ceos and other Financial Institutions will come to republicans for more reasonable regulations, lower regulations and lower taxes to fight back against things like iii. My point is, if you are going to use the financial power that you have accumulated to goto war against the values of our voters, impoverish our constituents who rely on cheap energy and destroy the jobs of people who work in the energy ■ listen to you when you come and ask us for a tax break or for reasonable regulations . I am to have a Good Relationship with you the more you guys insert in these fights the less good that relationship will be. The senator from maryland is recognized. Thank you mr. Chairman. I think all of you for being here. V a big fan of cdf eyes a mdis as vehicles in gaining capital into lower incomeareas and Small Businesses in places like baltimore. Baltimore needs that ecosystem of cdfis. As Interest Rate goes up the cost of borrowing o often these entities that are hardest hit. I know all of you are involved in one way or another with cdfis and , mr. Moynahan your bank has a significant presence of baltimore. N you speak brief your commitment is Going Forward and whether the higher Interest Rate environment is negatively impacting your determination to provide support for cdfis and mdis. Our commitment to working with this goes through all the cycles be impacted by the rate environment that we see. We share your perspective that the cdfis perform a ■ and reach a series of individuals in these markets that banks would not normally be able to access. Whether it is the investments that we make directly in them, we have talked about what we have done with our ppp money was given through cdf eyes because they have the ability to access customers who are not countable doing business with banks. Those partnerships and commitments will continue. 2 b in cdfis. Q it is very interesting and the way it can help us including a lot of us participate in the Veterans Home front where cdfis us participate in this and we think they can reach y with can other things that are critical. Not that we do not do a good job we have 40 billion in Small Business loans outstanding and it grew 10 yearoveryear is just that they our commitment has been there for many years, since they started, we just ga i appreciate that. I have worked with the chairman and senator warner and others t runs Small Business administration and the treasury when it comes to cdfis, i look forward to pushing hard as a vehicle Going Forward. We have had many conversations over the years about late fees, obviousl Overdraft Fees have a disproportionate impact on People Living paycheck to paycheckover at brookings estimated if the United States adopted a real time Payment System in 2007 when the bank of england did, American Consumers, and especially the folks at the lower income and would have saved 100 billion. I have been to adopt this fed now program. We have the clearinghouse system out there as wella brief where we are. I understand mr. Vince, mr. Sharp and mr. Diamond, yoenroll fed now, and my right . In the qualifications . That is right. I know ms. Fraser you and i had a conversation about this and i through technical issues, correct . Yes. We will be joining the system. Mr. Moynahan if you can give us an update on where you are. ■ bank of america,not here. We are in the process of doing Technical Work as jane said. It is just a matter of if. The more that you can do to push and get this system, ■. My last question, does not nkin but it does to an issue that the chairman and i have worked on for years with respect to trying to close a tax loophole, involved, but you all are rectl involved in the finance system and you understand the workings of this. Mr. Diamond, do you agree we should interest loophole once and for all . Yes. I always have i have been public about it. I appreciate that. I hope that we can do that and it is just egregious that it has gone on for so long. Thank you senator. ■[ the senator from alabama is recognized. Thank you mr. Chairman. To you. Thank you for carving out time for this. Over the last year we have seen a host of incredibly complex and market altering rules come out of nearly every financial, federal agency. Interestingly five of the top five financial regulators set before this Committee Last month and unanimously told me they believe the u. S. Banking system to be strong same time they argue for proposals that could fundamentally weaken it without providing an ■y question, why. You have seen actions, and we have seen them here from the Federal Reserve, which seem to go far beyond the bounds of r authority. Equally concerning is the apparent lack of initiative by these regulators to understand both the qualitative and cumulative impacts of all of these rulemakings. For example, focusing on basel iii proposal. In this committee a few weeks ago vice chair barr said it will have a minimal impact on lending that banks do. To say, mr. Sharp, most said you hast rule ranches of all the banks are presented here. My question is, can you briefly respond to that . With this proposal only a minimal impact on wells fargos lending . We will be on the Federal Reserve. When you look at the increases in capital that are proposed it will affect the availability of credit and pric in the marketplace. Additionally, as we have seen in other asset classes, wh■3en taken hold you can see substantial migration outside the Banking System. Thank you. At