tv Global Bank CE Os Testify Before House Financial Services Committee- Part 1 CSPAN April 10, 2019 10:34pm-4:14am EDT
and she hung up. >> this week on q&a. usa today washington bureau chief susan page on her biography of berg under barbara bush a matriarch. >> at the very beginning she said you will never see my diaries. her diaries are kept at the bush library but they're not available for public view. until five years after her death. i understood that and i thought she was unlikely to let me see her diaries. at the end of the fifth interview, she said, and you can see my diaries. and that was an incredible gift. >> sunday night at eight eastern on cspan q&a. >> chief executive from the nation's largest banks were on capitol hill wednesday to testify about banking regulations a decade after the 2008 financial crisis.
we were asked about lending practices, think profit in the 2017 republican tax cut bill. this hearing is chaired by california representative maxine waters. >> the committee will come to order. without objection the chair has authorized to declare a recess of the committee at any time. this hearing is entitled holding megabanks accountable, a review of global systemically important banks ten years after the financial crisis. i now recognize myself for four minutes to give an opening statement. but before i do, i would like to
acknowledge that bruce marks in the neighborhood a cystic corporation members are here in the audience today. you are welcome. today this committee is for hearing on the glue u.s. global systemically important banks. the force today is witnesses we have the chief executive from bank of america, bank of new york mellon, citigroup, goldman sachs, j.p. morgan chase, morgan stanley, and state street. at a hearing on march 12 we had wells fargo then ceo before the committee to testify. before i begin let me urge our witnesses to speak for themselves, i understand that there is some attempt to get mrs reports to speak for everybody. we know that he is very smart, we know he has been around for a long time but this is not just
to show today. the purpose of this hearing, is to review the extremities of this megabanks and examine how they are operated today. ten years ago, the ceo appeared before the very committee to discuss the financial crisis and the massive bailout taxpayers provided. a decade later, what have they learned, are they helping their customers, and working to benefit the communities they serve? or the practices of the things still causing harm? the u.s. g6 is a group has paid at least $163 million in fines. since the financial crisis a decade ago including consumer abuses and other violations of the law. over the course of the last ten years bank of america has paid 76.1 billion in fines, j.p.
morgan chase has paid 43.7 billion in fines, citigroup has paid 19 billion in fines, wells fargo has paid 11.8 billion in fines, goldman sachs has paid 7.7 billion in fines, morgan stanley has paid 5.4 billion in fines. but it appears that they have treated those fines of the cost of doing business. all of the megabanks represented on the panel continue to rake in massive profits. since the crisis the megabanks have collectively made over $780 billion in profits are nearly five times the amount they paid in fines. despite all of the compliance failures, under their watch no one has made up better than the ceos. one made as much as 30 million a
year, another 486 times the amount of medium employee bank and is paid. you always be profitable to the banks to can swindle consumers, investors and small businesses that no one is going to hold them accountable. as policymakers we must evaluate what it will take to rein in chronic lawbreaking of the visit at your biggest banks. but we should not do is to reward them for this behavior. unfortunately, that's precisely what trump and his allies in congress did with the passage of the tax scan. while an estimated 4.6 million hard-working americans are seeing their refunds reduced dramatically and another 4.6 million find themselves now owing money to the irs when they file their 2018 taxes, the
largest banks have seen attacks when full of $14 billion. in addition, trump's regulators are deregulating the megabanks by reducing bank capital standards, using test stress requirements. these actions, the expense of the financial stability while leaving hard-working americans to shoulder the tax burden. i am concerned that several of these institutions are simply too big to manage their own operations. too big to serve our communities. two big to care about the harm they have caused. the trainer recognizes the breaking member of the committee, the gentleman from north carolina, mr. mchenry for four minutes about opening statement. >> this is a hearing in search of a headline.
just weeks ago we had the ceo of wells fargo, then ceo of wells fargo on the committee of the banks that are on abusive customers. everyone at the regulators had find them in the last two years and other organization has been for two chief executives in just over two years time. i supported that hearing. it had legislative intent and it was important. perhaps, we are here based on your size. my democrat friends will know your size in some ways is the products of the legislator. dodd frank imposed a massive new regulatory regime. the last document i read put the new number of regulations around 400. so certainly growing your compliance department. size of some bank survives, even thrive. somethings cannot bear the cost so they consolidated. others close the door. in fact, we have over 2000 banks that are not here since
precrisis. at the time, that did not seem to be a big concern for some of my friends on the other side of the aisle. perhaps we are here today to talk about the u.s. banking sector. i can tell you this, the economy has grown. as we know, bank profitability and big revenue tends to track gdp growth. that is been the case. and so, they are up to. banks hold more capital than precrisis. that is positive. the labor market is strong, that too is positive. the u.s. added, 200,000 jobs in march in the new york times recognized a return to solid growth. so why are we here? i fear my colleagues on the other side of the aisle are here to attack our economic system. attack the nature of our market. i fear my friends want to dictate social and environmental policy through government mandates on banks.
that is not the right approach. earlier this year i sent a letter to chairwoman waters on critical issues that could pose to stomach risks to our economy and the health of our financial markets and thereby the health of american families and communities. one of the issues i included in the letter is brexit. that is in headlights today. that shares some of the headlines that you all, you seven or sharing. today, the prime minister theresa may is attending the eu summit to present her past forward three years ago. a more productive use of her time might be to question our banking regulators on whether or not there prepared for hard brexit on friday. approximately $450 trillion future throw underflow through the united kingdom.
what impact on derivatives and users here in the united states, what facts on the global banking system, we should be using this hearing to work together to ensure the proper preparation and ensure that those things are being done for our economy, our institutions and our consumers. that is the bigger issue here. brexit is not the only issue, chinese debt, the sewing nature of the global economy is a significant issue for the american people. and poor financial institution. we should be focused on that today. instead we have seven of you with three different business models here before is because your big. so, i don't think the majority called the hearing to talk about the systemic risk issues. i think that's a failure. now instead of focusing on the real issues, some of my colleagues will use the time for the law they enacted nine years ago. the use a lot to talk about how big you are. even insisted upon your growth.
what i would say to the witnesses, my focus is going to be on systemic risk. to make sure we are focused upon those key issues that matter in the short-term and long-term. thank you. >> the trainer recognizes the subcommittee chair mr. green for one minute. >> thank you, madam chair. we are here today to make headway not headlines. we are here today to protect the american economy and we are here to do the hard work that my friends on the other side declined to do in 2008 when we took a hard vote to save the american economy. we will continue to do this. we were here to see long-term capital go under. lisa lehman brothers become the largest bankruptcy in history. we saw bear stearns sold. they are combined asset of over 11 training dollars. yes there said to be too big to
fail which does beg the question, are they the right size to regulate or the right size to downsize. they indeed have the right to do business but we have the duty, the duty to provide oversight. both can be done in the american people will benefit. i yield back. >> the trainer recognizes mr. burns for one minute. >> this is a unique opportunity for each of you. it's an opportunity for you to identify what you consider the most significant risks to the financial system and how your firms are proactively mitigating those risks. there are many threats to the financial system i do not believe your size alone is one of them. chairman powell recently stated that the financial system is so much better capitalized and so much more liquidity has a better sense of risk and a better ability to manage the risk. i hope to hear how you are responding to the risks and actually identified including
cybersecurity, brexit and the need for continued efforts to evaluate regulatory overlap. finally i hope to hear about how your firms are de- risking or choke off banking services to law-abiding businesses including businesses that are important sources of jobs in my home state of kentucky including coal mining, horseracing, industrial hemp and borrow manufacturing. just because these activities may not be politically correct or fashionable. i yield back. >> i want to welcome today's panel. mr. michael l car back. cheap executive officer of citigroup and is been with them since 1983 he has served as ceo since 2012. mr. james dimon, chairman and chief executive officer of j.p. morgan. he has been a morgan chase since 2004. he has served in his current capacity since 2006. james p gorman, chamberlain and chief executive officer of
morgan stanley has been a morgan stanley since 2006 and is served in his current capacity since 2012. mr. brian mott hot, chairman and chief executive of bank of america. his been at bank of america since 2004 and has served as ceo since 2010 and is chairman since 2014. mr. ronald po hanley. president and chief executive officer of state street corporation brisbane estate street since 2015 and becoming president in 2017 and ceo in january 2019. charles w's trough, chairman and chief executive officer of bank of new york mellon he was appointed ceo in 2017 and chairman in 2018. david and solomon, chairman and
chief executive officer of goldman sachs is that goldman sachs since 1999 and becoming ceo in october 2018 and chairman in 2019. without objection your written statement will be made part of the record. before we begin, i would like to swear the witnesses in. with the witnesses please stand in each raise your right hand. do you solemnly swear or affirm that the testimony you will get before this committee and the matters 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, but the records show that the witnesses answered in the affirmative. please be seated. each of you will have five minutes to summarize your
testimony. you have one minute remaining a yellow light will appear. at that time i would ask you to wrap up your testimony so we can be respectful of the witnesses and the committee member side. mr. corbett you are now recognized for five minutes to present your oral testimony. >> chairwoman waters, members of the committee, i would like to thank you for this opportunity today to talk about city transformation since the financial crisis. as it was for many americans in many institutions the crisis was assuring experience for our firm. we greatly appreciated the assistance from the u.s. taxpayers and were fortunate to be able to repay the debts with significant return for a taxpayer. that experience has made a mission for us to never be in that position again. since a crisis, city has become
smaller, safer and stronger institution. we have transformed our institution not just in terms of capital and balance sheet and earnings but also in terms of control. risk audit and compliance. we also renewed our commitment to the communities that we serve. we have gone back to her roots today as a bank and we have two primary lines of business. our consumer bank and our institutional clients group. we are not a financial supermarket and not an insurance company and not a hedge fund. as the most global banks here today, citi is rightly scaled to service clients and many of them u.s. multinational corporations wherever they do business. whether it's ford, procter & gamble, colgate or the united states government, our global network provides 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. while we take pride in our work with some of americans
best-known companies we also invest in small business and last year we lent them $12 billion. to some extent, our restructuring was the easy part. as we have learned, rebuilding trust is much harder than rebuilding your balance sheet. that is why we have invested in our culture and made ethics a foundation of our firm. in fact, in 2014 our board of directors became the first to establish an ethics of culture committee and while we have is issues to overcome the crisis we have continued to make steady progress in strengthening our culture. we have also focused on building a truly diverse and inclusive culture at citi. we have made representation goals public and we have been very transparent about our gender pay gap. one of our strengths, putting our balance sheet to work to improve the communities that we serve across the country in tangible ways. last year, we catalyze more than
$26 billion in infrastructure investment including housing, community development projects, we often do this when smaller financial firms don't have the resources to tackle the difficult problems. this includes financing, the new mlk hospital in south-central los angeles. in helping the citi of detroit rebuild the street lighting grid. we are especially proud of her role as a country's leading affordable housing lender a title that we have held for nine straight years. in 2018 alone, we provided $6 billion to finance more than 36000 affordable housing units. we financed the renovation of the new england home for veterans in boston. we'll help restore the ocean day apartments in new york a public housing complex which was severely damaged by super storm sandy. we also ate aware of the challenges that approximately 25% of americans who are on
banks or under banked face and we have been a leader in financial inclusion. in 2014, citibank launched the access account and account which has low or avoidable monthly charges, no overdraft fees, and one of our fastest growing products. we now provide the 440,000 customers of 25 minority-owned banks, community banks and credit unions acros cost free as to atms. thank you again for the opportunity to speak with the committee about the progress we have made as a company. i look forward to your questions. >> thank you mr. corbett. esther diamond you are now recognized for five minutes to present your oral testimony. >> chairwoman waters in the distant members of the committee, we work every day to the trust in the communities we serve. it is essential to how we run a
healthy and vibrant company. we never lose sight of lessons learned. the crisis of keys concerns. in the 2008 financial crisis the u.s. government took extraordinary and president actions to stabilize the system. we all gratitude to the policymakers who stepped in on the americans. we are proud what we did to help. but markets in complete turmoil were able to lend to california, new jersey and illinois. we raise $1.3 trillion a consistent fair rates in many cases far below what the market would've allowed. we provide more than a hundred billion dollars to local governments, missing polities, schools, hospitals and not for profits for 2009. at the request of the united states government, in an effort to stabilize the system with bought the collapsed and later purchased distressed washington mutual. j.p. morgan was there for clients and customers through good times and bad and we did not cut and run.
