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tv Squawk on the Street CNBC April 10, 2019 9:00am-11:00am EDT
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make sure you join us tomorrow, you are looking at live shots of jaime dimon, "squawk on the street" begins right now. >> dimon and moynihan and solomon, among the big ceos are getting ready to testify in front of congress. good wednesday morning, i am carl quintanilla with jim cramer and david faber with the new york stock exchange. future is positive there is a lot to watch including ecb and cpi, we'll get fed minutes this afternoon that bank hearing is going to be front and center
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chaired by maxine waters we'll focus on big banks and ten years after the crisis state street is expected to tell lawmakers the reform making the system safer and less risky than a day ago. >> my congressperson who's just brilliant and fed chief powell had a fabulous time with her in the house. she's deeply focused on community and what you are doing for the community. for people who are not of great needs. >> i was with jaime dimon when he opened branches when she asks questions, it is not going to be what we think. what are you doing to help people getting loans america is going to like that. maybe some of these people bash. >> that's glass half full.
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>> i think it was politico yesterday who says do not look for a reason discourse of the regulatory regime. >> that's what i think is wrong. she's one of many. i spoke to her many times of what she needs to do democratic republican would agree, yes, we got to start giving more loans. >> this hearing is entitled and holding events -- >> there is chair waters who you may remember, we have been playing some of the sound all morning at the interchange between here and secretary mnuchin yesterday. take a listen to that. >> what i told you that i thought it was respectful that you let me leave at 5:15 >> you may leave any time you want >> please dismiss everybody, i suppose you to take the gravel to bang it
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>> please do not construct me to how i am going to advise this committee. >> any confrontation for today >> the discourse may be more explo exploritorial. >> the fed did put a full proposal to modify regulations, post '08 regulations the banks found two restrictions there may be some push back on some of that why should we make things easier for you guys >> there was a moment in jaime dimon's letter, the banks have more money, capital than all of the banks. i think you can explain, jamie has been very in-depth
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he's been very in-depth of handling very difficult questions about congress i think that michael corvat is a little untested. gol goldman if they go into malaysia, that's a tough one >> who knows, there is so many different people on in panel, you don't know where the questions will go to one person. it is funny to see both of those banks being state street and bank of new york are globally and systemically important i don't know if we consider them particularly important >> i would not expect too many questions directed to either one
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of those gentlemen we'll see. >> i was joking with joe, there was one that was particularly brutal where they brought up rich people. they looked at a bunch of rich people and they let him have it. >> jamie was at those hearings following the crisis >> he did well >>. >> you had a change. it was not corbin. >> they should focus on lending banks. >> and wells fargo is not there at all >> they would have trained them. goldman has a narrative of marcus if they can explain that and new credit card. if they would give goldman a chance to talk
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he did not do anything that i would think it is wrong. he addressed the regulations ahead of anyone. you got some stand up guys so it is a tougher case to make to scream at them and not everybody wants to chew this guy out it was not confrontational >> you expect things like detroit to come up when it comes to jp morgan >> dan gilberts is going to be on "squawk." i mean it is a tougher case to make, to say bad things about these guys >> they're not monolithic. and we know that and not that they are not competing they do in certain areas
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city is still a global bank. that's where it is really known for. still for that franchise i think they're going to get hit. the state street and the other one out there. bank of new york >> i think brian moynihan is a survivor of the past and very good -- he's very good in these situations you got people if the discourse is, they can move the ball i am trying to be positive of these things because i see people in this committee who are not trying to make fun of the banks. >> how do you expect them to answer questions about whether or not of better profits are coming from greater risks. >> i think if they can address the capital, if they are allowed to address how many capital they
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have and how much capitalize they are verses what they were here is the biggest problem. if they start talking about t-1. they start to talk about do you see carr remember when lloyd came before the panel lecturing senator levin. no, you got to keep your cool. >> mr. levin knew and he fairly studied his investigation committee. >> that was bad. >> not a particular humorous fellow i met him a couple of times. >> kept looking for it, i could not find it. >> the more we hear these guys have done so i think these guys have done a lot helping the community and veterans it is unfashionable to say there is a cohort, that's going
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to be a prevailing thing and not capital. why don't you go into the community. i think they'll try but i am sure you can always do more. >> yeah, we'll see if they make any broad comments of the economy as well. of course, cpi came in, a tad warmer than prior numbers. ecb unchanged through at least at the end of the year goldman says because of the improvements, their recession risk goes down to 10 from 20 >> that's good >> there is a lot of things that i don't like the narrative that i hear this is what they should talk about. real average weekly earnings were unchanged people are not making that much more money they don't make a lot of money but is that not really the banker's fault it is a good opportunity to talk about that >> you mean people who work for banks. >> that's why bank of ameri america -- >> that was not a coincidence.
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>> these banks spend a lot of money not hiring people and not adding people is what they got to do. tesla, look at that. a build to expand vehicle tax credit incentives. >> a group of lawmakers are going to introduce a bill to expand the tax credit per manufacture. >> no, that's not the reason >> tesla there were still one more piece that was loop worm that would need to be signed by the executives, i believe? is that how it works >> mr. cole, i don't think he's liking that. >> he was talking badly about wind power and wind and cancer tobacco and cancer
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>> yeah, he's not a big fan of the -- >> caterpillar is going to make the quarter because of mining. >> you know i speak to a dozen of utility executives. i went out to dinner with one two weeks ago. they hate coal so much it is scary. they have constituents and the constituents only to die another thing that's in the way. >> not in the price of natural gas which we talked about. more is being flared than used now. >> these ties, they have spouses that go to the super market. they go to things. they feel the pain of people say how can you destroy the environment. the millennials confront people c conscious. they have their conscious out of control. >> cannot let that get the best of you
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>> don't let your conscious be your guide >> no. i got an idea, why don't they call in the regulators and let them get away with everything. >> you would be here longer in office >> how about the justice department chose not to go after these guys that's who i want to hear from >> the big banks, the six biggest banks got $8.2 trillion in bail out. there was a third of a total bail out that went to the financial system we'll rehash it. >> yeah, we have to. >> a lot of people were not even born >> with interest, i believe. what's the sale by date
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>> while we have a minute though guys, you mentioned some sales side research. apple gets cut to reduce although they increase their price target, that's always a fun one. >> i know. have some fun. >> i totally disagree with that. if you listening to what she's talking about. apple is deeply embedded in healthcare this tesla thing is going to cost 95 billion. the most important interview this is going to be the new one
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were so great. the new generation >> i guess i have the old generation >> we got to step up they're sold out >> i bet all people were talking to people who work there i didn't know they were buying people hate apple. there is always a shot of tim cook >> there is your answer. >> how is samsung doing? >> samsung is having more trouble in the business as you well know. >> david was on-air yesterday midday, it was later in the day and he had no tie on >> he was recently in japan for fun >> yes, i was. >> you are going out to san francisco, can i say that? >> i am not going there -- los angeles. >> tomorrow.
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>> talking about upgrades, disney now we all love it if stock is up eight points. >> we did get a new "lion king" trailer this morning it premiers in 100 days. comcast and buckingham and 53, street high target there is a sense everybody can play in the space. >> yes, there is room for many because people watch a lot of tv and they don't read anymore. >> i would think it is going to shake out a little bit at some point you start to reach your limit well, that's deciding what services want. universal is going to be a free service added supported different. >> today there is jaime dimon there a there. >> there is david solomon. they got the retail conference and it is going to be
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universe tal univer universally bullish. chair waters here is swearing in witnesses. >> oh boy. >> we'll look for pictures that you will likely see in the days and weeks to come. >> the matter under consideration will be the truth, the whole truth and nothing but the truth. so help you god. if you will respond by saying. >> thank you very much let the record show that the witnesses answered in the affirmative, please be seated. each of you will have five minutes to summarize your testimony. when you have one minute remaining, a yellow light will appear at that time i would ask you to wrap up our testimony so we can be respectful both the witnesses and committee's member's time.