the end of the day it does play a vital role in and i to diminish that. I do want to focus on downstream. Smaller institutions to and businesses across cthe co the Manufacturing Energy sectors, individuals seeking a shortterm liquidity to help pay their bills of these impacted goes on and on. On this point, your banks have said by raising by 20 the propl would limit access to capital across the board and undeine Economic Growth. Mr. Moynahan can you explain this triple down affect if ezed requirements of this, what does it mean for Small Business owners seeking a loan, first or a small Financial Institution in lets say alabama. Thank you, senator. Asarp said and we talked about a lot today if you increase, if you have the same Capital Requirements increasede you have to get a higher return. That will be born by the Customer Base and none of those is good for the Customer Base and that applies throughout the board. The idea of this does not trickle down through the Banking System. We provide service to the banks and the Customer Service will go up. It has much more of an impact than people think. I know im running t time and i would love an answer from all of you. Would it be an inaccurate statement for regulators to assume that under this threshold , thh1e under 100 billion dollar asset mark, they have said they will not feel the impacts of this . My question for you ■ , will those institutions and people that i just mentioned under the 100 billion mark that ou quote not affected, will they feel the impacts of basel iii . Yes or no down the line. ez mate absolutely. We pride a lot of services. Yes, the trickledown effect israel. Yes. Is an integrated system. Yes, senator, it is likely. Yes, i agree. Yes. Last but not least, if this rule is implement it as written, do we risk putt United States Banking Sector at a Global Competitive disadvantage . Ms. Fraser we alr Playing Field with the european banks. The american banksplay an Important Role globally in the Financial System and they affect the competitiveness of the American Companies. Massachusetts is recognized. Thank you. I want to talk about g the Financial System to move money to finance terrorists, drug traffickers and sanction countries like russia, iran and north korea. ■rd our witnesses are the ceos of the largest banks in the United States and they do with this issue every single day. Mr. Moynahan, you are the ceo of bank of america. Let me ask you. If a terrorist group that wants to attack the United States tried to move money ts, do you have systems in place to identify that activity . To report it to Law Enforcement and to shut yes, we do. Mr. Diamond. You are the ceo of j. P. Morgan, if a move money through morgan accounts you have systems in place to catch it, have extensive systems in ■ place, but no system is foolproof. You do have systems place. Let me just ask all of you in the interest of time, race or high and if you have programs in place. Good i see all the hands up. I believe none of you want your banks used to finance terrorist attacks. Lets be clear, none of you runs antiMoney Laundering programs out of the goodness of your hearts. In i270 Congress Passed the Bank Secrecy Act to make sure banks do not run a Financial System open to terrorist and drug traffickers and rogue nations. Time past and the crooks got more sophisticated. After the 9 11 terrorist attacks , Law Enforcement discovered the way terrorist had gotten around the Bank Secrecy Act and congress was then called on to update the laws to cut off future access, congress did. Todays terrorist, have a new way to get around the Bank Secrecy Act, cr last year an estimated 20 billion in illicit crypto transactions funded every kind of dangerous criminal. North kor half its missile program, including nuclear weapons, using the proceeds to crime. Israeli officials have confirmed that hamas received millions of dollars through crypto transactions including large sums of from iran. Mr. Diamond, you been ceo at j. P. Morgan for almost 2 decades. Can you explain why crypto is such an attractive financial tool for terrorists, nations . I have been opposed to crypto. A true use casecriminals, drug traffickers tax avoidance and a use case for it is somewhat anonymous not fully because you can move money instantaneously because it does not go through, all of these systems have been built up over the years, it did not get bypassed. If i was the government close it down last week federaLaw Enforcement asked congress to update the banking laws saying quote, we cannot rely on statutory definitions through decades old to address the illicit finance risks that we specifically called out the use of crypto to finance terrorist attacks. The laws clearly need to be updated but crypto lobbyists are working overtime to block legislation. They claim crypto is special and it should not have to comply with the Bank Secrecy Act even if that means letting terrorists and drug traffickers and ■frans where criminals and rogue nations move billions of dollars totally unrestrictedyous facilitate transactions should have to follow the anti Money Laundering rules that your bank has to follow . Absolutely. ■lets go on down the line. Mr. Moynihan per absolutely. Absolutely. Periods absolutely. Absolutely periods absolutely. Absolutely. Absolutely. The word of we have a way to do this, senator marshall and i with 18 of our Senate Colleagues including senator cortez masters, senator smith, senator