As megabank CEOs attended their annual congressional hearings for day one of two on Wednesday, remarks on the U.S. economy permeated usual discussions around regulatory issues such as compliance and consumer protection this year.
JPMorgan Chief Jamie Dimon said he hoped a soft landing was still a possibility for the Federal Reserve but warned policymakers “should be prepared for the worst.”
The live comments build on pre-written testimony from Dimon, in which he touched on the uncertainty posed by conflicting macroeconomic trends — specifically, strong consumer spending and a robust labor market against the backdrop of historic inflation and unprecedented monetary tightening by the Federal Reserve.
“The U.S. economy today is a classic tale of two cities,” the leader of the country’s largest bank stated. “There are headwinds and tailwinds, making it challenging to predict the future.”
Dimon cited strong consumer balance sheets, “plentiful job openings” that continue to surprise to the upside, and healthy businesses while also highlighting crushing inflation that has eroded worker incomes, supply chain imbalances, the ongoing war in Ukraine, and restrictive Federal Reserve policy.
The comments came as Federal Reserve officials delivered a third-straight 75-basis-point interest rate hike in efforts to restore price stability and signaled more aggressive increases strategists have warned may tip the economy into a recession.
“While these storm clouds build on the horizon, even the best and brightest economists are split as to whether these could evolve into a major economic storm or something much less severe,” Dimon stated.
Citi Chief Executive Jane Fraser warned of “tough times ahead” for U.S. consumers, echoing Dimon’s sentiments about the economic picture,
Ahead of the hearing, Fraser also wrote in published testimony: “The worst of Covid may be behind us, but the economic challenges we face are no less daunting.”
In addition to Dimon and Fraser, other bank executives facing congressional leaders were Bank of America CEO Brian Moynihan and Wells Fargo CEO Charles Scharf, along with leaders of regional banks Truist Financial, PNC, and U.S. Bancorp.
The committee hearing, titled “Holding Megabanks Accountable: Oversight of America’s Largest Consumer Facing Banks,” saw the leaders grilled on a range of consumer issues including racial inequities in lending practices, whether or not they have exposure to Russian oil companies, overdraft fees, executive compensation, and a bevy of other items.
“America’s largest commercial banks play a critical role in the everyday lives of consumers and the overall health of our economy,” a memo describing the hearings said. “As Congress looks to tackle major issues such as pervasive racial inequalities in financial services, systemic risks to our financial system, including climate change, as well as the ongoing COVID- 19 pandemic, and Russia’s invasion of Ukraine, this hearing will bring greater transparency and accountability for the actions of these major industry players.”
On the account of the banks, executives lamented over hurdles facing their industry.
Dimon complained about higher capital requirements and the sum of liquid capital financial institutions are required to hold by regulators to ensure that the majority of banks’ holdings are not comprised of investments that increase the risk of default.
“This is bad for America,” he stated, “as it handicaps regulated banks at precisely the wrong time, causing them to be capital constrained and reduce growth in areas like lending, as the country enters difficult economic conditions.”
Wells Fargo CEO Charles Scharf, meanwhile, asked Congress for patience as the bank faces potential setbacks in working to address regulatory issues.
Alexandra Semenova is a reporter for Yahoo Finance. Follow her on Twitter @alexandraandnyc
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