i want to prosper a moment to take the 250,000 employees of j.p. morgan chase for the efforts during these difficult circumstances. since the crisis reforms have made banks much safer in centers in three important areas, capital, liquidity and recovery. large banks more than doubled the highest quality capital to protect against losses. under the fed's most extreme stress test scenarios the combined losses of all that the riverbanks only 6% of total capital. large banks have tripled the liquid access of unexpected cash flows and resolution planning has created credible framework for undermining large banks. it simply would not happen again. legislators and regulatory deserve credit for putting the basic rules in place. we all now must look forward to emerging threats of the stability of our system. unregulated mortgage lending is growing rapidly needs to be monitored. we need to spend more time on critical issues like aml, psa,
cyber, privacy and global competitiveness. i j.p. morgan we investor businesses, people in the communities in which we operate. the united states we raised wages and benefits for to 16 and a half to $18 an hour. in 2016, we introduced events a black leaders and expanded diversity and retention in the black community in the last few years our company has increased the number of senior black to 40 to 50%. at the local level, more than 30 cities, we set down with diverse groups who identify ways to
meaningfully address issues skills investment and how to collectively help the people of communities. j.p. morgan chase is a hundred $50 million investment in detroit and is generated a meeting between myself and leader of the labor movement. this is developed an investment model now known as invented cities to help more people move up the economic ladder in is working. america is still the most prosperous nation in the world. we are blessed with natural gifts of land and all the food, water and energy we need. with the most dynamic company in the world with viruses big and small, universities and unparalleled innovation. however, there are too many people not sharing the prosperity. our education system to drive inequality and lack of opportunity in school graduates often less than 60% graduate. our healthcare costs now represent almost 20% of gdp. the u.s. no longer reigns the top 20 of infrastructures top spending in the world. there are many other issues that must be addressed in government business can work together to solve these problems and if we don't our moral economic and military dominance will cease to exist.
i be deep in a blind faith in the united states of america and extraordinary resiliency and capabilities we do not have a divine rates of success. the oversight of this organist committee is a local responsibility that will respond to any questions you have. thank you. >> thank you mr. diamond, mr. gorman your recognize for five minutes. present your oral testimony. >> thank you, chairwoman waters, and members of the committee. thank you for having me here today. this committee has a important response ability to our nation, to ensure we have a regulatory framework of the financial system and the focus on maintaining financial institutions. i share your commitment to the school. the financial crisis in 2008 was devastating to our country. unquestionably the most significant event in morgan stanley's 84 year history. as a result, management and board of directors spent the better part of the past decade working hard to ensure that our
firm never experiences what we went through them. we also acknowledge that had it not been for the support of this congress in the u.s. taxpayers, we as a firm may not have survived. ten years ago, we had an aggressive plan to remodel morgan stanley. to ensure stability in the harshest of times. . . .
and more resilient than we would have before the financial crisis. our capital has increased every year rising from 34 in 2006 to 72 billion last year and. we've increased our liquidity leslists and 50 billion to approximately 250 billion while at the same time shrinking the balance sheet and leverage. however the strategy is just the beginning employees acting with the right values and managing risk appropriately will ultimately drive the ongoing strength. our current focus is to make sure all 60,000 employees have the right values and a sense of responsibility and professionalism which is what ultimately drives the project. our employees are committed to their mission. we further believe a diverse place in the leadership pipeline critical to delivering the best
of the best of the clients we recognize we have significant work to do to achieve the goal and it requires efforts at every level of the firm to deliver results over the long term. the numerous initiatives aimed at providing and sees opportunities for leadership roles and empowering them to achieve visibility and recognition that they deserve. our employees have a strong commitment to supporting the needs of clients while at the same time giving back to the communities where they live and work. as an example we separated the children's hospital since 1973 and they regularly give up their time and resources to volunteer organizations across the country and the globe. at morgan stanley we serve those in our communities and advise individual families and help finance institutions, governments, local and global corporations and we raise
capital and manage financial positions so they remained stable and can grow and provide employment opportunities. this focus ensures sound financial footing and living a culture committed to the right values is at the heart of what morgan stanley us today. thank you chairwoman, ranking member mchenry and members of the committee. i look forward to your questions.
>> through dodd frank and its regulations in 2010 we put together a team committed to change the company and had three years of simultaneous focusing first we had to clear up the mess from the federal countrywide and second we transformed and simplified the company and the change is aligned with dodd frank and we created a straightforward model to serve the focus on stability transparency and fairness. to clean up countrywide we had 2 million customers modifications and other alternative for closures entails the settled many lawsuits that was done by 2015. to simplify the company we divested too close to 80 to clo0 operating units and other activities and we also shrank to 20% smaller than it was before
the crisis in the 100 billion in capital, 300 billion liquidity, liquidity we also increased the club went into this an outstanding 35% more for the small businesses in the middle market companies he also recommitted to our purpose to serve the clients to make their financial lives better we do that through responsible growth. first we have to grow and then we'd be customer focused. the focus is what two all-time high customer service scores in the company along the way we have thadto make some decisionst would help her example we ended overdraft at the point-of-sale for the transactions in 2010. we also focused on small businesses for example in 2018 alone we originated over $8 billion in small-business loans. the third tenet of responsibility is to grow within our risk perimeters and that requires a strong board of directors since it's a clear risk appetite. couple that with a function of size and scale and it takes a culture of clay mates to earn
and live up to the purpose to do with the righgive it the right . so today we have record earnings and produced those for lower risk the market risk is 30% over and credit risk is all-time lows. finally it has to be sustainable but his three elements we have to drive operational excellence with other committees an our coe best place to work for the team. operational excellence allows us to invest with its 3 billion technology every year or increasing the range to cover 90% of the population of the next three years by adding 350 financial centers in 5,000 jobs. second we share success with committees through environmental and social priority as examples include the $300 billion environmental business initiative for the clean renewable energy future and the charity that exceeds 250 million a year in our employees volunteer hours in their communities and the 4.7 last year in the community development funding for the affordable housing and does the government bring a range of skills and backgrounds we also
have to be a great place to work and what does that mean in 2017 the race to the starting wage to $15 an hour and it's gone up since integral rise to $20 an hour the next two years. in the tax reforthe tax reform e awarded not one but two special bonuses to the teammates for the top 5%. 190,000 teammates received over 1 billion in additional compensation. last year we paid more than 27,000 teammates including 4,000 from colleges. we're in a plan to hire 10,000 we are well ahead of the pace. more than 40% of the managers are women and people of color make up 45% of the workforce and 37% of managers we also provide cost-effective health benefit her example reduced by half to help benefit eight years ago for
the lower compensated teammates if not increase the dollar since that time. with the scale comes responsibility for safety, soundness and responsibility that we be fair and safe to serve clients. the great place to work for our teammates and responsibility we serve the communities. we call that responsible growth and we are committed to that. [applause] please refrain from making any comments in the committee. [inaudible] the chairwoman is responsible under the rules of the committee to maintain order. members of the audience are reminded that disruption -- please remove this gentle man from my committee.