warnock, senator butler , they have a bill do exactly what lawenforcement asks. It would extend the anti Money Laundering rules that t b terrorist attacks or north Koreas Nuclear program. When usually with the ceos of multibillion dollar banks, this is a matter terrorists, drug traffickers and rogue nations should be barred from using crypto further dangerous activities and it is time for congress to act. Senator daines from montana. Chairman, thank you. Thank you to all of you for being here. Earlier this year we saw a series of bank failures, some of the largest in our nations history. These failures were du mismanagement by Bank Executives and regulators who instead of holding accountable, those in the supervisory positions responsible for missing the impending crisis, regulators decided to put forth would have done nothing to prevent the failure in the first place. Any regulator i questioned this year in hearings like this has confirmed what we all know to be true, that is the u. S. Bank system is strong and more capitalized. The prals put forth by vice chair barr and regulators will limit Economic Growth, reduce sinesses and for to obtain financing, they will see increased cost. Businesses, i hear from them firsthand about the critical need for access to capital, the concern they have with pending their businesses. I question vice chair bart before this a very committee about risks, waiting, and requirements in the basel iii end game proposal. Astonishingly, he claimed that Small Businesses would be better off e proposed scheme than they are now, despite the fact that less than 1 10 of 1 of businesses are publicly listed and would qualify for the lower risk waiting. Can you speak to how the basel iii end game proposal would speak to your ability to land critical fund to Small Businesses and what trickle down effects we might expect if this were to be implement it . Thank you for , senator. First off, these questions should have been answered way before, because it is very complex, the work should have been done, the details should have been shared with. We would have to charge more, and a lot of unintended consequences. cwe have to char just to make sure we get our return as close to capital. Secondarily, the Operational Risk capital will increase the cost of a Small Business Checking Account or making a loan. All of these things are cumulative effect. It will also affect r lol community banks, your local Affordable Housing, or the montana pension plan. So, all these things will trickle through, all of them will become more expensive, and there will be some other unintended consequences. How wede think some people may drop a few customers. It also leads to more concentru have to get more revenues from clients to justify the loan. Thank you, mr. Scharf, do you have any comments . I agree with what i want to shift into the issue of oil and Gas Investment in this last year and a half with russias invasion of opportunity to travel extensively throughout europe for an event with leaders of ukraine on the westside, also in the politics, as well as Ukraine Border countries. One thing i have really universal is they have let the winds of the day dictate their Energy Policy, and moved to quickly away from reliable baseload forms of energy like natural gas, coal, hydropower, and nuclear. I was struck, they took me out to their facility. By the way, when these floating ships, which are parked there, it is fittingly called the independence print as this lng really has been key coming off from the United States to get europe back on its feet to a certain extent. But i asked these folks who own the g plants, you do before you were in lng . I had a background in chemistry and im always curious about process. They said we used to ■. N Nuclear Plant in lithuania. What do you mean you used to run it . We used to supply 70 of lithuanias electricfor an energy plant print button 2009, it was shut down. So, why was it shut down . As a it they made them shut it down, and lithuania went from being a Net Energy Exporter to energy importer. This is just a warning thing for all of us to take into account, the winds of the moment. Sogreen movement. It was an old russian design chernobyl type reactor that s and they are paying a severe price for it. The need for fossil fuels is not going to dissipate in the nearterm. I am very concerned the Biden Administration has an all out assault on the oil and gas industry in the United States to further their green fantasy and hallucination. We can do this the safest and to have a balanced energy portfolio, that is to include the renewables and the exciting future we have in transition, but we better make sure we think about expanding our portfolio when the world is going to need 50 more energy than it does today in the ne mr. Dimon very briefly, 30 seconds, if you can prt can you discuss the importance of Capital Requirements, lending, and so forth in the oil and gas industry . Safe, Affordable Oil and gas to do that. Doing a great job reducing co2. If you dont have affordable, chenergy, the cost on poor people, poor nations will be dramatic. We can get it done right as long as you are very thoughtful about it. Nator smith is recogni from minnesota. Thank you, mr. Chair and all of you, glad to have you all with us. I would like mr. Scharf. So, i want to talk to you about the Community Reinvestment act. I think that this ly important tool for making sure that people and businesses in