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>> mr. corbat. >> i would like to thank you to talk about citigroup since the financial crisis >> we are fortunate to be able to pay those debts with significant return forters that made it a mission for us to never be in that mission again since the crisis, citi, has become smaller and less complex institution. we have transformed our institution not just in terms of capit capitals and balance sheets and earnings but also in terms of control and risks and audits and compliance we have gone back to our roots today as a bank. we have two primary line of
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business our consumer banks and our institutional client group we are not a financial super market or not an insurance company or hedge fund. citi is rightly scale to serve its clients, many of them, u.s. national or corporations where ever they do business, whether it is ford motor procter & gamble we provide our clients with an american institution to help them compete in a rapidly changing world rather than having to rely on a mix of foreign banks. >> last year we lent them $12 billion. our restructuring was the easy part and as we have learned rebuilding trust is much harder than rebuilding your balance sheet. that's why we have invested in
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our culture and may ethics found in our firm. our board of director became the first established ethics cultural committee while we had issues to come since the crisis, we continue to make steady progress strength strengthening our future we focused on unbuilding a truly diverse and culture at citi. we make our transformation public one of our strengths is to improve the community across the country in tangible ways last year infrastructure investment including housing and projects and we often do this in smaller financial firms don't have the resources to tackle those difficult problems this includes financing, new mlk's hospital in south central los angeles and helping the city of detroit rebuilding its street
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lighting grid. we are proud of our role as our country's leading affordable house leading lender a title that we held for nine straight years 2018 alone, we provided $6 billion to finance more than 36,000 affordable housing unit we finance the renovation of the veterans in boston we helped we storestore a public housing complex which was severely damaged by super storm sandy. we are aware of the challenges of 25% of americans who are unbanked or under banked faced and we have been a leader in financial inclusion. in 2014, citibank launched the access account and accounts that have low and avoidable monthly charges and no over draft fees and it is one of our fastest growing products we provide 440,000 customers of
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25 minority owned banks and community banks and credit union with free access to our atms thank you for the opportunity to speak with the committee of the progress we have made. >> thank you mr. corbat. mr. dimon you are recognized for five minutes to present your testimony. can you make sure your microphone is on >> chairman waters, we work everyday to earn the trust and conference of our customers in the communities we serve it is essential to have run a healthy and vibrant company. we never lose sight of the lessons learned. during the 2008 financial crisis, the u.s. government took extraordinary and unprecedented action to stabilize the system policymakers stepped in on behalf of americans.
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we are proud of what we did to help of the market completely in turmoil, we were able to lend to california, new jersey and illinois consistent and fair rates and many cases far below of what the market would have allowed. we provide more than $100 billion to local governments and municipalities and schools and hospitals and profits of 2009. at the request of the united states government, we bought the collapse bernstein, jp morgan was there with our clients and customers through good times and bad. i want to pause of the employees during these circumstances. large banks doubled the highest quality capital protect against
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losses the combined losses of all the 34 banks is only 6% of total capit capitol. large banks have tripled the liquid assets for unexpected cash flows this would simply not happen again. legislatures and regulators deserve credit for putting these rules in place we need to spend more time at critical issues like aml and cyber and privacy and global competitiveness. jp morgan, we invest in our businesses and people and the community we operate the united states we have raised wages and extended benefits for 22,000 we subsidized more than 90% of medical plant costs for employees making less than
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$60,000 a year 2016, we introduce advancing black leaders and retention and development of the black community within the last two years our company increased the number of senior black executives by 40% or 50% >> at the local level, of 30 cities, we sat down to identify ways to address issues and skills and investments and how to help the people in the community. jp morgan and chase is a $1 $150 million investment generated by myself and a leader of the labor development america is still the most prosperous nation in the world where he blessed of the natural gift of land and all the food and energy that we need. we are the most dynamic economy
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in the world with vibrant businesses and unparallel innovations. there are many people who are not sharing prosperity they are holding us back our healthcare cost now represents 20% of gdp. the u.s. no longer ranked 20 of the top infrastructure banking of the world government and business can work together and solve these problems if we don't, our moral and economic and military dominance will seize to exist. we do not have a devine rights of success the oversight of this committee is a critical responsibility and i will respond to any questions you may have thank you. >> thank you mr. dimon >> mr. gorman, you are
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recognized for five minutes. >> thank you chairwoman waters i share your commitment to this goal the financial crisis in 2008 was devastating to our country most significant event in morgan stanley in 84 years of history as a result, our management and board of directors have spent working hard to make sure the dow firm never experiences what we went through then we acknowledged had it not for this board of congress, we as a firm may not survive ten years ago we went back on an aggressive plan to remodel morgan stanley to ensure
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stability in the harshest of times. its ongoing strengths to support our clients and employees and shareholders and our communities. we make these business changes at the same time congress designated a new regulatory architecture which included stress testing, resolution planning and the living well process among other changes. on the hold, we have embrace these regulatory changes, morgan stanley in burglar is stronger as a result. we are safer as as business and more resilient than we were before the financial crisis. our capital has increased every year rising from 34 billion in 2006 to 72 billion at last ye
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year's end at the same time shrinking our balance sheet and leverage however, a sound strategy is just the beginning employees acting and managing risk appropriately will drive the ongoing strengths of our firm our focus is to make sure all 60,000 employees operate with the right values a sense of responsibility and professionalism which is what ultimately drives our culture. our employees are deeply committed to that mission. we further believe a diverse diversity base to deliver the firm to our clients. the required efforts of every level of the firm in order to deliver results of the long-term. we have numerous initiatives providing our employees opportunities for leadership
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roles and for them to achieve the recognition they deserve our employees have a strong commitment to support the needs of our kinds while at the same time giving back to the communities where they live and work as an example, we supported the morgan stanley children's hospital since 1973. our employees regularly give their time and resources to volunteer organizations across this country and the globe a we serve the schools and hospitals in our communities we invite individual families and we help finance institutions and governments and global corporations we help them raise capitals and managing their own financial institutions so they can maintain stable and can grow and provide employment opportunities for many others.
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>> the opening bell at the big board today. a bank check company celebrating its new listing. at the nasdaq, usta foundation >> look, i think there is so much attention and because in each case they're trying to talk about what they have done right. i wonder whether more humility would have helped them in the sense that they screwed up here and there but they all changed they all seem to have something great. america is not ready to accept that they have done great things even though i like very much of what they say. >> keep an ear opened for the tone there is moynihan. we'll get back to the hearing. >> 2010, we put together a team
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committed to change your company. we have simultaneous focus second, we transformed and simplified the company and made these changes aligned with dodd frank. the clean up country wide, we mass 50,000 teammates and other alternatives for closure we settled many lawsuits that was done by 2015 to simplify the company, we did a close down of more than 80 operating units. we shrank a balance sheet smaller before the crisis. during these fixes, we increased our core lending we also recommitted to our purpose to serve our clients to make the financial lives better.
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we do that through responsible growth first, we have toll grow second we have to be customer focused. our focus is what led to an all time high customer service scores with our company. we also focus on small businesses, for example, in 2018 alone, we originated over $8 billion in small business loans. risk framers requiring a strong board of director to set an appetite it takes a culture of teammates to do it the right way today we have record earnings. those earnings of lower risk and our market risk is 30% lower and credit risk is an all time lows. we have to drive operation excellence and share our success with our community and be the
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best place to work for our team. operation excellence allows us to invest. whether it is increasing our centers by adding 350 centers. >> examples including our ten-year $300 billion of renewable energy future. our corporate charity exceeds $250 million a year. our employees volunteer $2 million in the community. as the governance, we of skillss of people of color we have to be a great place to work what does it mean? we raise our starting rate at $15 an hour. it has gone up since given tax reform of 2017, we awarded not one but two special
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bonuses of cash and stocks to our teammates at the top 5%. 190,000 teammates received $1 billion of additional compensation we hired more than 27,000 teammates including 4,000 from colleges we are in a plan to hire 10,000 teammates from our neighborhood and well ahead of the pace of that plan. we have a diverse and inclusive team more than 40% of our managers are women. we also provide great cost effective health benefits, graduated costs for all teammates, reduced by hat and health benefits eight years ago for a lower compensation teammates have not increased the dollars since that time. responsibility that we be fair and accessible and safe for our clients. it is a great place to work for our teammate and our
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responsibilities we serve our community. we call that responsible growth and we are committed to that >> thank you >> will you please reframe from making any comment in the committee. order. >> the chairwoman is responsible under the rules of the house and the rules of the committee to maintain and preserve the order in the room. members of the audience are reminded that disruptio disruption -- would you please remove this gentleman from my committee? >> come on officer, i don't have a lot of time, get him out of here.