>> come on, officers. i don't have a lot of time. get him out of here. thank you. mr. o. henry you are now ready last for five minutes to present your testimony. >> chairwoman waters, ranking member mchenry and members of the committee thank you for inviting me to testify today. your work is important to the country. i was honored to be interested to become the ceo january 1 of this year. we've been headquartered in boston massachusetts in 1792 and today has two main lines of business investment servicing
and damaging. our clients are large global institutional investors such as pension funds, mutual funds, banks, sovereign wealth funds and foundations and insurance companies. we operate in 29 countries with over 40,000 employees. 16,000 of them in the united states. last year more than 40% of the revenue came from out side of the united states. our purpose is to create better outcomes for the investors and the people they serve. unlike many other major banks, we do not serve retail customers directly with traditional commercial retail banking or provide services like mortgages, credit cards or other consumer credit we also do not engage in investment thinking opportunities. still, we never lose sight of the people we are ultimately helping. those saving for retirement, a house or college education researchers are trying to finance the society's biggest challenges or governments looking to build or improve the
country's infrastructure. our servicing business includes keeping track of investment often referred to as back office operations. we play an important role in the overall infrastructure of the financial markets. for example for safekeeping at this be of assets. we also provide the same institutional investors related services such as foreign exchange, brokerage and other agency trading services to carry finance and deposit and short-term investment faciliti facilities. within the investment management business we provide a pension funds and other institutional investors with a full range of investment strategies including index based funds. more than ten years after the financial crisis, i believe the financial system and the united is more resilient. this is largely due to the strength and regulations and greater transparency overall and due to the bold action taken by the congress to stabilize the financial system for which we are very grateful.
in 2011, they were designated as one of the eight u. s. global gl systemically important banks by the financial stability board because of our role in the financial infrastructure that i described earlier. they are subject to the highest levels of supervision regulation and we take that responsibility very seriously. since the crisis, our capital and holdings of high-quality liquid assets have more than doubled and we have been subject to the federal reserve board most stringent stress testing. along with the rest of the industry, i believe that we've learned a number of important lessons from the financial crisis. one of the most important of them is the need to strengthen top-down risk management systems so we have better transparency around enterprise risks. we now have stronger independent control functions and higher-quality risk analytics. the crisis also casts a bright light on the dangers of corporate leadership and that is
one of the reasons the asset management business stepped up to focus on the board quality and diversity to promote their business and investment outcomes. many of you may be aware of the statute we placed near wall street emphasize the importance of diversity on the boards and senior management. the crisis also exemplifies the short-term incentives at the expense of long-term value creation. as investors and has a business, we've been advocating for greater focus on the long-term and that includes asking ourselves into the boards of the companies in which we are long-term investors whether environmental social governments risks have been considered. however we know we need to do more as an industry to regain trust following the crisis. we also note that can only be successful if a larger society in which it operates and we are committed to engaging on those issues that will generate a shared value for all of our stakeholders including shareholders, employees, clients and communities. thank you again for providing me
the opportunity to testify today, and i am pleased to answer any questions from the committee. >> you are now recognized for five minutes to present your testimony. >> chairwoman waters, ranking member mchenry, members of the committee, good morning and thank you for the opportunity to be here today. i appreciate the focus on account of the body. i work hard to create a coach or of accountability and ensure we are the best we can be. i would like to provide a bit of background about the bank and business model speaking to the financial crisis and advancements we've made over the decade. in 2007 the bank merged to create and today we are the largest running bank in america and a leader in the provision of global custody services. we operate more than 35 countries 50,000 employees. we provide investment services and infrastructure support and financial markets that help institutions and individuals succeed in markets all over the world. we are primarily a custody bank
and in that capacity he we perfm the nuts and bolts administrative functions of the financial system we are not engaged in retail banking or do we provide financial products such as credit cards and auto loans. we operate instead of processing company and record keeper pulping market participants around the world. our businesses include providing custody and other financial operational services to the government entities, pensions, municipal and mutual funds, unions, endowments, corporations and other institutional customers. these are simple, straightforward but important services, and we take the responsibilities to our customers and commitment to the financial stability very seriously. our specialized role in the global financial system and our position as a leading financial institution allows our clients and the government to benefit from our unique vantage point.
we work constructively with all stakeholders including regulators and policy makers to provide a transparency and global asset flows and the state of financial markets. looking back at the financial crisis, we understood them and understand now the gravity of this situation the economy faced. though the capital position is strong throughout the crisis we believe the capital investments and other efforts undertaken by congress, the treasury and the federal reserve greatly help stabilize markets and allow us to do more than we otherwise could have to help support and improve the financial markets at that time. we believe the global financial system is stronger today because of a significant regulatory reform that has been implemented since the financial crisis but also believe we should continually re-examine and recalibrate our financial regulations to reflect emerging risks. i can say with confidence that an even more resilient organization today than it was a decade ago. our bank is financially sound
and the work each day to make sure that continues. we've simplified our operations and enhance our compliance ethics processes and if you're constantly investing in our controls and risk systems and we regularly assess and upgrade our cybersecurity infrastructure to meet the challenges posed by new and evolving threats. while we don't have direct contact with individual consumers we are committed to supporting our communities through our work with unions and community partners. we also invest in our employees who are the most important asset and we are proud of our diverse workforce ability to deliver creative insights and solutions that lead to our continued success. we believe deeply diversity at all levels makes us stronger and contributes to our success. likewise we understand the importance of serving in the community and we are proud to be an important part of the history and future of new york and pennsylvania and we are continually making significant.
we believe it is important that those support all members of the community. whether it be our educational and small-business efforts in pittsburgh or financing and supporting the construction and preservation of approximately 5,700 affordable housing units in new york city we recognize we played an important role in the financial systems and we do not take that responsibility lightly. we remain committed to maintaining trust as well as that of the regulators and american public. thank you for the opportunity to testify today. i look forward to answering your questions. >> thank you. mr. solomon, you've are now recognized for five minutes to present your testimony. >> churning waters, and as of te committee i appreciate the opportunity to discuss the changes the industry has put in place since the financial crisis. i appreciate the focus on accountability. as the new chairman and ceo of goldman sachs and on behalf of
third to 36,000 employees and proud to say we celebrated our 150th anniversary. our clients around the world range intention and retirement funds, foundations, large and small businesses, state and local governments, startups and individuals and what remains true today as our employees work everyday to provide th best in class service and to work hard to earn their trust. today the system is substantially safer and more resilient and the institutions hold significantly more capital and they've reduced their leverage and holdings in the liquid assets since the end of 2007, goldman sachs equity has more than doubled. leverage is decreased by more than 60% and liquidity more than tripled. we could withstand very substantial market shocks in the federal reserve stress test. dodd frank made the system safer and we have made important progress to that environment however after ten years of experience it seems appropriate to express its improvements can
be made in consistency and undue cost. in addition to the reforms, we've made a number of important enhancements. we undertook a review of the business standards and practices and extensive review on the history and implemented a number of recommendations from conflict of interest to transparency and disclosure. the changes are part of a much longer much larger commitment by the firm to be more self-aware, open to change, learn the right lessons from experience. we know he will make mistakes but to make the high expectations shareholders and employees, regulators, congress as well as the broader public as it relates to the business strategy since the crisis, goldman sachs entered the consumer finance market in 2,016th we launched over digital consumer platform and the design of markets we spoke with were than 10,000 people across the country to understand their
banking needs. as a result of e we value simpl, transparency, and these are at the core of the consumer products. it's evolving and can help millions of people save and we offer online savings account, certificates of deposits and have a savings account rate of 200% with no monthly fees, no transaction fees, no overdraft fees. he also provided customizable fixed rate personal loans that are used to consolidate higher interest rate debt or as an alternative to credit cards or other debt. one issue to the ability to compete his diversity and to make lasting change on improving the diversity of goldman sachs we are committed to long-term goals that create a representation of the communities across all levels of the firm and we hold managers accountable in advancing these goals. last i believe we've built the highway programs that have been creating opportunities for
thousands of entrepreneurs and small businesses. in the last ten years we've committed more than $2.5 million to initiatives that provide more access to capital, training and broad community support. to the 10,000 small-business initiatives we provide education by partnering with community colleges, business support services and greater access to capital to thousands of small businesses across all 50 states, puerto rico and the district of columbia. i am proud of goldman sachs one of the largest contributors to community colleges in the united states. since 2001 we have committed approximately $7.8 billion to the urban investment group to benefit low to moderate income communities approximately 80% of the urban investment group's investment located in or serving minority communities and last year we announced the launch of a 500 million-dollar initiative to invest in the companies and investment managers which we will expand to improve business is founded, owned or led by people of color.
looking ahead we see tremendous opportunities to invest in capital and expertise for the success and progress including the environment, healthcare, education infrastructure and many other areas. thank you for the privilege of being here today. i'm happy to answer any questions you may have. >> before i begin my questions, i would like to take a moment to recognize a very special guest in the audience reverend jesse jackson founder and president of the rainbow/push coalition who's been involved in fighting for access to capital, small business loans and community development. reverend jackson. [applause] thank you very much. let me begin and i will take five minutes for questioning. much has been reported about how the bank is the pathway for
criminals and allies of mr. putin to move funds out of russia that recent information shows that some of your institutions have also been providing services for the russian individuals or entities that may be engaging in questionable transactions and in particular i'd like to ask bank of america, citibank, j.p. morgan and morgan stanley to answer the following questions. has your bank conducted any review to identify and assess russian related accounts? bank of america. >> chairwoman waters, we obviously comply with all sanctions required by the federal government, so we review that on a constant basis. >> thank you. 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 her findings is that right?
>> not that i'm aware of. >> let me ask next of citibank. >> thank you, chairwoman. we take our responsibility very seriously. >> that has your respective bank conducted any review to identify these related accounts? >> we've conducted thorough investigations and can comment on an ongoing investigation -- >> so you are saying as a result of your investigations you did identify may be some suspicious accounts or transactions? >> so you haven't taken any action as a result of your findings because you can't comment is that right? >> we take it very seriously -- >> okay morgan stanley what about you, ask your bank conducted any review to identify and assess russian related accounts? >> we conduct regular reviews consistent with u.s. sanctions. >> did you identify any
suspicious accounts or transactions? >> not to my knowledge. >> so you haven't taken any action. >> that's right. >> you mentioned that you have downsized somewhat and eliminated some business. have you determined that helped to manage, make management easier in your bank? >> we have downsized considerably. >> how many businesses? >> 70. >> ha >> as they make management easier? >> yes it has. >> have you eliminated any business lines? >> every year we look at things that cause problems and close them down. >> how many business lines have you eliminated? >> 17. >> has it made management better? >> the downsizing number of different businesses. >> has it made management better? have yo to downsized any businey businesses and stuck to your core business?