low and moderate income communitie capital and lending and Financial Services. I for one am encouraged by the new cra rulemaking, which i think is an important update, and i think it makes some thouul changes to realign the cra and to give banks and Financial Institutions clear direction on what activities qualified for cra credit. So, mr. Scharf, could you tell me how u. S. S. This final rulemaking for the cra and do you think these changes will better enable banks to meet their cra obligations . Senator, i very much agree with your sentiment of cra. And the need to make changes p existing cra legislation, to ensure the ultimate goals are actually achieved through the actual legislation. I think when you look at the changes that have been made, there are certainly many items that are taken into account, which are directionally supportive of what i just said. We have given some comments to regulators about some of the l them to just reconsider as they work towards that goal. Ionally cra and doing it in a way that all the regulators come together is extremely helpful. Thank you, i agre i think having everybody be on the same page was an extremely important part of this as well. Another thing that i think is true is that these this dra were decades overdue, so do you think it would be helpful for regulators to update these roles more regua more rapid cycle . I am not talking about changing rules all the time, but i am saying learning from our to make sure they are learning we senator, it absolutely makes sense to relook at these things and make sure they are having the intended consequences. Ose filter through a lot of work we have to do. Strike and that right now is also, i think, very important. Great, thank you. Mr. Solomon, good afternoon, good to see you. Many of us are giving thought to how ai, artificial inlligenceis and how we should be setting guardrails for its use, and understanding that ai has been in e i think it is true that generative ai has gotten a lot of attention over this last year, both for its capacity and also for the limitations that have beenfull view. Earlier this year, the chatbot urged a New York Times reporter to leave his wife,just last week, it was reported the amazon chatbot experienced severe hallucinations and delete confidential data. So, my question for you as the adGoldman Sachs is how do you see using this . I know that you probably have been using ai tools for quite a long time, but could you talk a little bit about how the generative ai projec working on is being deployed internally and how you are thinking about the appropriate guardrails . Thank you for the question, senator. Obviously it something we are very focused on. And as you highlight, there are super offensiveproductivity things that can be done with the technology. As you point out, we have been time. Artificial intelligence these Large Language Models accelerate our ability to use very, very highly paid people more effectively with clients. [ indescernible ] is sorted and organized more quickly, those are the positives. The negative, the technology can obviously be used to disrupt activities, disrupt markets. Thinking about cyber protection, guardrails, we have an enormous amount of focu9 in thinking through how these tools could be used to attack our system, our platforms, et cetera. I think it is the acceleration of this technology, it is going to continue, the pace is quite robust, and i think there are opportunities, but we also certainly have to be vigilant to recognize there are things th are going to develop and we have the right protections in place. And mr. Fraser, i have a couple minutes left. Te about four years ago, we put some principles in place about how to use ai and topics such as transparency and how it is used, making sure you can understand entries the different place and things like that, making sure that there are human beings governing this. And make sure the protections are there, so we get the opportunity from it and also use it to defend against threats. Thank you. Senator fetterman from pennsylvania is recognized. Thank you, mr. Chairman, thank you. So, mr. Moynihan 26, back in 20, the bank of america, your bank, bad Investment Decisions as you made, and you had to be bailed out and thenwwin year, the Silicon Valley bank didnt maintain enough capital and had to cost over 20 8o ic. So, let me ask you, should we believe you that you have a bet man, weve got this, kind of an issue or should we be able to have an intervention to adjust this . Well, senator, i think since the financial crisis, this body, along with congress and the president , passed an act, and les. There is a an adoption of standards, on top of that[ indescernible ] even the last five years, we have probably had to15 more required for those tests. So, i think there has been a significant amount of regime change made. The question isthe institutions that failed earlier this year, none of them are [ indescernible ] our view as a group, we had to go and do two things, keep them alive long enough for a result, and secondly this week, a similar check of 2. 