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states last year more than 40% of our revenues came from outside of the united states. our purpose is to create better outcomes for the world's investors and the people they serve. unlike many major banks, state street does not serve retail customers with traditional commercials with retail banking. we also do not engage in investment banking activities. still we never lose sight of the people we are ultimately helping. savings for retirement, a house or a college education, researchers trying to find answers to society's biggest challeng challenges or government is h k looking to build or improve infrastructure we play important role in the overall infrastructure of the financial markets. the safekeeping and custody of assets we also provide those same institution investors related
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services such as foreign exchange and brokerage and deposit and investment facilities we provide pension funds and other institution investors with a full range of investment strategies including index space and exchange credit funds. more than ten years after the financial crisis, i believe the financial system of the united states is safer and more resilient. this is largely due to strengthen regulations and greater transparency overall there is also due to the bold action taken by the congress to stabilize the financial system in 2011, state street was decembsignated by the financial stability board because of our role in the financial infrastructure that i described earlier. we are subjected of a high moment -- >> dow is up 27.
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s&p is 28.83 lyft, guys, it is a new low. it is below 66 this morning. >> it is not performing particularly well. at the time, carl, jim, they said they had a strong look where they thought they'll not have a lot of flipper. it is proved to be relativity weak we got uber coming interestingly, you would anticipate well maybe uber is happy that lyft is not performing uber wants lyft to perform well. of course it is in second place dramatically in seconds. regardless, it would point to a strong valuation for uber and how they price it. it will be interesting to see how they choose to go about that as uber expects to hit the
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market here very soon. of course, billiuilding that bos going to be crucial for them as well and finding investors and certainly don't seem that willing. >> it is very interesting how well levi was handled. fantastic conference call and the deal was placed really with n non-flippers it was a textbook of how to do a deal maybe that's what people have to know they give you a bargain. buyers are going to win, seller will win and they did. chip is a season hand who knows how to do this i question whether the ceo of lyft understood how to do it >> we'll talk to chip byrd later on this morning. >> he's a delight. >> they come in with a beat.
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revenue is up 7. >> jim, you are not hot on the denim ipo. >> denim is not that good. chip was not a denim story chip is a life story storstyle . it is getting away from denim. it was great >> all right let's get back to the hearing. charles scharf, i believe. >> we are primarily custody bank and in that capacity, we perform the nuts and bolts of the financial system we are not engaged in retail banking nor do we provide financial credits such as credit cards or autoloans we operate as a processing company and a record keeper
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helping market participants around the world our businesses including providing custody and other financial services to government entities and pensions and unions and endowments and corporations and other institutional customers. these are simple, straightforward, important services we take our responsibilities to our customers and our commitment to the financial stability very seriously. our specialized role in the global financial system and our position as a leading financial institutions allowing our client and the u.s. government to benefit from our unique vantage point. looking back at the financial crisis, we understand them and we understood the gravity it
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faces. we believe the capitol investment and other efforts under taken by congress, treasury and the federal reserve greatly help stabilize the marks and allowing us to do more than we otherwise could have to help support and improve u.s. financial markets at the time. we believe the global financial system is stronger today because o f the regulatory reforms that's implemented since the financial crisis we believe to examine and recalibrate our regulations to reflect emerging risks i can say with confidence that we are a resilient organization today than a decade ago. our bank is financially sound and we work each day to make sure that continues. we are constantly investing in our controls and risk system we upgrade our cyber security infrastructure to meet the challenges by old and new
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evolving threats while we don't have direct contact to consumers, we are committed in supporting our communities who are working unions and retirees and community partners we invest in our employees, we are proud of our diverse work forces ability to deliver creative insights and solutions that lead to our continued success. >> we believe does he habelievel levels make us stronger and continue to our success. we understand the importance of serving our community. we are proud to be the important part of history and new york and pennsylvania and making significant and local investments. we believe it is important that those investments supporting all members of our community whether it is educational or small business in pittsburgh or financing in supporting the construction or preservation of approximately 5,700 affordable house units in the community
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we recognize we play an important role, we do not take our responsibility lightly we remain committed for your trust and as well as the american public. thank you for the opportunity to testify today, i look forward to answering your questions >> thank you mr. scharf. >> mr. solomon, you are recognized for five minutes to present your testimony >> chairwoman waters i appreciate this committee focus on accountability. as the new chairman and ceo of goldman sachs, we just celebrated our 150th anniversary. our clients all around the world ranging from large and small businesses and endowments and start ups and individuals. what remains true today is our employees work everyday to provide these clients with best in class service and to work
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hard to earn their trust today the u.s. financial system is safer and more resilient and financial institutions holding more capital and they reduce their leverage and holdings and liquid assets. goldman sachs's equity has doubled. we are confident that we can withstand shocks dodd frank has made the system safer and we made important progress adopting to that regulatory environment after ten years of experience seems appropriate to assess whether improvements can be made to avoid duplications and inconsistencie inconsistencies. we under took a three-year review of the firm's business standards and practices and most extensive review of the firm's history and ranging of conflict
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of interests to transparencies and disclosures. the changes we made are much longer and larger and ongoing commitment by our firm, opening to change and learn the right lessons from experience. we know that we won't make mistakes but we can learn from the responder ways to meet our customers and shareholders and regulators and the broader public as it relates to our business strategy and the crisis, goldman sachs entered the consumer finance market 2016, we launched our platform called marcus, designing marcus, we spoke with more than 10,000 people across the country understanding their banking needs. we value simpila simplicity and transparency these are the core of our market we offer online saving accounts and certificates of deposits and we have a saving account rate of
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no monthly fees and no transaction fees or over draft fees once central issue our ability to compete is diversity and i am motivated personally to make real lasting change. we are committed to long-term goals, across all levels of our firm we hope to manage and be accountable for these goals. the last ten years we have committed more than $2.5 billion to initiatives providing more to capital and training and broader community support. we are 10,000 initiative, we
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partner with colleges and greater access to capital and thousand of businesses across the 50 states and puerto rico and the district of columbia i am proud that goldman sachs is the proudest contributor to community colleges in the united states since 2001, we committed $7.8 billion to benefit low to moderate income communities. approximately 80% of the investment group are located or serving minority communities last year we announced and launched with gs, a $500 million initiative, we'll expand to include businesses found or owned or led by people of color. looking at this opportunity of our expertise and define our country's success and progress including the environment, healthcare and education and infrastructure and many other areas. thank you for the privilege of being here today i am happy to answer any questions you have >> thank you very much
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before i begin my question, i would like to take a moment to recognize a special guest in the audience, reverend jesse jackson, founder and president of the rainbow push coalition who has been involved in fighting for access for capitol small business loans and community development. reverend jackson. thank you very much. let me begin and i'm going to take five minutes for questioning. much has been reported about how deutsche bank has been a pathway for criminals, kleptocrats and allies of mr. putin to move illicit funds out of russia. recent information shows some of your institutions have also been providing services for russian individuals or entities that may be engaging in questionable transactions in particular i'd like to ask bank of america, citibank,
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jpmorgan and morgan stanley to answer the following questions has your respective bank conducted any review to identify and assess russian-related accounts bank of america? mr. moynihan >> yes, chairman waters, we obviously comply with all sanctions that are required by the federal government and so we review that on a constant basis, whether it is russian banks or not. >> did you identify any suspicious accounts or transactions >> not to my knowledge but we do regularly investigate all accounts >> so you have no reason to have taken any actions as a result of your findings, is that right >> not that i'm aware of. >> thank you let me ask next of citibank. >> thank you, chairwoman we take our responsibilities around aml very seriously. >> yes, but has your respective
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bank conducted a review? >> we have conducted thorough investigations and can't comment an an ongoing investigation. >> you're saying that as a result of your investigation, you did identify maybe some suspicious accounts or transactions >> can't comment on ongoing -- >> can't comment on that you have not taken any action as a result of your findings because you can't comment, is that right >> we take it very seriously and -- >> okay, morgan stanley what about you? >> we conduct regular reviews consistent with u.s. -- >> very good did you identify any suspicious accounts or transactions >> not to my knowledge >> so you have not taken any action, is that right? >> that's correct. >> thank you very much mr. corbett, you mentioned you had downsized somewhat, you eliminated some business lines have you determined that that helped to manage -- make management more easy in your
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bank >> in our bank we have downsized considerably -- >> how many business lines did you downsize >> 70. >> has it made management easier >> yes, it has. >> mr. dimon, what about you have you eliminated any business lines? >> every year we look at small businesses and things that cause problems that are clouzi inclos so the answer is yes. >> how many have you eliminated? >> 17. >> has it made management better >> sure. >> thank you what about you, mr. gorman >> yes, we have downsized a number of different businesses. >> has it mading management better >> it certainly makes it organized. >> thank you, mr. moynihan, have you downsized any business lines and stuck to your core business? >> yes, we have. >> has it made management easier and better >> it has made it more focused, yes. >> mr. hanley, what about you? >> yes, we have. >> has it made management better >> yes, it does. >> mr. scharf, what about you? >> i'm not aware of that. >> you're not aware of what's happening in your bank
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>> i'm not aware we downsized or eliminated businesses. >> so you have not -- you have not reviewed and you don't know -- is this something you think you need to take a look at >> chairman waters, i have reviewed businesses we're in and don't think we should be eliminating businesses that we're in and to the bestof my knowledge, we didn't exit businesses for prices. >> mr. solomon >> i can't hear you. >> we eliminated a hand of businesses since the crisis. >> thank you today there are more than 44 million americans that owe -- student loan crisis. $1.56 trillion in student loan debt this committee received testimony that last year 1 million student loan borrowers defaulted, which is on top of the 1 million borrowers who defaulted the year before. what are you doing to help us with the student loan debt who would like to answer first mr. moynihan, big bank >> we stopped making student loans in 2007. >> you don't do it anymore mr. corbett?
