How'd You Feel If Your Boss Made $486 For Every Dollar You Make?

Apr 10, 2019
Originally published on April 10, 2019 7:02 pm

Updated at 2:23 p.m. ET

The heads of some of the nation's biggest banks faced tough questions from Democrats on Wednesday about overdraft fees, the stability of the banking system and their own multimillion-dollar compensation.

The House Financial Services Committee hearing was titled, "Holding Megabanks Accountable: A Review of Global Systemically Important Banks 10 years after the Financial Crisis."

"Ten years ago, the CEOs appeared before this very committee to discuss the financial crisis and the massive bailout taxpayers provided," said committee Chairwoman Maxine Waters, D-Calif. "A decade later, what have they learned? Are they helping their customers and working to benefit the communities they serve? Or are the practices of these banks still causing harm?"

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But much of the questioning veered into executive pay and consumer issues.

Democrat Nydia Velazquez of New York noted that Citigroup CEO Michael Corbat received $24 million in compensation last year, while the median bank salary is less than $50,000.

"Does this ratio seem fair to you?" she asked Corbat.

"My compensation is decided by our board and voted on by our shareholders," he replied.

"If you were an employee, and you saw your boss making $486 for every dollar you make, how would you feel about that situation?" Velazquez asked.

"I would be hopeful there's opportunity to continue to advance within the firm," he said.

"Unbelievable," Velazquez said. "And this is why people that live in a bubble or ivory towers cannot understand why there's so much anger out there."

Rep. Carolyn Maloney, D-N.Y., told JPMorgan Chase CEO Jamie Dimon his bank has been the subject of numerous complaints about overdraft fees, citing data from the Consumer Financial Protection Bureau.

"You're essentially gouging your most vulnerable clients, the ones that are living paycheck to paycheck," she said.

Dimon replied that bank customers can choose accounts that have different overdraft fee structures.

"The overdraft policy as it stands today, which was changed, by the way, in 2009, is that the client has to opt in," he said. "They are given a choice on opening the account on whether they want to have overdraft features or not."

Also testifying at the hearing were Bank of America's Brian Moynihan, David Solomon of Goldman Sachs, Morgan Stanley's James Gorman, State Street's Ronald O'Hanley and Charles Scharf of Bank of New York Mellon.

It's the first time bank CEOs have appeared before the committee since the Democratic takeover of Congress and the first joint appearance by the heads of all seven banks on Capitol Hill since the financial crash.

Perhaps in anticipation of Wednesday's hearing, Bank of America announced it would raise its minimum wage to $20 an hour by 2021.

Ranking member Patrick McHenry, R-N.C., accused Democrats of staging a political stunt and said the committee would be better focused on relevant issues like the impact of Brexit on the U.S. financial system.

"Why are we here?" he asked. "I fear our colleagues on the other side of the aisle are here to attack our economic system, attack the nature of our market. I fear my friends want to dictate social and environmental policy through government mandates on banks. That's not the right approach."

McHenry questioned the CEOs about whether Britain's departure from the European Union without a firm plan in place would destabilize the global financial system.

Most said it would be a challenge but not a systemic risk. The heads of Citigroup and Bank of New York Mellon said they have already taken steps to relocate their British operations to other European countries in anticipation of a hard Brexit.

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The heads of seven of the nation's biggest banks were on Capitol Hill today testifying about how the industry has changed 10 years after the financial crisis. Democrats also grilled them about overdraft fees, mortgage lending and even their own paychecks. NPR's Jim Zarroli reports.

JIM ZARROLI, BYLINE: When California Democrat Maxine Waters became chair of the House Financial Services Committee this year, she promised to hold the nation's largest banks feet to the fire. Today she got her chance, calling the titans of Wall Street to testify. She noted that it was the first time so many bank CEOs had been summoned to a hearing since the financial crisis.

(SOUNDBITE OF ARCHIVED RECORDING)

MAXINE WATERS: A decade later, what have they learned? Are they helping their customers? Or are the practices of these banks still causing harm?

ZARROLI: One by one, the CEOs assured the committee that the financial system has grown healthier and more stable than it was. New regulations have forced the big banks to curb risky lending practices. Here was JPMorgan Chase CEO Jamie Dimon.

(SOUNDBITE OF ARCHIVED RECORDING)

JAMIE DIMON: While you'll never lose sight of the lessons learned, post-crisis reforms have addressed key concerns.

ZARROLI: And the banks are doing well. They're enjoying healthy profits right now. And for Democrats, that raises questions about what they're doing to protect their customers. The CEOs were pummeled with questions about small business lending, high overdraft fees and diversity efforts. Citigroup CEO Michael Corbat faced some awkward questions about his salary. Democrat Nydia Velazquez of New York noted that he had made $24 million in compensation last year. The median salary at his bank, she noted, was less than $50,000.

(SOUNDBITE OF ARCHIVED RECORDING)

NYDIA VELAZQUEZ: So let me ask you this question. If you were an employee and you saw your boss making $486 for every dollar you made, how would you feel about that situation?

ZARROLI: Corbat answered her carefully.

(SOUNDBITE OF ARCHIVED RECORDING)

MICHAEL CORBAT: I would be hopeful that there's opportunity to continue to advance within the firm.

ZARROLI: Velasquez then cut him off, saying, this is why people who live in a bubble or an ivory tower can't understand why there's so much anger out there. Democrat Carolyn Maloney took CEO Dimon to task for high overdraft fees at his bank.

(SOUNDBITE OF ARCHIVED RECORDING)

CAROLYN MALONEY: You're essentially gouging your most vulnerable clients - the ones that are living paycheck to paycheck.

ZARROLI: Dimon replied that customers who want overdraft protection have to opt-in by asking for it. For the most part, the questions from Republicans were a lot less antagonistic. Many talked about how the big banks played an indispensable role in the U.S. economy. Ranking Member Patrick McHenry said banks are earning big profits today but only because the economy is doing well.

(SOUNDBITE OF ARCHIVED RECORDING)

PATRICK MCHENRY: I can tell you this. The economy has grown. The labor market is strong. That, too, is positive. The U.S. added nearly 200,000 jobs in March, a move The New York Times recognized as a return to solid growth.

ZARROLI: McHenry suggested that Democrats were using the hearing to score political points. It was a hearing, he said, in search of a headline.

(SOUNDBITE OF ARCHIVED RECORDING)

MCHENRY: I fear my colleagues on the other side of the aisle are here to attack our economic system. I fear my friends want to dictate social and environmental policy through government mandates on banks. That's not the right approach.

ZARROLI: McHenry said the committee would better spend its time on some of the more pressing issues facing banks today. They include the impending departure of Britain from the European Union and the impact it might have on the U.S. economy. Each of the CEOs said Brexit was a challenge but not enough of one to threaten the financial system.

Asked what was the most serious issue they face, they talked about cybersecurity - how to protect their bank's assets at a time when hackers routinely try to breach their defenses. That, they suggested, is the problem that keeps them up at night. Jim Zarroli, NPR News. Transcript provided by NPR, Copyright NPR.