>> guess wyes we have. >> has it made management easier and better? >> yes, we have. >> has it made management better? >> yes it has. >> i'm not aware of that. >> you're not aware of what is happening in your bank? >> i'm not aware that we've downsized or eliminated businesses. >> so you have not reviewed and you don't know. is this something you think you need to take a look at? >> i have reviewed the businesses we are in and i don't think that we should be eliminating business we're in and to the best of my knowledge we didn't exit since the crisis. >> mr. solomon. >> we eliminated a handful of businesses since the crisis. >> or 444 million americans that own a business in a loan crisis. 1.56 trillion in student loan debt last month the committee received testimony last tier
1 million students default it which is on top of the 1 million borrowers who defaulted the year before. what are you doing to help with student loan debt? who would like to answer first? >> we stopped making student loans in 2007. >> weighted student lending in 2009. >> when the government took over student lending we stopped getting student lending. >> what about small business. you mentioned you are making loans to small businesses. they can't plug-in and you shoved it off to the community development organizations. can say that you've made an important business line lending to small businesses? >> as i said earlier he made $8 billion in loans and we have operating accounts for 9 million small businesses.
>> thank you. my time is up. the gentleman from north carolina is recognized for five minutes. >> does bank of america lend to small businesses? >> we made 8 billion -- >> do you lend to small businesses? >> so let me get back to the systemic risk here to this fundamental question. we see what's happening in china, the pace of the economy, the slowing pace of the eu economy and we see the debate going on between the uk and the eu and their relationship and the potential of a no deal on friday. let's talk about systemic risk and i just want to ask the panel, and i hate to do this but there are seven of you. you can did in the affirmative or a negative however you see fit.
in the event of no deal on friday does that pose a challenge to the international financial system? >> a challenge but he don't see systemic risk. >> you don't see systemic risk, but a challenge. >> we are prepared, but we don't know all of the potential outcomes. >> i would agree with my colleagues i think it is a challenge but certainly not rising to the systemic. >> i agree it is a challenge the industry spent a lot of time preparing for and i also agree it isn't entirely certain what will happen but it is a challenge. >> we spent a great deal of time preparing for it on behalf of our clients and i think it will be a challenge for the world economy. >> i also believe there will be a challenge i think we and our clients are prepared for it but don't believe we understand all of the potential ramifications.
>> i believe ther it will be a challenge as we spend time preparing but it's hard to see the second or third derivative risks that could come out of that. >> your institutions have the greatest exposure of any institution on the panel so let me ask you this question do you have contingency plans on friday? >> since article 15 was prepared, we have prepared with a mindset towards a hard exit. we also have been planning for a hard exit. >> in light of that what is the nature of your plan and? >> we have relocated our banks out of the uk to ireland which is compliant with the banking and he moved broker dealer or a
portion of it from the uk to germany and its licensed and operational and we moved the necessary people front office, medical office to support those. >> has it taken a portion of your time the last three years of planning? it's an important issue for you. >> we have a bank that is headquartered in belgium and we moved a series of the activities from the uk to belgium and we also have built up control functions and moved individuals onto the continent and away from the united kingdom and probably most importantly we worked closely with our clients on moving their transaction to different entities and all of the required paperwork that goes along with it. >> let me segue to china, another issue of systemic risk for the federal reserve latest
disclosure. along those lines, mr. solomon, your institution recently divested or sold off your investment to the commercial bank of china. previously bank of america had investments along the same lines in china i believe prayer to ceo and chairman of your organization. in light of that, mr. solomon is this an eye towards the challenges of the chinese economy or was this about simplifying your business or about systemic risk or the regulation of chinese bank's? >> we had made that investment years ago at the time it was going public in international markets and in partnership with them it was a financial investment and there came a point in time when it wasn't related to the broad issues of the economic relationship
between the u.s. and china. >> thank you for your testimony. this is an important discussion and topic today as well as overall regulation and i won't go back. >> the gentleman from new york ms. maloney also the chair of the subcommittee on investor protection and entrepreneurship and capital markets is recognized for five minutes. >> welcome. after the shooting last year for a gunman killed 17 students and staff with a military style rifle, two of the banks on this panel, citibank and bank of america stepped up to the plate and adopted a formal policies limiting their business with certain gun industry clans and i want to publicly thank them. now mr. diamond, last week you publish your letter to shareholders. in the section on responsible drinking you wrote the paragraph
is up on the screen right now. you said turning down clients with low characters, plot, oftem often the only way to be a responsible bank. actions speak louder than words on guns and from what i can tell, these are not just words to you. let's talk about some of the actions on your banks activiti activities. even after the massacres at sandy hook lost vegas and parkland, j.p. morgan arranged about $273 million of loans for the manufacturers of military style firearms and the same weapons that are being used in mass shooting all over the country. even worse, last year jpmorgan took partial ownership of flemington, the manufacturer of the exact gun 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 client selection is important and even though two of your competitors already adopted these policies so my question is will you live up to your own rhetoric and committed to adopting a formal policy that ensures responsible lending him your thanks business with the gun industry? >> everything we do goes through a review and th they are the sae that make equipment for the military and the united states police force which we hold in the highest regard. there's over 100,000 retailers out there that sell guns in every single one that we do business with we do a thorough
review in spite of the fact 6% a year they are regulated by state and federal government and if we think they are 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 the bank on responsible business like your competitors have with the gun industry. >> we will consider that, yes. >> going onto the next question. in 2009 i passed the credit card act which the consumer financial protection bureau says saved consumers 16 billion a year and play the way, all of you on the panel opposed the legislation even though it hasn't 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. i was looking at the consumer
complaint database and there's over 1,500 complaints about abusive overdraft fees. a surprising number that your customers complained about one of the worst overdraft practices recording transactions so that the largest transactions such as a rent payment is processed first putsch maximizes the number of overdraft fees you can charge a customer. a typical complaint from one of your customers is up on the screen right now. my adobe overdraft protection act would make this practice illegal because you are essentially gouging your most vulnerable clients, the ones that are living paycheck to paycheck. so, let me ask you given that your bank won't end the practice voluntarily, do you think it is time to prohibit these kind of abusive overdraft practices by law and that's what my bill would do and i welcome your
comments mr. diamond and others on overdraft. >> would you accept a wall banning this practice? >> overdraft policy as it stands today was changed in 2009 is that the client has to opt in their given the choice about whether they want to have overdraft features or not. >> what about reordering transactions. >> my time is expired may i ask for a response in writing from the panelists. welcome to all of you. one of the questions i always like to ask is how does this data does this regulation create
jobs in my district in st. louis missouri my constituents want good paying jobs and opportunities for themselves and their children and families. mr. solomon can you discuss how your institution supports access to capital for consumers to buy a home with a start a business or send their kids to college? >> we just started a small consumer business at this point in time. we take deposits and we make small unsecured loans. it's a very small business we are not currently in the business where we make mortgages for consumers that we might at some point in the future. >> how are you helping my constituents get capital to buy a home and business and send
kids to college? >> we provide mortgage loans to about three or 4% of the american population. we do it directly last year $50 billion in mortgage loans but recently we recognized that there were the time for receiver down payment has become under the rules and regulations so they notified them to help people that may not have been advantaged and that goes on the balance sheet good credit quality and we do programs like that and masturbated $4.7 billion not only for the homes to rent and place -- >> how much? >> 4.7 million since the crisis probably 35 or 40 billion. >> you are not just banks that provide credit loans who are also providing hundreds of thousands of good paying
american jobs. can we go down the line and i would ask each of you if you are able to answer how many people do your institutions employ here in the united states of america? we will start at the end with you. >> 67,000. >> over 150,000. >> 180,000. >> 16,000 in the united states. >> 26,000. >> large financial institutions play an important role in the broad thinking ecosystem. anyone who can answer this, can you talk about your relationship with banks and other spices like community banks and regional banks and while i'm sure you've compete with others 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 whether it's raising capital, help them manage their liquidity, providing various forms of financial advice and being there is a participant for the financial institutions of one of the smaller institutions don't have the technology, some of the capability simply because of the scale. >> guess we provide financial services for banks of all shapes and sizes community banks, national banks and every bank sitting at this table as a client of the bank. >> very good point. i also served as a ranking member on diversity and inclusion. mr. moynahan, who drives diversity and inclusion at bank of america? >> i do and the other management
team. >> most people talk about diversity and inclusion as a kind of hr issue. why is it important to you as a ceo into the business? >> we want to have a place that is the best place to work and every teammates to come to us and say no matter who i am when i come in the door -- >> do you have both ar those the built with qualifying people? >> we continue to watch that in every unit in the business review are you making progress and that the goal of having the company reflect the society at large we want to make sure they go from the jobs and that is
what we are striving for. >> thank you very much. my time is expired. >> they awarded more than 24 million in the compensation for 2018 according to the banks 2019 statement the compensation for employees at the city was 49,766 they have the distinction of having the largest between the compensation [inaudible]
>> i cannot hear you. >> i don't think it is fair for me to judge. i would say i completely acknowledge i'm very fortunate i started -- >> i'm just asking if it seems fair to you the ratio the amoune amount of money that you are making compared to the 49,000 others. >> it is displayed by the board. >> i understand he d you do nott your own salary. few people do but we do set a salary for those that work under this site if you are not happy with the ratio there are two ways to correct it. lower your salary or raise the salary of others. let me ask you this.