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>> we actually did student lending in 2009. >> mr. dimon >> the government took over student lendinging in 2010 or so, we stopped doing all student lending. >> thank you what about small business? you mentioned that you were making loans to small businesses small business operators can't walk into your bank and get accounts, you shove that off to community development organizations. who can say that you have made an important business line lending to small businesses? >> chairman waters, as i said earlier, we made $8 billion in loans last year and we have operating accounts for about 9 million small businesses. >> thank you my time is up. the gentleman from north carolina, ranking member mr. mchenry is recognized for five minutes. >> about that, small business lending, mr. moynihan, does bank of america -- >> we have to stop right there and discuss what we just heard that was a heck of an icebreaker
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from chairwoman waters. >> the speed with which it went through was embarrassing for the executives i think that they didn't really get a chance to kind of give a full answer. but charlie scharf, who i always said is an outspoken guy, this is ridiculous, just say i didn't -- no, i didn't do anything i have a good bank and it was kind of -- >> running it that long -- >> i'm saying -- >> not like the other banks, anyway. >> he's not going to tolerate this. >> tolerate what she was asking all these questions and moving on. it is easy. >> it is embarrassing. cut off everybody. she cut them off. >> they're happy. >> they're happy to be cut off >> the shorter the question, the shorter the stay. >> that's true that's when they should say, i apologize. i apologize. what do you say? >> set a tone for the whole hearing? >> other guys are going to be less clipped and they're going
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to ask about could you please tell us how to work together to make it so more people have jobs >> jim, what's on mad tonight? >> i don't even know. >> depends on how this goes. >> holy cow. mark butler, you know, i'll ask him how many business lines he's closed michelle gass from kohl's. >> student loans >> i don't know. i think she got out of it in 2009 when congress decided. >> we'll see you tonight "mad money" at 6:00 p.m. back to house financial services. >> -- we and our clients are prepared for it but don't believe we understand all of the ramifications. >> i believe it will be a challenge if we spend a lot of time preparing for ourselves and clients. but it is hard to see the derivative risks that come out of that outcome. >> according to your public filings, your two institutions have the greatest exposure to the uk of any institution on the
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panel. so let me ask you this question, do you have contingency plans for a no deal brexit >> we have prepared with a mind set and eye towards a hard exit, yes, we have plans in place. >> we also have been planning for a hard brexit. >> okay. so in light of that, what are the nature of your plans, mr. corbett? >> we have relocated our bank out of the uk to ireland which passports and so is fully compliant with eu banking. we have moved our broker dealer or a portion of our broker dealer from the uk to germany to frankfurt and is licensed and is operational and we moved the necessary people from front office, middle office and back office to support those. >> is this taking a portion of your time over the past three years for the contingency planning >> it has. >> it is an important issue for you? >> it is.
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>> mr. scharf? >> we have a bank that is headquarter headquartered in belgium and moved a series of activities of company from the uk to belgium we also have control functions and moved individuals on to the continent and away from the united kingdom probably most importantly worked very closely with our clients on moving their transactions into different entities and all of the required paperwork that goes along with that. >> and so let me segue to china, another issue of systemic risk per the federal reserve, the latest exposure of their meeting minutes. along those lines, mr. solomon, your institution recently divested or sold off your investment, the commercial bank of china previously mr. moynihan, bank of
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america had investments along the same lines in china. i believe prior to your assent to ceo and chairman of your organization so in light of that, mr. solomon, is this an eye toward the challenges of the chinese economy or was this about simplifying your business? was this about systemic risk or the regulation of chinese banks and intervention of chinese banks? >> we made that investment years ago. at the time, the bank was going public in the international markets. it was a financial investment and there came a point in time when the financial investment had seasoned and saw it wasn't related to the broader issues of the economic relationship between the u.s. and china. >> thank you for your testimony. i think systemic risk is an important topic today and overall regulation i yield back. >> thank you very much the gentlewoman from mark, miss maloney, also the chair on the subcommittee on investor protection, entrepreneurship and
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capital markets is recognized for five minutes >> welcome after the parkland shooting last year, where a lone gunman killed 17 students and staff with the military still semi-automatic rifle, two of the banks on this panel, citibank and bank of america, stepped up to the plate and adopted formal policies limiting their business with certain gun industry clients and i want to publicly thank them now, mr. dimon, last week you published your letter to shareholders and in the section on responsible banking you wrote the paragraph that is up on the screen right now you said that turning down clients with low character is, quote, often the only way to be a responsible bank, end quote. well, actions speak louder than words on guns, mr. dimon
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and from what i can tell, these are just words to you. let's talk about some of the actions on your banks. on your bank's activities. even after the horrific massacres at sandy hook, las vegas and parkland, jpmorgan arranged about $273 million of loans for the manufacturers of military style firearms. the same weapons that are being used in mass shootingi ins all r our country. even worse, last year jpmorgan took partial ownership of remington, the manufacturer of the exact gun that was used to kill 20 children in the sandy hook shooting. and jpmorgan has refused to adopt a policy to ensure responsible lending to the gun industry even though you claim that client selection is important and even though two of your competitors have already adopted
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these policies so my question is, will you live up to your own rhetoric, will you commit to adopting a formal policy that ensures responsible lending in your bank's business with the gun industry? >> everything we do with clients goes through a severe process of review, reputational risk, et cetera we have the same gun manufacturers who make military equipment in the united states military and for united states police force, which we hold in the highest regard regarding sellers of guns, over 100,000 retailers who sell guns. every single one we do business with, we do a thorough review, audited by the atf, only 6% a year regulated by state and federal government and if we think they're doing something wrong, we stop doing business with them. >> that's not what i was asking. i was asking you to adopt a formal policy for your bank on
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responsible business like your competitors have with the gun industry >> we would consider that, yes. >> going on to the next question, in 2009, i passed the credit card act which the consumer financial protection bureau says has saved consumers $16 billion a year and by the way, all of you on this panel oppose that legislation even though it has not hurt your bottom line at all. and now i'm trying to do the same thing for overdraft because unfair overdraft fees cost consumers $15 billion a year so i was looking at cfpb's consumer complaint database, and there are over 1,500 complaints about abusive overdraft fees a surprising number of your customers, mr. dimon, complained about chasing engaging in one of the worst overdrakt practicft p
