Dec 6, 2023 - Economy

Big bank CEOs slam proposed tougher regulations: "They don't make sense"

JPMorgan CEO Jamie Dimon appeared alongside seven other bank CEOs in a Senate hearing on Wednesday. Photo: Tom Williams/CQ-Roll Call, Inc via Getty Images

Leaders of some of the nation's biggest banks attacked regulators over their proposals to toughen industry rules — even threatening at a Senate hearing on Wednesday to challenge the constitutionality of the plan.

Why it matters: It's unusual for the heads of the nation's biggest banks to so publicly berate regulators. The heated exchanges offer a preview of what could be ahead for the proposed rules that CEOs claim will hurt the economy.

What they're saying: "It was not thoughtfully done," JPMorgan CEO Jamie Dimon said, referring to how regulators put forth their proposal for more stringent rules. The proposals "don't make sense ... they weren't well-thought out," added Dimon, who appeared alongside seven other CEOs.

  • Morgan Stanley's CEO James Gorman also said one of the proposed rules "didn't make sense."
  • Citibank CEO Jane Fraser said they would be prepared to fight the constitutionality of the proposed regulations, which stem from an international framework, as a "last resort."

Catch up quick: The country's bank regulators — the Federal Reserve, Federal Deposit Insurance Corporation (FDIC) and the Office for the Comptroller of the Currency (OCC) — introduced a proposal over the summer that would require banks to hold higher levels of capital.

  • Regulators say it will make the banking system safer and more resilient against any crises.

The other side: Banks, however, say the rules will make lending less profitable.

  • At Wednesday's hearing, the CEOs said the proposal will raise the cost of borrowing for consumers, or force institutions to pullback on the activity altogether.
  • "If you have capital requirements increase ... to do the exact same activities you did yesterday, you have to get a higher return," said Bank of America CEO Brian Moynihan.
  • "That higher return will be borne by the customer base — or you'll have to leave the business. Neither of those is good for the customer base."

State of play: The proposal as written is far from certain and might take years before new regulations are fully implemented. Even some top Fed officials have expressed skepticism about the proposals, warning about adverse effects for low-income and Black borrowers.

  • Republican senators on Wednesday piled on. "Your bank isn't broken, but [the FDIC] is going to tell you how to fix it," said Sen. John Kennedy (R-La.), alluding to the failures of Silicon Valley Bank under its watch and toxic work environment allegations at the regulator.
  • "Do you find that ironic? Isn't that kind of like being given gun safety advice by Alec Baldwin?"
  • Some Democrats also raised concerns about the economic impact of the proposals. That includes Sen. Mark Warner (D-Va.), but he added: "I get extraordinarily frustrated that any time there is any proposed new regulation or rule, the industry reaction is 'Oh my god, the sky is falling.'"

Of note: Sen. Elizabeth Warren (D-Mass.), an outspoken critic of big banks, acknowledged a rare moment of agreement with the bank CEOs about tougher rules for the cryptocurrency industry.

  • "When it comes banking policy, I am not usually holding hands with the CEOs of multi-billion dollar banks, but this is a matter of national security," Warren said.
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