if you were an employee and saul your partner making 486 for every dollar you may become how would you feel about that situation? >> there's opportunity to advance within the firm. >> that's unbelievable. this is why people that can't understand why they're so much anger out there especially among students and millennial c. graduate student debt in one hand and a diploma in the other. mr. diamond, last week in your annual letter to shareholders, you stated and i close simply put, the social needs are far too many of our students are not being met. you've also noted, and i quote income inequality is getting
worse. however, in the same note to shareholders, you observed congressional republican tax cuts helped raise the bank's profit by $3.7 billion last year alone. in fact it's been estimated by the fdic that now the banks made an additional $28.8 billion in profits last year through a tax cut. one reason so many financially struggling americans view this cut is unfair is that it expired the majority of the tax cuts are made permanent. so i would like to ask a simple yes or no question. giving your acknowledgment of worsening income and vast record profits, with you at a minimum
support the tax cut? >> no. >> mr. diamond, will working families see that the tax cut is set to expire while the companies made permanent and posting a record-setting $2.5 billion in a single year as a result can you see why so many find income inequality comments disingenuous? can you see why that position screams credibility? >> the american government reduces tax rates to make america competitive. we have been sending trillions of dollars in capital. >> reclaiming my time, how can we make america competitive when there'there is a large number og people graduating with no future? >> they pay quite well including
medical, retirement, $37,000 a year starting. competitive business will drive the wages over time. what we do on the individual side i supported expanding the earned income tax credit to help people -- >> the gentle lady yields back. the gentleman from oklahoma is recognized for five minutes. >> thank you madam chair. i would offer an observation as i begin my question. i come from a multi-generation of debt so understand in addition to my responsibilities on the committee, i also serve as a 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 finance committee among other things w they have jurisdiction over a portion of the cybersecurity regulatory
regime and your institutions there is a lot of responsibility but the regulatory structure for cybersecurity is in many ways just as complex. just some of them the white house, omb come fdic, the fed of some of the federal agencies with cybersecurity policies applicable to your institutions and it is nothing but a state-based or international also in place for you to depend on and dealing with your customer base. we can all agree that it is of the utmost importance that i find myself wondering about the regulations. could you elaborate a further on how you comply with these rules
since it is important to your customers and my fellow citizens? >> we spend 600 million a year on cyber and to protect privacy in the system i agree it is probably the biggest risk to tht financial system faces in the world is a global risk and you are correct it makes it very complicated but on a good note most of us are going over and making with agencies to try to get it a little more coordinated a better job detecting the united states of america. >> i would add to that you will find despite all the things you talked about like many things take it upon themselves to drive the implementation so we all spend a lot of money but the important thing is we make
available all of the information through the system so if we find an issue that is something we have driven the industry for the members of regulators we believe it is incumbent upon us to protect ourselves. >> and the impact not just on your operations but even my smallest institutions in oklahoma they stress and strain even more trying to address those issues and as a society as we move away to all of the electronic transactions it is a bit unnerving. anyone else care to touch on this and how you are trying to address this issue? >> i would add to this i do believe that this labor is a clear and present danger and i
think we have to move from an adversarial-based system to one where there's real cooperation n between and among the institutions that exist now and at the regulators. >> just to get a sense of scale morgan stanley five years ago spent approximately 50 million on cybersecurity. this year we're spending in excess of 400 million on building so-called fusion centers in baltimore and new york and singapore and glasco all designed and working hand and fist with the government agencies. this is the single most existential threat to the financial system in my opinion. >> and congressman, i would close by saying it's not just the interest of what we do in america to protect america's interest, it's what these institutions also due around the world in terms of cyber and protecting our american clients information.
>> and with that madam chair i will yield back. >> the gentleman from california is recognized. >> we are here because of what happened ten years ago but due to the post traumatic stress, we forgot what happened ten years ago. ten years ago hank paulson came to congress with their t.a.r.p. program. the plan was for the federal government to buy toxic assets from you that is to say today the worst mortgages. if we had spent $700 billion on toxic assets, we would have lost the lion's share of the $700 billion the effects on the social structure if we were having this hearing and the federal government 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 the social fabric. instead, this house stood strong and demanded changes. they jettisoned the idea of buying toxic assets and instead bought preferred stock and the only reason capitalism continues to be the majority view in the country is because we didn't buy toxic assets but instead by biting preferred stock we got our money back with interest. real capitalism is at every bank and every size competes fairly but too big to fail is to big to access. for ten years senator bernie sanders and i invite four cosponsors this year have been putting forward a bill to say too big to fail is to big to
exist the giant institutions need to be broken up. i will give you the capitalist reasons why. it says that you drive .8% cheaper cost of funds because wall street's nose and big money knows if you are going down, you will be here and they believe we will bail you out whereas medium or small sized bank if they go down, their creditors are not getting bailed out to the extent they are over the fdic limit. let's talk about consumer protection. i would like you to raise your hand if you do not impose forced arbitration provisions on your regular middle-class customers. what the records show with the
exception. so this means if one of your customers had a phony accounts opened by an overzealous one of your employees and they already have one account with you but all of a sudden the different account got open they would be free to go to court? >> we would give $500 to take us to a small claims court so they are free to go to court. >> wait a minute. you get a phony accounts, your credit rating goes down, you miss an opportunity to buy a house and two years later it's worth $100,000 more and you get to go to small claims court about it. so you're saying that you will not allow the regular court system to be available to them is that correct? >> i think that is the regular court system. >> small claims court is a
separate court. you won't allow them to go to federal court order general jurisdiction? i will do this again. is there anyone here that will allow a regular middle-class customer to if they had a dispute go to a regular court under general jurisdiction? i see mr. moynahan's hand went up. i want to focus on ms. maloney's bill. for one, it would prohibit manipulating the order in which you get an account in order to maximize overdraft protection. please raise your hand if i can count on your lobbyists here in washington, we all have them, to support a bill that will prevent a manipulating order in which the accounts are given.
>> not a single -- [inaudible] >> this one provision you would support. >> the gentleman from florida is recognized for five minutes. >> thank you madam chair and witnesses for appearing here today. i have noticed a 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. ..
those would be sanctioned individuals in the united states today. >> any industries? >> that in particular perk up and those that make a decision of what we do so these are based on we picked the right thing for our communities. >> are there any completely legal businesses that you do business with her will not do business with xp back i am assuming you are referring to have over 100 teammates directed by the situations like las vegas like the pulse nightclub. and then to come to the
conclusion we ought to continue to work with manufacturers or firearms to modify the practice he would ask them to change it would not do business with them. >> any others besides the weapons industry? >> and to make a decision that we ship with the various energy companies or oil companies we do business with me have some coal companies but it's all based on our determination and our teammates making the decision. >> you already said you're okay to make loans to those that manufacture weapons? we have a process.
>> anybody you found objectionable quick. >> no but there are some that we were not specifically deal with we don't do business with manufacturer high-capacity magazines or bum stocks. >> our clients are predominantly financial institutions and asset managers with those suitability reviews to make those determinations there is any as an industry. >> we have a franchise committee with those different transactions.
>> we have restricted our activities with retail sales with semi automatic weapons. >> we serve investors. >> i understand that and you refuse that you to do business with quick. >> no. >> the gentleman from new york is recognized for five minutes. >> and let me just also say another reason why we are here is lack of trust the average american people have with those financial institutions
so that is why i urge you they are policies change that are getting a fair deal. and to say that most of you that most individuals in my district that have foster home have not recovered fully. and they are in financial decline to prevent them from their kids from going to school and they could not utilize their investment. that is part of the problem here. so the ills of foreclosure is tremendous. so i will ask mister
monahan, bank of america, 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? >> have you looked at any alternatives that we can do to keep someone in particular if they are a responsible borrower? >> yes. we work with borrowers who have difficulty with foreclosure. as we have said even cleaning up countrywide situation is a last resort for the borrower and the lender with security so we do everything we can with modifications with all different types and we have done many of them the good news is the portfolio with all the work doesn't have as many
delinquencies as we had at that point. we spent a lot of time with 26 centers around the united states talk to face-to-face at the start of the team taking over 50000 teammates. >> because i have had tremendous problems and having certain mortgages modified or refinanced. so one was with bank of america. on a continual basis. so let me move quickly. you mentioned in your testimony you were talking about diversity. so what has been done to accomplish your diversity
goals? so please be specific and define what success is and that accountability is measured and there is a that is critical if somebody chooses to include you. it is belief with your agenda or your presence or difference, you belong. >> and but access to your platforms for example i want to know specifically what are the goals and how do attempt to accomplish those goals?
>> yes. we have a number of initiatives with diverse minority owned businesses and management programs and asset managers run by and owned by minorities and women. we have employee programs. >> as the minority we need to know if you talk about when in american or lgbtq or african-americans can you break that down quick. >> absolutely. >> i am out of time but i would like to get the details of exactly what it is and who you are doing business with. >> thank you very much the gentle man from missouri is recognized for five minutes. >> thank you madam chair. to be enhanced supplementary
leverage for our institution so that can move wherever it may move and not a reduction to our capital. >>. >> as you know i have been raising awareness i believe it can have a detrimental effect on the economy with credit card companies the housing industry do you have any concerns and how do you believe it would affect the economy as a whole? >> so for the life of the loan and for j.p. morgan i don't have concerns with that requirement but i do think
that it puts them in a position that when the crisis hits to put the emphasis on lending to clean up that reserve. >> one of the concerns that i have is the faster they looked at look at a downturn that exacerbated the situation. >> i think banks can slow down - - precisely will not target us. >> then what about the gse quick. >> it's a very good question i'm just not familiar. >> anybody else have an opinion? >> and financial services companies are very concerned
especially smaller banks. and then a couple of you mentioned in your testimony is very difficult to pass on. and the cost that it takes to comply with the bank secrecy act? and between 13 and 14000 people that spend full-time and we spend in excess of $1 billion per year to be compliant. >> my number is a little bit higher. >> it is a much smaller issue. >> it's hard to isolate this as a part of everybody's job
reserve bank of new york community banks and community development which for anybody that has the butt for that satisfaction for the large banks but the reason for the discrepancy includes unfavorable repayment terms and higher interest rates and issues related to consumer complaints and while you have modestly been increasing your banks and counting only 25 percent of all loans and business which frankly is not good enough. as drivers of the economy we must promote small business
and any impediments of access to credit can undermine their business leading to job loss. the cf pv but unlike the markets market we have far less information about what is happening in the small business space including potential discrimination. >> bed is generally they would say the portfolio is over small loans from the sbic data under $1 million size.
to provide benefits to certain customers seeking a mortgage quick. >> congressman first off i would like to apologize to those clients who were affected and did not receive that relationship pricing benefit. it was a the was in our interest to make sure that our customers receive the benefits of which they are entitled. of those 24000 people, there was not race or ethnicity or gender bias in the data that we could compile and would say that.