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recording transactions so the largest transaction is processed first, which maximizes the number of overdraft fees you can charge the customer. a typical complaint from one of your customers is up on the screen right now my bill, the overdraft protection act, would make this practice illegal because you're essentially gouging your most vulnerable clients, the ones that are living paycheck to paycheck so let me ask you, given that your bank clearly won't end this practice voluntarily, do you think it is time to simply prohibit these kinds of abusive overdraft practices by laws and that's what my bill would do and i welcome your comment, mr. dimon, and others, on overdraft. would you accept a law banning this practice, would you support such a law >> the overdraft policy as it stands today, which was changed by the way in 2009 is that the
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client has to opt in they're given a choice on opening an account, overdraft features or not. those overdrafts very often stop -- >> what about reordering transactions >> -- paying far worse -- >> my time is expired. may i ask for a response in writing? >> the gentlewoman from missouri, miss wagner, is recognized for five minutes. >> thank you, madam chairman and welcome to all of you. one of the questions that i always like to ask when considering action or inaction as a member of congress is how does this hearing, this bill or this regulation create jobs? and grow the economy and in my district of st. louis, missouri, and across the nation. my constituents want good paying jobs and opportunities for themselves and their children, their families mr. solomon, mr. solomon, can
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you discuss how your institution supports access to capital for consumers to buy a home, start a business or send their kids to college? >> sure, we generally have not been a consumer bank, but we just started very, very small consumer business at this point in time we take deposits and we make small unsecured loans for consumers that amount from 3500 to $45,000 it is a very, very small business we're not currently in the business where we make mortgages for consumers. but we might at some point in the future. >> mr. moynihan, could you hanser thhans answer that question how are you helpinging my constituents to get capital to buy a home and start a business and send their kids to college >> sure, we provide mortgage loans to 3% to 4% of the american population. we do it directly. last year $50 billion in mortgage loans recently we recognized that there were time to save for a down payment has become longer
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under the current rules and regulations so we built a $5 billion program to speed up the time to help people who may not be advantaged by having parents or someone who can give them money for a down payment assistance that goes on our balance sheet good credit quality and we do programs like that and last year we did $4.7 billion in loan moderate affordable housing not only homes, to own, but homes to rent and good place to live. >> how much in low and moderate income housing >> $4.7 billion last year since the crisis, probably 35 or $40 billion. >> you're not all just banks that provide credit loans, you're providing hundreds of thousands of good paying american jobs. could we quickly go down the line and ask each one of you, if you're able to quickly answer how many people do your institutions employ here in the united states of america we'll start at the end here. >> 67,000. >> over 150,000.
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>> 45,000. >> u.s., 180,000. >> 16,000 in the united states >> 26,000. >> little less than 20,000 in the united states. >> great, thank you. large financial institutions play an important role in the broader banking echo system. mr. gorman, or anyone actually who can answer best, can you talk about your relationship with banks of other sizes? like community banks and regional banks while i am sure you compete with other banks for some services, do you not also provide critical services to many of the smaller banks and institutions >> yes, we do. we engage in a number of activities for them, whether raising capital, helping them manage their liquidity, providing various forms of financial advice, and being there as a participant in the markets with other financial
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institutions a lot of the smaller financial institutions don't have the technology, some of the capability that the large institutions are blessed to are because of their scale >> mr. corbett >> yes, we provide financial services for banks of all shapes and sizes, community banks, regional banks, national banks, and every bank sitting at this table with me is a client of our bank >> very good point i also serve as the ranking member on diversity and inclusion. mr. moynihan, who drives diversity and inclusion at bank of america >> i do and the other management team members drive it. >> most people talk about diversity and inclusion as an hr issue. why is it important to you as a ceo and to the business? >> we want to have a place, a company be the best place to work we want every teammate to come to us and be able to see, no
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matter who i am, when i come in the door, i can be who i want to be -- we're 50% women, 40 plus percent women managers in terms of people of color, we're 45% overall people of color, 37% people of color managers and we continue to watch that in every unit and every business review, are you making progress of the goal of having our company reflect society at large. but importantly, we want to make sure that people can go from that entry job to our jobs and that's what we're describing. >> thank you very much my time is expired i yield back, madam chair. >> thank you the gentle woman from new york, miss devel miss ha miss valasquez is recognized for
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five minutes. >> compensation for 2018, according to the banks, 2019 proxy statement the median compensation for employees at citi was $49,766 citigroup has the dubious distinction of having the largest discrepancy between ceo compensation and median employee salary of any of the institutions present here today. a remarkable 486 to 1 ratio. does this ratio seem fair to you? i cannot hear you. >> congresswoman, i don't think that's fair to me to judge i would say that i completely acknowledge that i'm very fortunate, i started at our firm -- >> i'm just asking that if it seems fair to you, the ratio of
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the amount of money that you are making, compared to the 49,000 average employee is making -- >> my compensation is decided by our board and voted on by our shareholders. >> so i understand you don't set your own salary. few people do. but we do set salaries for the people who work underneath of us so if you're not happy with the pay ratio, at your firm, there are two ways to correct it because beneath me doesn't look good lower your salary or raise the salary of others 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? >> i would be hopeful there is opportunity to continue to advance within the firm.
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>> well, just unbelievable and this is why people that live in a bubble or ivory towers cannot understand why there is so much anger out there, especially among students and millennials who drive away with student debt in one hand and diploma in the other mr. dimon, last week in your annual letter to shareholders, you stated and i quote, simply put the social needs of far too many of our citizens are not being met. you also noted that, and i quote, income inequality is getting worse. however, in that same note to shareholders, you observed that congressional republicans tax cut helped raise your bank's profits by $3.7 billion last year alone in fact, it has been estimated by the fdic that many banks make
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an additional $28.8 billion in profit last year through this republican tax cut one reason so many financially struggling americans like those referenced in your note view these cuts as unfair is that while individual tax cuts expire, the majority of corporate tax cuts were made permanent. so i would like to ask you a simple yes or no question. given your acknowledgement of worsening income inequality and given banks record profits, would you at minimum support on setting the corporate tax cut? >> no. >> mr. dimon, when working families see that their tax cut is set to expire, your company makes permanent, and is posting a record $32.5 billion in a
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single year, can't you see why so many americans find your income inequality comments disingenuous can you see why that position strains credibility. >> yes, but it is incorrect. the american government reduced tax rates on businesses to make america competitive. we have been sending trillions of dollars of capital overseas -- >> how can we make america -- reclaiming my time how can we make america competitive when there is large number of young people that are graduating and they see no future competitive business will drive wage and jobs overtime what we do in the individual side is separate so in that same letter i supported expanding the earning of tax creadit.