1 billion to the fdic to pay for the cost of the cleanup, and our company alis that these capitals arent really going to address that. And there have been many capitals applied to these institutions and banks which do apply to that, and that a sour earlier this year. Yeah, well, if you felt that we all supported those kind of changes after the crash, and h , now some 15 years later, if there wasnt the kind of intervention, there would have been another kind of a crash. So, have we got it right yet . Should we have to make any more changes . Are you okay with this idea that a relatively small bank, especially compared to the size of all of you in front of us tonight, could cause a crash, systemwide, unless the president had to quickly interviewed and make sure that any changes . Anything else . Is it that a small bank could imperil an entire Financial System . I think 4000 banks have failed over the course of time, thats what the fdic was created to help, and they have been resolved about have any economy . 07, 08, the system was outside, so many of the people the invention of the broader purview of the banking regularyam■u nets. The invention, we talked about, the invention of stress testing, the invention of all these things, and rules to measure, to move to an advanced methodology using models and other things that measure risks, as opposed to standardized methodology m is what we are going back to now. All of that change the system. Silicon valley didnt threaten the u. S. Economy, it could have been resolved and it was resolved. Why did the president act so swiftly if there wasnt such a concern . That is amazing that you can get on the phone and asked so quickly for that kind of money if there really wasnt such a significant risk. I mean, i wasnt read about the other 4000 banks that crashed, required the president to react in such a swift manner. You would have to ask the people. We thought all of that could be resolved differently. Many of us got involved with the First Republic transaction. You are going to have to ask the other people why they did what they did, but it is not us. But again, so, no changes are necessary despite now that we seem to have this entering that kind of a risk that bad behavior or bad investments could actually crash our whole financial syems . There were specific things that happen in Silicon Valley banks that ould have regulations and the most important was excessive Interest Rate risk. I think the American Public should know that banks pay for the fdic. It is not government money, that is a mutual company, and i would love to take it off your hands and manage it ourselves but with all due respect, i dont think it really matters who is paying for it, but the fact that anyone has to pay because of these traces actually, mr. Din quickly. Outstanding. Mr. Dimon, you claim that the Capital Requirement that will increase costs chase done 5. 7 billion in shared buybacks and 9 billion in dividends so far this year. So, wouldnt it be easier to just kind of hold onto a lot of that money and lend itougive it away to the shareholders . Buying back their own stock. It is the shareholders money, d ■ the proper landing we can and should do. It will■vre to bank of doing business, i dont think we should be asking people to do stuff that is on probable for their shareholders. Im happy to talk about that in more detail. My committee will take under advisement mr. Dimons proposal to take ■e yeah, i wish there was more time, i would love to explain why a democrat should support thank you, mr. Fetterman. While i like mr. Dimon, i need to think more about fdic. Senator warnock is recognized. Thank you so very much, mr. Chair. Question that i set out to ask, i have to respo to the senator from ohio, who apparently takes great own bridge tothe words are the letters sent by the lease of these institutions, responding to the Voter Suppression bill that was passed in georgia. I know a Little Something about Voter Suppression georgia. Fqe today is in fact the one Year Anniversary of my election in georgia. Should not give people the false impression that there is no Voter Suppression in georgia. It should not you have a misunderstanding about how bad our law actually is. In fact, i had to sue the state of georgia. Because at the beginning of my runoff a year ago, they decided that folks wouldnt be able to the. Runoff. Claiming that this was a clear vote a couple days after a holiday, that holiday being thanksgiving, and a day that used to honor the anniversary of confederate lee. So, i had to sue them, then aga georgia voters could vote. So, i think people in your position do have a corporate responsibility, and i hope you will certainly feel the freedom to lean inin the places and the spaces where it is necessary, and that the end, i want to ask you about the safer banking act. Legislation recently considered by this committee on cannabis spanking. Many of your banks have lobbied for this bill. The american ba association, of which you all our members, supports the bill as well. Raise your hand if you support if you support the safer banking act . None of you support the safer banking act . I am going to ask you a vh question, raise your hand if you support the safer banking act. Senator, we all support the intent of it, the problem is it raise your hand if you believe passing the safer banking act will reduce will reduce the racial wealth gap . So, this is interesting, so we should have some conversation about this. The american bankers asso are a part, right, this legislation will provide legal and regulatory clarity for access to Financial Services. My question is legal and regulatory clarity for home and who are we making safer . Over 50 years ago, communities across america have been decimated, they have been hollowed out. Communities all across