>> your time has expired. >> the gentle man from michigan is recognized for five minutes. >>. >> we have and trade our relationship properly but now we have remedied that you look forward. >> reclaiming my time i will try to move quickly. is a very large panel and i would note and then there is some venting about not being all we need to engage but as someone who was publicly
opposed head at the time i was not congress at the time you feel the echoed today. and to. >> about why the had gone on. >> or to vote for situation like that but what we're trying to do is to make sure it never happened again on anybody's watch. but i do have one main line of questioning and i would like to have all of you answer very quickly or yes or no are you properly capitalized and sized and stable so that you can survive without taxpayer american dollars having to be put back into the system with
the taxpayer on the hook clicks. >> we are properly scaled to serve our client. >> yes. >> yes. >> yes we are. >> yes we are. and to be properly capitalized but the numbers to speak for themselves. exit and the center of the derivatives market only two contracts were written in 2018 the uk has but then to
maintain a presence i assume you all do. everybody does clicks but the chairman but he also added that the package will cormack provide a bridge to a dual dual regulatory framework where the driving you when - - derivatives market may continue and endure. i am very concerned rather regardless the right outcome whatever it is, are your institutions will need to do more direct training with continental backs
a dominant number in the us. >> i will be submitting some questions and thank you for your involvement in detroit. >> i especially thank you for your courage and to stand up to consumers and i am grateful for your attendance, the guy would perceive if the seven if you have something in common , you appear to be white men one --dash just one among you is something other than a white mail.
kindly let the record reflect there are no hands in the air and the panel is made up of white men. this is not a pejorative. you have all i would say please and him to the hair. let the record reflect fear that you may not hear me just raise your hand in now so i know you are there. raise your hand please. . . . .e
next question has to do with something near and dear to my heart. my ancestors were slaves. in 2005 is it true j.p. morgan released information directly indicating that it benefited from slavery with the representatives respond? >> i do believe that in 2005 we had a report about the transactions that involve slavery between j.p. morgan. >> there was an indication i believe that you've accepted the phones against the slaves as collateral, true? >> have any of the other banks compiled a study as to whether or not you've benefited from slavery? if so, raise your hand please. let the record reflect that none
have raised their hand. do you believe that the bank benefited from slavery in some way in terms of its business practices if so, raise your hand and if you do not believe it benefited, raise your hand. let the record reflect all that mr. diamond raised a hand. thank you. let's move on. i am concerned now about the raise th that will occur. you indicated there would be in the near future is that correct? >> yes, we said we would raise the minimum starting pay from the current level of about 15 to $16 an hour to $20 an hour in the next two years.
>> is there a bank that will have an amount that will exceed the $20 per hour in the same time period if so, raise your hand or if you currently pay more, raise your hand please. >> you are to be commended for what you are doing in terms of raising the wage. i think all of you. my time is up, but i do want you to know that we believe you can do better. i yield back. >> the gentleman from wisconsin is recognized for five minutes. >> mr. moynahan, -- >> we cover 80% of the population today, and that is by places we continue to build out.
>> do you have a presence in all 50 states? >> we have a commercial bank. >> what is the name of the bank that you represent? do you think they represent the values of all of america? >> i think we have a purpose >> where are you from? >> southeastern ohio. >> do you ever go back to ohio? >> yes. >> i bring it up because i look at the gun policy and i think that there's a lot of americans who use their that would greatly disagree with that policy. it might play well on the east coast or california and may be e
your bank us and the bank of new york or california. i would point out you can look at guns but do you bank with hollywood studios? >> all kinds. >> anyone that makes video games? >> i think we do. >> i think you do too. have you watched any movies from hollywood? any movies that use guns because i don't think there's any movies that come out of that don't glorify the use of guns. >> i was being precisely for that our decision was based on teammates, 100 plus that were in places -- >> you follow the rule of law and appreciate the second amendment. >> it's the rule of law in this land we agree.
>> your policy doesn't necessarily agree. >> it's about people that we ask the companies that manufacture these type of funds for sales to citizens if they would have been the practice to somehow put a governor on it so our teammates wouldn't be in a position we would be the 200,000 of these people represent everybody. >> we've had guns in america for a long time. the things that happened recently are horrific. maybe your bank should s. is going on in america changing people's mindset to pick up a gun and use something horrific or use a crockpot or a machete or u-haul. something is happening and to take away the rights of law-abiding american citizens where i live i would tell you
that does not comport with my view of america and if you're not going to look at movies and families and video games, did you also comments that you don't think some energy? >> which ones don't you bank? >> we had a policy to work our way out of our portfolio of people who did what please to call strip mining but it's not call monday. >> what about oil and gas or coal. >> excuse me one moment. would you please speak up and speak into the microphone. >> i just want to make a note to the panel i appreciate what you do for america. i think mr. diamond says that
while. if you are smaller does your work go to the banks if you don't think the big deals that you bank, they will go to small banks don't they go to the bank obankof china, doesn't your buss go somewhere else? >> it would go to larger banks overseas that could do the business. >> would you say we are a leader in global finance? >> america is a leader in global finance and i hope to god we remain ou that for the foreseeae future. it's a critical part -- >> i ask for ten more seconds but was taken from the. >> i'm sorry we have members breaking -- >> you took ten seconds from my time. >> if you insist go ahead and take another five seconds. >> thank you. maybe i will follow up in
regards to what impact you have on global sanctions that come from america on foreign countries that are bad actors that take place -- >> your time is expired. the gentleman from missouri was also the chair from the subcommittee on national security international development and the three couples the recognized for five minutes. >> thank you madam chair. >> i just want to follow up on my colleague judge green. i think some of you are already practicing the rule and others of you aren't. those of you that are not as it relates to hiring would you please show your hand so we can see. the rooney rule started when commissioner rooney said when you interview for general managers and coaches of nfl
teams you must interview a diverse group of candidates. if we applied it to banking, our interviews during that? >> everybody? okay. but pretend some of you have such a policy. alright i'm getting a headache. that didn't work because i'm not understanding to make sure that we are understanding it the same way. everybody talks about diversity and i was just trying to find out if there was part of the structure and the bank in terms of human resources where you
automatically make sure all sectors of the population have access to those jobs. i don't know if you are familiar with the consumer lending report if you are not i would suggest you get a copy. it's quite telling. one of the things in the study and one thing that is growing, they found we've eliminated this level because algorithms are making the decisions, but the report shows there was a subtle and unintentional discrimination actually factored into the
writing of the algorithms. are any of you familiar with the study? very good study. how many of you are involved with its? so you use algorithms obviously to make those decisions. i'm hoping that you will read this report and i'm very serious because people may be walking around with the assumption that because we are using algorithms there is no chance that we are going to make any decisions based on anything other than pure qualifications and study shows that is exactly the opposite of what's happening. my time is running out. i want to ask one other questi question. when we gathered in this room in
2008 i think from all the bad news we were given on the economy, we had about 7500 banks in the country. we are down to about 5,000 dropping as you know many of the small things were unable to survive. what are you doing to be able to respond to the needs of those without a bank or barely in comparison to the people that are naturally and normally catered to by your bank's? >> we do a lot and also work with those who -- i hate to
interrupt you, but -- >> on the consumer side? >> any effort or move towards dealing with the unmaintained barely banked. >> for those that have received benefits a lot waived the fees and charges given. we continue to work on the problem. >> the chairman from ohio is recognized for five minutes. >> i'd like to wish all the witnesses a happy new year. it's 2019. we have a strong economy in the united states, low unemployment coffe,three to 4% economic growd well-capitalized banks so rather than real litigating the dodd frank act i would like to talk about the depressing financial issues and financial challenges in the current issue is. the first question if you could
each be brief but do you think the biggest risk to the financial system is today? >> our ability to talk ourselves into the next recession. >> cyber we mentioned is the biggest and i don't think it's systemic yet but it's growing rapidly and should be closely monitored. >> global growth is slowing, u.s. growth is slowing a little bit. and ultimately that will have an impact on the ability to serve as credit around the world and that impacts the financial system. >> i agree not being under the tent is a critical issue and ultimately it will reflect as james said that right now the american economy is solid.
>> cyber as we spoke about earlier and the fact that our growth is slowing around the world. >> i agree with that, cyber first and slowing growth second. >> i'd also say slowing growth around the world i but in particular the difficulties in the relationship with u.s. and china. >> let the record reflect that cyber was a consensus item as was slowing growth around the world and a tip of the hat to the folks that also mentioned the nonregulated financial industries. i want to shift for just a second and follow-u follow up on something mr. duffy asked as he talked mostly with you and i will follow up he talked about the american sanctions we are able to leverage on the rest of the world when they are bad actors were criminals and we have the secretary in here yesterday and he spoke to the fact of the importance of the
dollar and large financial institutions we have far critical to our ability to enforce our sanctions. you already spoke to the fact your large customers if you didn't think them would be banked by foreign national banks. in the absence of u.s. banks if we only had big foreign banks how do you feel like big european banks were state owned banks in china would do at helping us enforce american sanctions against bad actors and rogue regimes around the world, for example iran. >> they have to be executed by the banks in america. because we move all that money and we do exactly what they tell us to do the second thing is you have to have a reserve currency so the strength of america and the banking system. >> so well if you agree that having large financial institutions is good for
america's national security? can you raise your hand if you've agree with thayouagree w? let the record reflect everyone raised their hand. because cyber was such a consensus item i have time to address that issue now. what each of you agre would agre that a static standard does not work, a government standard that sets the standard today but tomorrow is outdated almost the day that it's effective, mr. diamond i will let you start with that one. >> it changes every day and it is critical. >> while i have 55 seconds left, i want to mention anti-money laundering that came up in some of the comments that you made across the board do you also love suspicious activity reports could you raise your hand if you do not get feedback from the government when you fill those
out. does anybody? let me ask the other way could you raise your hand if you do get feedback on your suspicious activity reports? great. let the record reflect that. none of them get feedback. we have to work hard to make a better system where you've actually get feedback and know that the information you are giving is helping us catch the bad guys and keep our financial system clean. we all are going to work with the treasury department to improve the process. thank you all for your time today. >> the gentleman from connecticut is recognized for five minutes. >> thank you madam chair and thank you to the panel for being here today. i was sworn in in january of 2009 and joined the committee shortly thereafter. being on the committee at the time was like walking the next day through a city that had been the subject of a nuclear
explosion and the echoes of that go on today and the politics saw trillions of dollars in value disappear for reasons they didn't fully understand and then they sell this institution do what it had to do which is to bail your institutions in many instances out and so what the american people saw at the time is our government is there for the large financial institutio institutions, but it wasn't there for us and delegitimized you and us and the regulators and that is the single factor driving our politics today not the single factor but an important one guiding our politics today. i don't ever want to go through that again because i think we can maybe sustain one of those, but i don't think that democracy can sustain another so i have one question for all of you and it is a specific version. as you sit here today, what product financing mechanism or
market do you think is generating systemic risk that we should pay attention to that gives you each 30 seconds so i'm going to ask you to name a product or market it very quickly what you think we should do about it. >> people talk a lot about the leverage lending and what that's done. i don't believe today that it is systemic because most of it is being driven outside of the regulated financial system. >> thank you. >> it is growing rapidly deteriorating rapidly. >> going back to what we discussed at the committees i ti would say right now able to focus on the international markets is slowing the global economy that's going to give rise to credit risks we've had a series of crisis -- >> we probably can't do anything
about the global economy. i'm looking for a market or service. >> obviously the amount of credit is large by historical standards, so i don't think it's dangerous but it's large and something to be mindful of. >> i think any other day whe onf the lessons learned was leverage and the places my colleagues mentioned in student lending is biggest on the personal side in terms of impact right now and on the corporate side. >> if leverage worries you does that mean we should be thinking about increasing generally speaking capital reserves and standards? >> we have capital standards tested under the worst scenario in thworse scenarioin the crisip with more capital after then we started with. that is the purpose of stress testing. >> okay. thank you. >> the concern of student loans
and also anything that pushing activity into the shadow banking system. >> i would agree with both of those things. >> the growth of the shadow banking system is mentioned and others also been significant changes the last ten years of market structure and none of it's been tested under stress. so -- >> thank you. i have another minute or so. many of you mentioned the shadow banking. so just to pick on you, are we talking hedge funds, private equity. >> there's beehas been significt formation is people talk about leverage lending sometimes they think about it on the banks of the large institutions here but there is more and more direct lending being done in separate vehicles not regulated or advised at the moment. i don't think it is systemic but it's not growing or obscure and something over time the cycle continued and we want to have a closer look at.