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>> thank you the gentle lady yields back. the gentleman from oklahoma, mr. lucas, is recognized for five minutes. >> i come from a multigeneration, group of debtors, so understand my perspective as a customer to the financial institutions in addition to my responsibilities on this committee, i also serve as ranking member of the house science committee. and for just a moment, let's talk about the issues that impact your customers, the safety and security of their information and for that matter their money. on the science committee, among other things, we have jurisdiction over a portion of the cybersecurity regulatory regime and your institutions bear a lot of responsibility for cybersecurity due to the business you're engaged in but the regulatory structure for cybersecurity is in many ways just as complex as the financial regulations. the sheer number of agencies involved in the issue is
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astounding just some of them, the white house, omb, dhs, fdic, the fed, occ, s.e.c., cftc are just some of the federal agencies with cybersecurity policies applicable to your institutions. this says nothing of the state-based or international regulations in place for you to depend on and dealing with the customer base. we can all agree that cybersecurity is of the utmost importance but i find myself wondering about the cost of implementing this large web of regulations. could you elaborate further on how you comply with these various cybersecurity rules? since this is critically important to your customers and my fellow citizens >> i think -- we spend $600 million a year in cyber. all of us spend huge amounts of money to protect privacy, the system i agree with you, cyberrisk is probably the biggest risk i think the financial system faces
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in the world it is a global risk and you're absolutely correct, all those folks getting involved in making it very complicated. but good and happy note, after this meeting, most of us are going over and meeting with the agencies and top security officers trying to get it a little more coordinated, we can do a better job protecting the united states of america. >> i would add to that, in that working with these broader groups of colleagues in the industry, you'll find that the financial services industry despite all the things you talked about as like many things just take it upon themselves to drive successful implementation. and so we all spend a lot of money, as jamie said, but the important thing is we make available throuin the various g all the information we can glean all the way through the system if we find an issue, we make sure everybody in the financial system has as fast as humanly possible with big banks, small banks or everything in between that is something that we have driven our industry at
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irrespective of the numbers of regulators in the amount of different people looking at. we believe it is incumbent upon us to protect ourselves. >> clearly and the impact not on just your operations but the smallest financial institutions in oklahoma, they stress and strain even more trying to address those issues and as a society as we moved away from checks and cash to all the electronic transactions, it is a bit unnerving to the folks. again, anyone else care to touch on this, how you're trying to address this issue >> i would add to this that i do believe that cyberis a clear and present danger to the financial system and i think that we have to move from an adversarial base system and to one where there is real cooperation between and among the institutions which exist now and between and among the institutions and regulators. >> congressman, just to give a sense of scale, morgan stanley five years ago, we spent
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approximately $50 million on cybersecurity. this year we're spending in excess of $400 million on it, building so-called fusion center in baltimore and new york, singapore and glasgow, all designed and working hand and fist with the government agencies this is the single most existential threat to the financial system >> congressman, i would close by saying that it is not just the interest of what we do in america to protect america's interests. it is what these institutions also do around the world in terms of cyber, in terms of protecting our american clients information. >> with that, madam chairman, i yield back. >> thank you very much the gentleman from california, mr. sherman, is recognized for five minutes >> we're here because of what happened ten years ago, but due to post traumatic stress, we forgot what happened ten years ago. ten years ago hank paulson, in
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your industry, came to congress with their t.a.r.p. program. toxic asset recovery program the plan was for the federal government to buy toxic assets from you, that is to say to buy the worst mortgages in the back of vault if we had spent $700 billion on toxic assets, we would have lost the lion's share of the $700 billion. and the affect on our social structure, if we were having this hearing, and the federal government had lost the lion's share of $700 billion, everybody in this room would be a socialist. that's the effect it would have had on our social fabric instead, this house stood strong this house demanded changes. they jetsoned the idea of buying toxic assets and instead bought
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preferred stock and the only reason we got our money back and the only reason that capitalism continues to be the majority view in this country is because we didn't buy toxic assets, but instead by buying preferred stock, we got our money back with interest. real capitalism is at every bank of every size and competes fairly but too big to fail is too big to exist for ten years, senator bernie sanders and i, and i invite more co-sponsors this year, have been putting forward our bill to say too big to fail is too big to exist, the giant institutions need to be broken up why? i'll give you the capitalist reason why the ims study says that you derive a .8% cheaper cost of funds because wall street knows,
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big money knows if you're going down, you'll be here and they believe we will bail you out where as a medium or small size bank, if they go down, their creditors are not getting bailed out to the extent they're over the fdic limit let's talk about consumer protection i'd like you to raise your hand if you don't impose forced arbitration provisions on your regular middle class customers everyone -- let the record show that with the exception of mr. gorman, hands up so mr. dimon, that means if one of your customers, say, had a phony account opened by an overzealous one of your employees, and they already had one account with you but a
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different account got opened, they would be free to go to court. >> we give them $500 to take us to small claims court. they're free to go to court. >> wait a minute you get a phony account, your credit rating goes down, you miss an opportunity to buy a house, two years later that house is worth 200 -- $100,000 more, and you get to go to small claims court about that. so you're saying that you will not allow the regular court system to be available to them, is that correct, mr. dimon >> i think that is the regular court system >> the small claims court is a separate court system. you will not allow them to go to federal court, you will not allow them to go to a court of general jurisdiction is there anyone -- i'll do it again, is there anyone here that will allow a regular middle class customer to, if they had a dispute, go to a regular court
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of general jurisdiction? i see mr. moynihan's hand went up and mr. corbett's hand went up want to focus on miss maloney's bill for one, it would prohibit manipulating the order in which you debit an account in order to maximize overdraft protection. how many -- please raise your hand if i can count on your lobbyist here in washington, you all have them, to support a bill that will prevent manipulating the order in which accounts are debited. not a single -- thank you. >> the whole bill. >> what? >> the whole bill. >> okay. but this one provision you would support? >> thank you the gentleman from florida, mr. posy, is recognized for five
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minutes. >> thank you, madam chair. thank you, witnesses, for appearing today. i have noticed recent trend to withhold or withdraw banking services from completely legal businesses which seem to have found disfavor with the media or in some political groups and so my question is exactly what your bank's policy is on that matter and your rational behind that policy and we'll start with mr. corbett. >> our bank's policy is that we have a screening process that has taken on any significant business decisions through our business practices committee and when that committee can't come to a decision, it is ultimately escalated to the board we then have the creation of a policy which we then publish and enforce with our clients as we go forward. >> okay.
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do you do that on every single account that is opened at your bank in. >> no, this is not account -- necessarily account specific, this would be more issue specific >> well, can you give me an example of some of the businesses you don't think you should do business with? >> i think we have taken stances as was earlier talked about in terms of our interaction with retailers in the united states around the best practices of -- >> just give me some examples of people you don't like to do business with or you're not doing business with or refuse to do business with >> sanctioned individuals in the united states today. >> okay. any industries you particularly don't care for >> i'm sorry >> any industries you don't particularly care to do business with >> none in particular. >> okay. mr. moynihan, same question. >> we have a committee that is a group of business people and
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senior team that make a decision on what we do. so there are -- these are based on us taking a look at what we think the right thing for our teammates and the communities we serve are. >> so what are -- are there any completely legal businesses in this country you don't do business with, that you will do business with? >> sir, i assume you're referring to this decision we made afteri inhaving over 100 teammates directly affected by the situations and people -- places like las vegas, 100 plus of our teammates, pulse nightclub were in there, we shou -- for people who wouldn't modify the practices, we made a decision we would ask them to change, if they didn't, we wouldn't do business with them based on our teammates pushing the issue. >> any other businesses besides the weapons industry
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>> many years ago one of my predecessors made a decision on tobacco companies. various energy companies, this is determined by oil companies we do business with. coal companies we don't do as much business with it is all based on our determination, based on our communities and teammates making the decision >> okay. mr. dimon, you already said that you're okay with making loans to people who manufacturer weapons for our military and stuff and i appreciate your omment mr. solomon, same question to you? >> we have a process of vettingivetting i -- >> anybody you found objecti objectionab objectionable? >> there are certain industries based on practice we won't specifically deal with. >> okay, such as -- >> we don't deal with -- we don't do business with companies that manufacture assault weapons, bump stocks or high capacity magazines >> okay.
