It’s not 2008, but bank CEO hearings could still get testy

WASHINGTON — The industry’s track record helping consumers and the economy navigate the pandemic, and individual banks’ policies addressing climate change and social justice issues, are expected to take center stage when CEOs from the six largest institutions testify before Congress later this month.

It has been over two years since lawmakers held a public hearing with big-bank executives. The world is considerably different since then thanks to the global COVID-19 crisis and a sharper focus on racial equity following national protests over policing.

The banking sector is no longer the punching bag it was for Congress in the wake of the 2008 financial crisis. But the CEOs of Citigroup, Wells Fargo, JPMorgan Chase, Bank of America, Goldman Sachs, and Morgan Stanley are still expected to come under sharp scrutiny on issues such as the Paycheck Protection Program, whether they have made progress on diversity and inclusion goals, and Republican-criticized decisions by certain banks to curb lending to gun and fossil fuel companies.

“This isn’t a beloved industry, and there will always be issues and topics that will provide for attacks in public settings like this hearing,” said Isaac Boltansky, director of policy research at Compass Point Research & Trading.

The six CEOs — Jane Fraser of Citi, Brian Moynihan of BofA, Charlie Scharf of Wells Fargo, Jamie Dimon of JPMorgan Chase, David Solomon of Goldman Sachs and James Gorman of Morgan Stanley — will testify before the Senate Banking Committee on May 26 and the House Financial Services Committee on May 27.

After spending the past year facilitating government-mandated loan forbearance requests from borrowers facing financial hardships, working with the Small Business Administration to distribute Paycheck Protection Program loans and taking other steps to mitigate the economic impact of COVID-19, some observers said the executives have a positive story to tell about the industry’s role in the pandemic.

Regulators and lawmakers have acknowledged that banks were well-capitalized ahead of the coronavirus pandemic that put them in a better position to handle a distressed economy.

“I don’t think there’s any doubt that they’re in a better place than they were obviously right after the [2008] crisis,” a former congressional staffer said.

Ed Mills, a policy analyst with Raymond James, agreed that chief executives can emphasize that they were part of the solution to the coronavirus pandemic.

“During a significant shock to the system, the banks kind of were able to be leaned upon to support rather than the area that is being bailed out,” Mills said. “It is just fundamentally a different place for them.”

Still, Democrats have expanded their power in Washington since the last round of big-bank CEO hearings in 2019, taking control of the Senate in addition to the House.

Some lawmakers have criticized banks over allegations that they were providing concierge services to wealthy customers when distributing PPP loans, and concerns continue to grow about whether mortgage servicers will work cooperatively with struggling borrowers on workout options as they near the end of their forbearance periods.

Sen. Sherrod Brown, D-Ohio, and Rep. Maxine Waters, D-Calif., who chair the Senate and House committees, respectively, have made clear they intend to keep the heat on the industry.

At a recent conference with community bankers, Brown said, “People just don’t trust the largest banks.” He echoed that sentiment in a statement to American Banker, saying, “For too long, this committee has done the bidding of Wall Street instead of doing its job of overseeing the banking industry.”

“We are going to take a close look at the risks these…