our of explosion of mass incarceration. Incarceration capitol of the world. Missing bodies and abandoned buildings. The war on drs on communities of color. I want to be clear that i am open to safer banking regulatory clarity around cannabis, but my fear is that if we pass this bill right now, then your banks and other powerful voices will be missing in action when it comes time to address the broader horns of the war on drugs. And so, i sut safer banking, you all seem reluctant to say whether you support it or not. I am concerned about equity. And whether we will get that in the process. So, let me ask you v othis, to your banks will uphold the standards that would standards and the Community Investment act, that is, which we will soon have another opportunity to address, will you support standards to increase equity move forward, perhaps on safer banking . Mr. Scharf . Yes, senator. Mr. Moynihan . Yes, sir. Would have to see the actual words, the actual law. What you support efforts to be intentional about supporting equity and addressing the awful impacts of the war on drugs, which has been a war onbl . Yes, but for me to agree to something, i like to see the actual detail down to the last word. I absolutely support the intent of the details, we look at it. E ] we support the intent. Similar to my colleagues, we would want to see the detail. Mr. Solomon . I would want to understand the detail more, we will continue to do things to support invement in thank you so very much. I think this is critical. There is noth me that if we leave behind these communities that are marginalized, as we make banking safer, for porful banks and people in positions who sit here, was sent there, there is nothing in history that suggests to me that we are going to go back and get those folks, so i hope i can continue to engage you as good, corporat active interest in this, recognizing that it is not only the right thing to do for the future of our economy, it is the smart thing to do. Thank you so m thank you for se record straight on the Georgia Election law. Thank you, mr. Chairman. Welcome. Today about basel iii. We know what it means for your banks. I would like to explore for a little bit what it means for Small Community banks. Wyoming and other rural states rely on all communy d while the requirements apply to the systemically important banks, i would like to know if there are additional impacts on Smaller Community banks and their customers. So, i will address the question to mr. Dimon, and then ask anybody else who wants to take a swing at this to weigh in as well. Thank you, senator. I think the Smaller Community banks are not directly affected by this, but since a retirement funds, we think the city is, we bank other Small Businesses, we bank local schools, cities, states, hospitals, it will trickle down to higher costs to them in one it also changes the competitive landscape. It makes it harder to compete with us as opposed to less hard. Would anyone else like to take a swing at americans interact with Financial Institutions through their banks and they save for kids College Education with mutual funds and protect their families with insura can you explain why ultimately these changes will impact families planning for the future . So, my question is what are the impacts of basel iii on pensions, mutual funds, insurance companies, and other users of derivatives who hes . Now, hedging in my industry, agriculture, is very important. So, i am nointerested in the implications for hedging and the other entity as i mentioned. Perhaps ms. Fraser, would you address this . Yesvery Important Role for protecting against risk and helping mitigate risk. [ descere it is important for providing stability and income flows and commoditying is a critical piece for any farmer in america. So, the increase in capital associated with the ba■fsel iii role will have an impact on the cost of that hedging, and potentially even provision of that hedging, and as■tyou say, it permeates many different parts of our economy and society, it is not just for the most sophisticated players. Want anyone who is interested in responding to this question to take it. My s observed is that one of the most poorly thought out parts of basel iii is used as a prox for counterparty risk and derivatives. Counterparty credit risks in derivatives. So, it looks like this would harm at a minimum nearly 70 millioinvest in mutual funds. I would like to know if you agree with my staff concern and how we might address that . Wish to take it. Yes, sir . It is a very crude mea of risk and doesnt reflect the fact that some of the largest and most sophisticated companies in america are public. So, it is just putting in ■one basket, saying thatby definition, if you are not public and if you look at the trends, in fact, fewer and fewer companies are public these days, that is a whole different kind of debate we could get into some other time, an terribly crude measure. Do you know why they chose to make public versus private company is different and treat thin terms of using them as a proxy for counterparty credit risk in derivatives . Anyone . Well, we dont know either, so we are all in the dark. Okay, question, why and this again is for anyone who wishes to weigh in. Why is it so important that the United States have a Regulatory Framework that allows our financial instutions to compete on the global stage . As we see the rise of china asserting the influence all