>> since many of you mentioned the shadow banking should the committee be taking a hard look at moving these entities that are doing shadow blending into a regulated environment? >> i personally think that there should be a hard look and better understanding of what's there potentially is i is that crows f it continues to grow that would be something to consider that it needs a harder look at transparency. >> think you and i would yield back the balance of my time. >> thank you. the gentleman from kentucky is recognized for five minutes. >> thank you madam chair. can you please describe the u.s. economy into th and the global y without your institution. >> i think the global economy would be a different place without citibank and the banks here. last year so that we have actively engaged with and
financed and supported over 700 u.s. companies around the world and if we were not there to do that as i said in my opening statement, that would fall under the hands of foreign banks and as we know in the world of cyber sanctions competition, the playing field isn't necessarily a level so i think we act as an important agent for the companies abroad. >> what does the world look like without your institution or if your institution were forcibly broken up and particularly in a downturn. >> remove approximately $6 trillion around the world every single day for clients such in large part is obviously american corporations. it would've to corporations 10 billion, 15 billion, markets around the world multiple bond issues all has to be done by other large banks not based in the united states of america and i don't know the long-term
effects. a country that doesn't have a strong healthy banking system including the large banks you will not have a strong economy and if you go around the world you can see that phenomenon. would weaken american competitiveness? >> absolutely. >> same question. >> there are many parts of the business that would have an impact that are obvious. the manager of wealth in the world we manage $2.5 trillion for the retirement and financial wellness that's obviously critical to those individuals and their families and second, we are responsible for about 21 or 22% of all equities trading around the world so efficient and effective markets depend upon institutions like us. >> what would happen to the competitiveness of bank of america were forcibly broken up?
>> they talked about larger companies but with th these phenomena and the success of the american business companies altogether comfortable to sue the manufacturer out of the midwest is placed into china is a successful company and we have to help those like that figure of the world so not only the largest, small or midsized companies operate on a global basis and if we weren't there to support them it takes a global reach to make that work. >> as you answer this question obviously pay attention to the unique custody services you offer. >> we processed 10% of the financial assets and by operating at that scale we are able to deliver our services at a very low cost the pension funds and endowments foundations would suffer dramatically
without us being able to operate at that scale. >> what i would add to that is the service institutions of all sizes from very small ones to 300 million-dollar pension funds up to 6 billion or 6 trillion-dollar asset management, so those institutions are going to look for companies o with ties to provide their services to demand so if it's not sitting u us sitp here today, it would likely be a big foreign bank. >> described the u.s. economy without your institution. >> or institution provides services largely to corporatio corporations, institutions around the world and we are one of the larger money managers around the world if we don't provide these services, someone also has to. that organization is to be broad, global and most likely wouldn't be a u.s. institution if they were not providing the
services. >> all of you testified about how the institutions are more resilient and you've are better capitalized o from this higher liquidity and less leverage, but what if we overdo it in terms of adjacent surcharges that would make american institutions less competitive to the foreign counterparts? anyone can answer that in the remaining time. ..
institutions but i really think you are too big not to employ african-americans and minorities and females in your pipeline and high position so it is about changing the culture. i'm not so sure i understood the hand game so i will ask a different way because i am the chairwoman and i will ask you to go on the line to say yes or no. i want to know where you put in writing you would develop a diversity plan that includes pipeline. yes or no quick.
>> that plan is already in plac place. >> but would you put it in writing to me quick. >> yes. >> absolutely. >> so just to be clear i want it in writing addressed to me. yes or no so business diverse city who are you using with your assets do you have an african-american minority or female company that manages your assets quick. >> we are not in the asset management business. >> your members or your pensions or your hedge fund or your money quick. >> i'm not sure. >> i'm pretty sure.
>> yes we have minority. >> yes. >> yes we do. >> yes we have minority firms managing our money. >> with a diversity committee chair. and then with the federal banks and the last question. would you participate? and in your position will you hire directive diversity? yes or no. >> our director does.
>> and a head of hr. >> but i'm talking about the director of the office of minority inclusion in the bank. will you do it quick. >> we can look at changing the title. >> we can look at changing the title. will you authorize this person to have a meeting with me so i can do a follow-up quick. >> we would be happy to. >> and let me just say those of you that were smart enough to meet with me before i was chairman not of you are where you should be thank you for being aspirational. mister solomon thank you for coming in at least having people in the pipeline.
and thank you for coming in to tell the truth and heightening people. and mister diamond and thank you for doing a program that included me. i yield back. >> the gentleman from texas is recognized for five minutes. first of all i'm a happy guy not an angry guy. thank you for keeping the american dream alive i'm glad you make money because that helps means street america even though they are well-capitalized the economy is growing at the fastest pace and we are having a serious debate the transfer made a system to the economic
system. yesterday i asked the secretary minutia and what would happen to gdp going away from free market principles to adopt a more socialist approach it was clear and concise. and this has deteriorated significantly. we cannot let the smallest compromise of socialism to put socialism on trial and do it today to have a one-size-fits-all economy where land of opportunities? will incentivize entrepreneurs to take risk and government dependence? so with a straightforward question are you a capitalist?
spent capitalist. >> capitalist i saw a letter in your shareholders for those that may not have had the chance. >> it is a market economy which is a good safety net and to acknowledge those that were left behind in socialism the government owns the company's and never leads to corruption not what people want and how
they are they all become driven by political actors and if you don't believe it take a tour around the world to the socialist countries. >> and without objection of like to enter that portion of his letter for the shareholders. >> and with the previous wells fargo ceo the banks should be liable if there is a oil spill. i have been a car dealer for almost 50 years and i have helped countless people secure financing for vehicles. if the auto lenders were held liable for a car accident on have a much harder time selling cars. somewhat what happened to the lending market and financial institutions were liable whether that be a car
accident? >> it would go way up or down. so all of us that all of you are competing. it is the largest banks in the united states but i have a two-part question and compared to the largest international competitors do you think international competition will fill the void if you were forced to downsize by a future president or congress quick. >> that is very interesting because those that were represented here with a very large corporation.
's of the us financial institutions are not doing it but it has 5000 small banks and this is the least concentrated banking sector i grew up in australia for the top four bank banks. >> thank you matter chairwoman i like to ask a question as the heads of banks your supervised with consumer protection that has announced to check on compliance and to no longer examine compliance.
examining for compliance cracks to many of you submit in writing with employees on your behalf you wanted them to stop. >> i did >> not that i'm aware of. >> a painful reminder - - three marines lost their life ends others that you put on the uniform to this nation that that law was passed. because as a matter of fac fact, 80 percent of lose security clearance do so because of financial distress which led to the enactment of the military lending act in 2006. so who looks out for the military families?
what i have taken is that none of you would be objecting to be examined for compliance with the military lending act. raise your hand if you object. >> you would? sir? >> too many negatives park go - . sorry. know i would not object. >> so with the fines that have been levied especially with corporations with egregious mistakes and wells that is not here today or equifax the market doesn't seem to punish them for the bad and egregious behavior it did not punish them on the stock side or revenue side. so what deters bad behavior? if the market doesn't do it then certainly those regulatory entities are not
engaged in any enforcement activity so what is it that can be done to deter bad behavior? so your understandable objective and to get rid of bad behavior? so what in the world would work quick. >> let's see with mister solomo solomon. >> we are working to do the best we can and to be held accountable over time. >> i cannot comment on wells or equifax. >> we try to do the best job that we can from another perspective.
participate what is the key to success that seven out of ten jobs are created by small businesses with access to capital. so pre- crisis better than 6500 banks we are now down at 4700 providing access to capital with geographic constraints that i represent have to deal with. fortunately we have seen a proliferation of online banking with the financial services technology to have the potential to remain economically viable. so maybe you could speak to what your institutions to
>> we support them with the derivatives and equity dinner that to finance those mortgages but also banks with those of color with fancy small businesses and to go down here. and then we do some philanthrop philanthropy. >> and then the nexus between big banks and small banks. and jamie dimon if you could follow up on mortgages.
and to get that lending. and with those large banks in the world community. >> there are 3000 servicing and we never finish the regulations because of those things with the risks on the legal side and with those self-employed and that can be fixed. and opened the mortgage markets with gdp growth in america. >> and with the small business
caucus we had a meeting a month ago that the business loans are down 13 percent since 2008 women owned businesses are only 16 percent of traditional 3 percent of venture capital funding. so that initiative to write the discrepancy. >> and then those that are started by people of color. >>. >> recognized for five minutes. >> thank you to all the witnesses. i want to ask you about the daca recipients.
issues that came out and my colleagues here let's keep them here. >> can you find out and get back to me? >> the second question would like to go down the line with the institution continue to lead to an individual repeatedly defaulted on his or her prior loans quick. >> we look at the circumstances but likely not. >> likely not but we do give second chances.