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mr. scharf >> our clients are predominantly financial institutions and asset managers. >> speak up a little bit. >> our clients are predominantly financial institutions and asset managers, and we do a series of suitability reviews on those clients and make individual determinations. >> are there any you found objectionable you don't want to do business with >> no. not as an industry as individuals, yes. >> mr. gorman? >> yes, so, we have a franchise committee which evaluates different transactions for companies. >> we're running out of time have you found any you don't want to do business with >> we restricted some business >> okay. mr. hanley, you're the only one left here. >> we serve investors so -- >> i understand that any you refuse to do business
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with because political groups don't like them? >> no. >> okay, thank you thank you, madam chair, my time has expired. >> the gentleman from new york, mr. meeks, who is also the chair for the subcommittee on consumer protection and financial institutions, is recognized for five minutes >> thank you, madam chair. and let me just also just emphasize another reason why we're here is lack of trust that the american people, the average american people are having now in our financial institutions. we have got to fix that trust. and one of the reasons why we have that lack of trust is what miss malone write said when you talked about overdraft checking. people feel like they're getting ripped off with overdraft checking so that's why i urge you to make sure that, you know, your policies change because that then gives the american public an idea that they're getting a fair deal. the other reason why we're here is, and i know you stated in your testimony that most of you
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have recovered fully but when i look at individuals in my district, who lost their homes, they have not recovered fully. they are still suffering, many who have owned homes and now permanent renters and they're in financial decline. and prevented them from allowing their children to go to school, like my parents, who bought their home and was able to utilize that investment so that i could get educated that is part of what the problem is here. and so the foreclosure is tremendous so i'll ask mr. moynihan, i guess, bank of america had a lot. you and your company looking at any alternatives to foreclosure that can keep a borrower in their home even in the face of financial shock, there is something that the american
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people want something that is given to them, so have you looked at any alternatives that we can do to keep someone and particularly ifthey are a responsible borrower in their home >> yes, we work with borrowers who are having difficulty to foreclosure as we have said consistently even in cleaning up the country wide situation is the last resort for the borrower and last resort for the lender and investor and the security. we do everything we can to do modifications in all different types and have done many, many of them. for the portfolio, because of all of the work we did, we just don't have as much delinquency as we had at that point, but we spent a lot of time working with those borrowers. we talk to them face to face after the start of the team taking over. 50,000 teammates to work on them we have done -- >> because i've had tremendous
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problems in having certain mortgages modified or refinanced and a lot of them, that's why i ask you the question, mr. moynihan, with bank of america, and so it is a continuing basis, these folks have never recovered. let me move quickly, running out of time, let me ask mr. gorman of morgan stanley, you mentioned in your testimony, you were talking about diversity. and, you know, i want more than just a comment so i want to know exactly what is done to accomplish your diversity goals and that question is not only diversity goals within the firm, but with vendors, external managers, please be specific to what the goals are and please define what success is and how accountability is measured and tracked. >> congressman, diversity and
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belonging and i use that word explicitly rather than inclusion is critical to our institution the sense of inclusion is somebody chose to include you. sense of belonging as it is your place. you belong there, whatever your gender, whatever your color, whatever your preference, whatever your difference from the majority that you belong that is -- >> that's what i was asking for specificity. access to your platform, for example, from minority firms, i want to know specifically what you're doing, what your goals are, and how you attempt to accomplish those goals >> congressman, we have a number of initiatives working with diverse and minority owned businesses, but with our minority owned vendoring management program, working with different asset managers that are run by and owned by minorities and women we have employee programs to
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bring women back to work. >> and when you use -- i'm almost out of time, the word minority, do you break it down so we know whether you're talking about women, whether you're talking about african-americans, whether you're talking about lgbtq, do you break it down in that? >> absolutely. >> i'm out of time let me ask you, i would like a detailed report on what it is and how you market and who you're doing business with so i will know. i would ask -- >> thank you very much thank you very much. time is up the gentleman from missouri, mr. luetkemeyer is recognized for five minutes >> thank you, madam chair. gentlemen, the fed is proposing something called enhanced supplementary leverage ratio and there are those that contend that the eslr proposal would lower capital levels at your banks by $121 billion. three questions. is that figure accurate? does it take into account capital to whole income level? and how much capital would leave
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the organization if the proposed modification is made who would like to take that one? anybody? nobody >> i'm fine to start the figure is not accurate because there are other capital restrictions under which we with operate. we estimate it would probably reduce the capital we would have to hold by less than 5%. >> okay. mr. corbat >> in the case of citi, it is not accurate by the federal reserve's own calculation, there is 23 or 24 different times of -- types of capital being calculated and for our institution it is in the the binding constraint, stress testing or ccar capital is it is not going to be a reduction to our capital >> i was going to repeat what you said, doesn't take into account holding capital, it doesn't reduce our binding constraint for capital.
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>> perfect, thank you. mr. dimon, as you know, i've been raising alarms with regards to cecil i believe it can have a really detrimental effect on our economy. i heard from industries and banks in particular, insurance companies, credit card companies, the housing industry, they will suffer because of ill advised accounting standard that it is. do you have any concerns about cecil and how would you believe it would affect the economy as a whole and financial institutions >> it is the life of the loan up front. for jpmorgan, i don't have concerns the number would be like 6 to $8 billion depending on the environment we're in i do think we should look at what it will do to smaller banks. i think it will put them in a position that when a crisis hits, they will have to stop lending because putting up those reserves would be too much at precisely the wrong time i think it has become an issue for you all to reconsider. >> one of the concerns i have is
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i don't think they have looked at and studied the effects of this and the cyclicality of this, they didn't look at market to market i think the same thing could happen with cecil. do you agree with that >> i think cecil will constrain banks at precisely the wrong time, yes. >> okay. do you see an effect on the gses and freddie and fannie >> i have not. >> very good question. i've just not studied it. >> very good anybody else have the opinion? no novemb moving on, i have a lot of financial services companies that are very concerned about the cost of compliance, especially smaller banks all of you are big enough, you can absorb the cost, but the problem was at some point you have to pass this all on the bank secrecy act is something -- i think a couple of you mentioned, it is very difficult to pass on can you give me a cost of what it takes to comply with the bank
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secrecy act with regard to sars, how many do you send a month >> for citi, we have between 13 and 14,000 people that spend full time working on bsa and we spend in excess of $1 billion a year to be compliant >> we filed 200,000 a year with the federal government. >> it is much smaller issue for our company given the nature of the business hundreds of millions. >> mr. moynihan? >> it is a little hard to isolate, because it is a part of everybody's job. there are hundreds of thousands of sars filing and the question that we have raised and we talked to is there value in those and are they actionable and provide value. the customer isn't how much to spend, it is whether giving the value that it should.
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>> funding the move there. >> we were not involving with funding. >> do you know what kind of impact it will have on the city to not have that business locate there? >> i don't know the specific numbers? >> understand it was 25,000 jobs initially. i'm sure there is more jobs as well is that what you heard >> that's what i read, correct. >> okay. thank you very much. i yield back >> thank you very much the chair wishes to inform members that votes are currently pending on the floor we will briefly recess for votes and resume the hearing immediately after the committee. committee stands in recess >> with that, you've been listening to ceos from the nation's largest banks, testifying on capitol hill today
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before the house financial services committee we're going to get back to that hearing as soon as it picks back up in the meantime, i'm carl quintanilla with david faber at the new york stock exchange. sara eisen is with us from washington we take stock of what we heard so far been a bit fiery not so much discussion about capital levels and systemic risk it has been about overdraft fees, financing of guns, lines of business they prefer that were not in, that kind of thing. >> each member seemingly focused on their own particular concerns the only headlines i have are that at morgan stanley, they're spending on cyberdefense went from $50 million to $400 million over a number of years james gorman saying he sees it as the single most important issue facing financial institutions, i think. and that david solomon said goldman at least he held out the possibility it could get into the business of offering mortgages. if you ask me sort of for any news highlights, those are the two of them, jamie dimon's one
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word answer to asked if you would consider reforming tax corporate taxes and he said no >> no. and that was it. >> that was it. >> sara eisen, does it look any different to you down there? >> what i thought was interesting is how much space there is between the financial crisis and when the ceos weren't there, only jamie dimon. the predecessors were there, having to answer for bad behavior a lot of democrats trying to go after the ceos from diversity to maxine waters, the congresswoman, trying to bring up student loans, a business that the government has taken over, so that really fell flat a lot of issues that they were trying to go after really are not front and center issues where the public, you know, has these judgments against the big banks. i will say one issue that did resonate was congresswoman velazquez brought up the pay gap between ceos and employees and directed it to mike corbat