help me understand why we have to stay competitive. I speak as an immigrant to the states. Bed america plays a Critical Role around the world in terms of supporting supply chains, rld investment funds, we account for over 50 of all of those capital activity and investment activity in the world, that is a Strategic Asset for america,■< it is something we should be incredibly proud of, and it is something we need to defend. Anyone else . Anybody else want to answer . I think when you are next to last, people are kind of tired. Thank you very much for your pa senator butler, the newest member of this committee and sorry you have to sit there. And number 100. When you are number 100, you stand between the panelists and lunch. So, i appreciate very much the time you all put into talking to with me, knowing i was going to be the last person asking questions. Because most of you have a state of california, i am on behalf of the 40 million california residents, sitting representing their interests across this industry. I am glad our Ranking Member made his way back as the newest member of the senate, i am still getting to know my colleagues. I want the Ranking Members to know i do agree with him on a key point he maa majority of American People who are watching this broadcast, particularly who are still watching, are not talking about basel iii end game. They are talking about fairness and fees and affordability. And so, that is land my two questions. I want to it is honestly not in the space and intention of moving things along. I want to pick upsenator smiths point around algorithms and algorithmic deployment. About this, as it relates to Customer Account closures. We talked specifically about the november fifth New York Times article in which the city2 omer of yours who owns a bar. And who was making bar like depots, end of day cash deposits in round amounts, so they could actually keep petty cash on hand■]to be able to mak change at the bar. And found themselves the victim of an account closure due to what the algorithm determined was suspicious activity. Can you talk more about the s t across the city to give customers confidence that■ when you are doing your Due Diligence as a significant Global Investment institution, when you are doing your Due Diligence to provide and enhance National Security, how do those American People still still listening, you will hear this back, how can they have confidence that their credit isnt going to be negatively impacted, that you are going to return ever their remaining balance that they might have on time, in a way that they can actually get their bills paid, duwrongdoing of their own . Thank you very much for the question, thank you also for sitting through the entirety of the hearing today. You raised really important points, all of us want to protect our customers, there is a tremendous amount of fraud, cyber probably keeps us awake at night, we want to do a go w to look after them and enable them to make their lives and their financial lads secure. We have moy that are very significant, in which we are not allowed to go and tell the customer why it is we have closed their account. ■lq and i think all of us appreciate how frustrating that is for our customers, but we must follow the law. You anhave also talked about when it is found out that a customers account is being closed in error or for some other reason, how do we then quickly . Again, no bank ceo on this table that does not want to help a customer to do that. We are very happy to follow up with you on the different ways that can be achieved. Thank you. Thank you, thank you for extending that opportunity to continue to figure out ways that this body can act to protect california customers, but people who are banking with her institutions around the country. My last que you and i also talked about this, as the representative from california, it is critical that i represent those voices onaffordability and home affordability. In particular, your institution has done an incredible amount on this issue, and i want to applaud and recognize you for on the other hand, the other issue that i raise with you is a concern, ■x■otio declaration and a support for investing in Affordable Housing and making mortgages more affordable for low and middle income families, and the practice of financial Estate Development purely for the purposes of putting it up for rents. Those two things seem to be an opposite and in contrast to me, and there was a report of jp specifically on california about this behavior, and i would love to give you the opportunity to talk to californians about how you are meeting both of those obligations, the obligation to housing, help to create more access to the American Dream, and at the same time, buying more and more singlefamily residential properties, where they are going to be only be brief. Renting. Thank you for the question, senator. [ indescernible ] mu locosts. Work on that for 10 years now. [ indescernible ] building homes. I think it is 200 homes for rental. Remember, rental is appropriate for some people. Concern and i will look into the specific thing, but building more homes is good for Affordable Housing. Eight of you for joining us today. For senators who wish to submit questions, those questions are due one week from december 13t to the banks, please submit your responses to these questions for the record no more than 45 days from the date you again, the hearing is adjourned. ■