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saying the ratio there was 486 to 1 in terms of what he gets paid versus the medium wage at his firm and i thought, you any, she asked him does that seem fair and he sort of responded that it is decided by the board and that employees should aspire to try to get promoted to try to make that and not sure that's the best answer. that was the one point they hit them in terms of the criticism from the lawmakers but otherwise, not much in terms of bank regulation as you said, carl, and i think it shows how much distance there is between then and now, financial crisis to today >> yeah, the answer on that was pretty good. i would be hopeful there is opportunity to continue to advance within the firm. and very few questions about macro, what they're seeing in terms of risks, demand for credit at large. especially internationally >> very little you had a line of questioning at
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the end there, in terms of just some of the voluminous -- the bank requirements in terms of filings and things of that nature and whether that is an efficient use of capital and time and employee time and then some lines of questioning that frankly are hard to figure out, the gentleman is asking about guns and assault weapons and a number of the banks, interesting, i hadn't fiollowed this as closel as i thought and that weird question at the end about the amazon hq from the representative from missouri not sure -- not sure why he's interested but jamie dimon and mike corbat didn't have anything to say about it. >> as we're talking lloyd blankfein tweeted, an article from the new york post about this very hearing and says, boy, i really miss my old job >> lloyd does like his ability to unrelated tweeting. get something feedback
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but i want to go back to the top of that hearing, guys. seven ceos of the nation's biggest banks brought together again for the first time in a decade pretty amazing sight to see them there. in her opening remarks, chair maxine waters listed the amount of fines the banks have paid in the last decade, in the way in which it had been dwarfed by the profits they had made. when it came to her specific questioning, the topic of whether the banks are too big to manage came up and she asked if they cut business lines and if that made it easier for the banks then to be managed. >> mr. dimon, what about you have you eliminated any business lines? >> every year we look at all of the hobbies and small businesses and things that cause problems and close them down. so the answer is yes. >> how many business lines have you eliminated >> if i remember correctly, 17. >> it made management better >> sure. >> what about you, mr. gorman? >> we have downsized a number of
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different businesses >> has it made management better >> it makes it organized. >> thank you mr. moynihan, have you downsized any businessli lines and stuck your core business >> yes, we have. >> has it made management easier and better >> more focused, yes >> questions followed on topics like student loans, loans to small businesses, also whether or not they were taking too much risk some of the republicans like chair ranking member mchenry asked about systemic risk including on brexit. also that heated exchange you mensed on mike corbat's pay. also time in there for protest that focused on loan sharks. that protester was removed we're in a brief recess now for votes to take place. guys >> all right thank you very much for that joining us this morning is bill cohen, vanity fair special correspondent and cnbc contributor, written extensively about the financial crisis in
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'08, banking in general. welcome back. >> good to be here. >> i think a lot of viewers want this hearing to be constructive and learn some things. what needs to happen to make that happen? >> carl, i think, you know, i'm struck by how difficult the format is. you are asked a question and then have a split second to answer no time for elaboration. everybody is worried about the clock. and so it seems to me frankly that this is more a forum to score political points unfortunately that's the way these hearings tend to run, which is a little distressing. if you want to get real information and real knowledge about how the banking system works, and what has changed in the last ten years, and i don't think the forum allows for that. so frankly i think it will be difficult for real information to be conveyed here today. >> what would you like to ask if you were on the committee? >> are you kidding me? okay where do we begin? >> one or two? >> okay. well, i mean, frankly, you know, one of my pet peeves has been the fact that the compensation
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system on wall street has not changed from before the financial crisis to now. in other words, people have big incentives on wall street to take big risks with other people's money because of the bonus culture as opposed to the partnership culture that used to exist. it would be nice to say what are you nice to say what are you doing about your compensation system to reduce the risk that you're putting on the american people if things go wrong. i would also like to know what their view is of the ongoing miss pricing of risk because of the fed keeping interest rates low for so long and, frankly, the fed was beginning to move in the right direction late last year but now we're getting into this job owning period where the white house is trying to job own interest rates back down again and that leads to mispricing of risk, explosion of collateralized loan obligations, people what i called call the yield hunger games driving for yield, wanting yield and taking
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livings out of control for what they should be taking. those are the things i would like to know about, yes. diversity is important, more women, minorities, people of ethnicity and color in the workforce, more women at the top would be great those things don't seem to be getting asked really >> i also thought, bill, sara in d.c., there was basic misunderstanding from lawmakers about some of the rules and regulations that govern these banks. for instance, they were asked about student loans, a business they are no longer in, asked about russia, and mike corbat of citi said we can't talk about that because they're doing an internal look, prohibited to speak about it because of u.s. federal law. my question is how powerful this committee is of the house financial services committee given some of these basic not following of the issues and then the regulations that currently these banks abide by. >> sara, you're right.
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david's point about the amazon hq question, i think a lot of congress people, unfortunately, do not have basic understanding about how the banking system works, even though they're on the house financial services committee. we saw that, you know, eight years, nine years ago when carl levin led the subcommittee on investigations, the hearing all day about goldman sachs. talking past each other, a failure to understand how the banking system works, which is why i wrote "how wall street matters" to try to understand, have people understand the way wall street really works you know, for some reason it just doesn't get through and you have silly questions, you have lost opportunities, and it seems like people are just trying to score political points. >> yeah. i'll never forget when geithner was asked how, you know, how he could have worked at goldman sachs and be the treasury secretary. of course he never -- remember that one, apparently never worked at goldman sachs. >> never worked at goldman
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sachs, no. >> you know, specific to this idea of comp and risk, with the answer some of them be if it were asked, we have the volcker rule, moved out of markets and those markets may have suffered from a lack of liquidity in areas where we used to be able to trade significantly >> yeah. david, mine first of all, i think the volcker rule ended up being ineffective where banks were allowed to dodge around it. risk has moved out of the banking system because as you said, they can't make the kinds of markets in trading and bonds, especially that they used to make, and that's probably, you know, a good thing that probably makes these big banks safer. that doesn't mean that there isn't still plenty of risk around the rest of the financial system in nonbank banks and other financial institution, hedge funds, people who are making these markets now there's -- the risk doesn't go away it just gets move out of the central nervous system which probably is a good thing,
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probably happened, definitely happened by design and so these banks that you're seeing here, don't forget only one of these guys was here ten years ago, jamie dimon, so the banks as a whole are much safer probably, but there's still plenty of risk around nobody is even talking about. that's what i worry about. >> you have to imagine, bill, that i mean these ceos have been preparing for this hearing likely for weeks, that if that question does come up later on in the session they will have answers, don't you think >> well, they never like to talk about compensation and i think when it comes to risk, yes, i mean if david soloman were asked about risk or jamen dimon were asked about risks they would have good answers. whether they would broaden it and talk about the risk in the nonbank financial sector where a lot of risk is moved to i don't know what they would say about that these risks are out there, they can happen at any time and they can be quite devastate and lead
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to a lack of confidence. when you've had interest rates held so long so long and a about to go into a period where they're being held low again, risk gets miss priced and people make bad decisions and when things go wrong, company goss bankrupt or default that ripples through the financial system hopefully won't happen at the nervous system but that done mean it doesn't happen at the veins and arteries and ventricles out there in the larger world that can very much affect confidence. >> yeah. well as we all know, of course, the next crisis may not necessarily be what the last crisis was sara, i was interested when james gorman, i mentioned this sort of spoke up at least in his view as cyber being perhaps the biggest single threat to the financial system and detailed the increase, i think an eight-fold increase in spending at morgan stanley in terms of defending themselves against those threats. >> yes jamie dimon confirmed that most of the big bank ceos will stay
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in washington after this hearing and have discussions with agencies and regulators to talk about cyber security i do know that they are actually set to meet with the treasury secretary steve mnuchin later today. he's at the imf world bank right now. we will talk to him later. he has a meeting with some of the bank ceos and the topic of that meeting is cyber security how to protect the u.s. banking system, the american public. i also thought it was interesting they talked about how they share information on this front, not just between each other amongst each other but foreign governments and banki banking institutions and there needs to be more coordination when it comes to cyber security. one other point we haven't mentioned i wanted to throw into the mix, jamie dimon defending tax reform he made an argument that tax reform makes firms like his, american companies and banks in particular, more competitive against other foreign companies. that ultimately that helps the
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american people because it gives them ability to raise wages and to contribute more economically. i just wonder if that's going to be a position that these bankers and that company executives are going to have to take against this democratic congress >> yeah. he did say, america does not have a divine right to greatness. bill, stay with us we're going to continue to monitor the hearing on capitol hill we'll get you back to the bank ceos as soon as that resumes dow is down 24 don't go away. jamie dimon,
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. good wednesday morning welcome to "squawk alley." i'm carl quintanilla busy morning as you can tell we continue to monitor the proceedings on capitol hill where the major u.s. bank ceos have been taking questions from the house financial services committee. that hearing is currently in recess and we expect it to continue in a few moments. wilfred frost is in washington and has more on what we've heard so far wilf, good morning, again. >> good morning, carl. so far it's been less about bank
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