>>. >> same answer. >> we don't do lending. >> we look at the circumstances most likely not. >> would you lend to an individual if you knew had inflated the value of their assets to secure a loan from your institution? >> it depends on the type of loan. >> you might quick. >> if they inflated the values of their assets quick. >> if we were lending versus a personal guarantee against a personal asset. >> unlikely. >> we don't do many of those but if we did very unlikely.
institution provides a loan to pay off a loan to be extended by your bank so if one division provides a loan to an individual would you give another loan to pay off the first quick. >> it depends on the circumstances. one could have credit card debt. >> circumstantial. >> same answer. >> based on circumstances. >> we are not in the lending business. >> you don't loan to people who commit fraud? good for you. >> same answer. >> the gentleman from georgia
is recognized for five minutes. >> and we have hurt our economy is strong from the banking system and the previous federal reserve chairs and other regulators are telling us this is encouraging. it's about movement with the same amount of money out there and we are moving that money they trade resources for money and we move it. so my interest is keeping the money moving and resources and
what i think is the real threat to our economy, not just perceived threats or the other politically driven questions you may have had today. coming from an it background cyberis a serious threat that only to our economy or individuals or personal security but the biggest threat us financial system and part of the problem of the breach notification laws. that exasperates the problem we already have. and we need some type of standard. what are your thoughts quick. >> you are correct mentioning opening comments we will meet with homeland security and
then to make that friskier - - and then riskier not safer. >> could you be out of compliance with another quick. >> yes. >> and with the financial regulators and with the war on cybersecurity and those that have the same information to slow down the process and we work together. anything that spends time that
is not as important as time taken away from defending the perimeter and finding out who is doing it which is critically important to the infrastructure all over america and the world it doesn't just help the banks but all people. >> i'm from georgia. we are home to two thirds of payment processing also the chair of the payments caucus along with representative scott from georgia. but you said something recently that you were both inspired and worried by china's strength. that is an interesting comment. what should policymakers be doing to make sure we remain competitive in this field
quick. >> going back we also protect our clients we do a lot of cyberprotection which including governments in hospital so that is the backbone we had a team of people go to china those companies are ahead of us with ai i'm not saying that we will compete but the bottom line is we have one of the most innovative societies in the world it is hampered there's not enough kids in innovation were not building infrastructure and we have to get that going to allow companies to compete you will fail when you try new things so that is critical for infrastructure. >> thank you. i see a lot of partners that we could make america safe and secure and strong because we all benefit i want to continue
you do for new jersey i am very grateful i wish we could also put up slides that looks more like this one how many firms are how many slides of entrepreneurs to be supported by the institutions showing how many pensions and four o one k you employ more than 1 million people with small business loans to the tune of 471 million to make homeownership possible unfortunately there is no slide up there about that i appreciate the opportunity to discuss his success of the changes made over the last decade and thank you to dodd frank investments over the last ten years with the
changes you have made there is room for improvement i'm grateful for those changes made working at microsoft while on the cloud and e-commerce so as the cochair of the caucus i have a quick question. what do you think is the future of banking looks like how does it affect your institution in the space quick. >> if you look at that percentage of activity with a 27 million and it is increasing the way we help them manage those finances better that your balance is low these are terrific things just for the consumer so it is
a tremendous impact makes us more secure but it can be driven by what the consumers do. >> your institutions all provide to consumers and businesses 40 percent of total lending is done in the industry and across my district if i could start with mister jamie dimon what about facilitating small business growth quick. >> so small business you could have credit or access right away to move money quickly and cheaply for you can see real-time payments to manage investments on the phone so we
have more digital services actually they get almost all the services that they need. >> mister solomon you said that initiative that helps entrepreneurs create jobs and economic opportunities providing access to capital where are the ongoing efforts. >> we created the 10000 small business program over a decade ago because we are not a big platform but there are other ways we can help and support small businesses committing $500 million to educate business owners throughout the country and we have seen real results in their businesses by providing basic education and financial services and the capability.
>> what changes have been implemented to make sure the firms are safe - - safer than they were before quick. >> just give me a thumbnail. >> triple the liquidity and to put in place a living will and the stress test to fundamentally change the organization because before the crisis we were in the low one hundreds. >> i will submit for the record how much is been invested with businesses of all sizes and those in my district that have been through a lot of growth thank you for being here today. >> the gentleman from ohio was recognized for five minutes.
>> thank you very much for your testimony here today for the quality work you have done i want to focus on technology particularly in certain sectors we are entering into a new era of innovation cybersecurity and how they can raise capital and to take advantage of this new technology the us is now lagging behind due to the regulatory circuit one - - issues my colleagues and i and from others that are not on the committee introduced a bill yesterday to provide regulatory since sector mister
solomon i will read an excerpt from an article that caught my attention goldman sachs will have a crypto focused unit by the end of 2018 and as reported in december of last year however september 5th business insider reported a name sources say the firm is scrapping that plan due to the and clear regulatory environment why do goldman sachs initially decide to open a crypto trading desk quick. >> they try to understand crypto currency market as it develops with some certain functionality in the futures but other than that we never had plans to open a crypto trading desk no question dealing with crypto currency
it is unclear if in the long run if they will work or be viable. >> and some of those tokens that are issued await the definition what is a security or the appropriate trading platform and frankly even those that are needed to address after. in 2017 you called crypto currency not a real thing but your firm unveil that we are supportive of crypto currency as long as they are properly controlled and regulated. >> the block chain is real and we think it will work over time there is no value behind it and they have serious issues about that.
so that is a token to be shipped real-time is somebody once cash. >> so the settlements will happen almost instantaneously there will be a block chain and how will that facilitate quick. >> but the fact is this could be a faster way because of data everybody has the same data at the same time. >> because of the nature of the block chain is transparent. >> yes. it has to be secure things like moving the money. >> we can't talk without having to protect a consumer
the secure custody of digital assets there is no regulation or guideline who is a qualified for digital assets so look at crypto currency even though it cites regulatory clarity can you expand on the statement to highlight any other hurdles you are facing in the space quick. >> as the website says there is a lack of clarity and quite honestly crypto currencies are early in their existence and not significant today to speak of in terms of a real currency to move value. so we are actively thinking what we want to do. one of the biggest issues is money laundering.
>> i yelled back. >> the gentle man from guam is recognized for five minutes. >> thank you mister chair. i was very excited to hear that the wages at bank of america went up to $20 an hour but none of your enterprises do business online or in our territories or actually in our district and i want to put that on the record because there is a serious disconnect in this country when it comes to job creation and that is impacting not only my district and territories but a lot of rural america. referencing the chart most
financial crisis in nonmetropolitan areas have not recovered. they are still about two points below the norm while the metropolitan areas are eight points above where we were. a lot of this has to do with the job creation happening with economic activity but also with the access to credit is more pronounced in fact 27 percent of the country has two or fewer banks is not just a territory lower democratic issue mostly they are rural
areas. so my question to this panel to pose a question with a fiscal policy considerations when the fed chairman was here i inquired if he would be open to revolving interest rate policies across the board for all financial institutions and would consider metropolitan in nonmetropolitan areas. if we keep interest rates low than we have more money in the pockets of consumers well if we had a different interest rate policy we could combat inflation in those areas.
so would you be open to exploring the idea of the interest rate policy to bifurcate. >> to be honest it would not work. >> this is the arbitrage if you wanted to tax a balance. >> we just have to figure it out but to do something quickly from what my colleague spoke about without the corresponding worry of how that would impact. >> i do think there are more direct ways.
>> i would absolutely explore that. >> i would explore that i think it is great you are raising that but i agree with my colleagues i look at other means to address the issue. >> the fed has two mandates with job creation and fighting inflation so when we have the fed raising interest rates five times will metropolitan areas are not covering the job markets this underscores the fact we are under serving segments of our community and choking off there are opportunities because we are not treating them the way we should be taking everything into consideration but thank
you for trying to flesh out a policy with the thresholds to address the lack of job growth in those areas. i yield back. >> and i want to start for the record that sites publicly available data from the federal financial institutions council this shows that account that had to all consumer lending that hold roughly 40 percent more capital than they did ten years ago $750 billion in capital which significantly strengthen the resiliency. is that okay with you madame chairwoman thank you for being
here today we talk about those vast improvements here institutions have made over the last two years capital is not free but we are worried it will increase cost to increase investments such as cybersecurity. so can you please describe how capital requirements affect the decision-making such as how you would allocate capital that was recalibrated quick. >> it is risk based capital obviously we are very mindful looking at the allocation not
the optimization and mindful of the risk and that those are appropriate with the natural sku of the exercise of the data that takes less risk than might otherwise be done so that would reflect itself in terms of new business ventures. it could act as an inhibitor to growth. >> i think there is excess capital i thank you could change it the congressman from guam it will not change
systemic risk the same thing on the liquidity side. trillions of dollars locked up in perpetuity why is all that cash sitting around doing nothing? >> and the others? >> it gets to the core issue at what point is stable enough and at what point you need to gross you can retain more capital but then you're not it planning for growth so that is the fundamental so that is what will create the jobs. >> we always struggle to explain this in our position but if you think about our
company the difference between a 10 percent and 9 percent requirement would be $140 billion. so the question is the difference between nine and ten for us we actually have 11 and a half so that is $140 billion of loans that small business lending that we cannot do today because they cannot have risk. >> and also looking at machine learning artificial intelligence to help them better mitigate the risk so can you speak to the challenges are the opportunities you have based in deploying machine learning and how are regulators responding and
implementations? >> you touched on compliance which is something we have been very focused on so with that of a lid on - - ability to do more and what can be done by individuals. >> thank you to our witnesses there is a difference of nature of questions that were not present ten years ago so with a quick show of hands how many of you were at the helm of your bank when lehman fell with tarp? only jamie dimon. so if you are new what was it like to be a member of
congress? >> our phones were ringing with a mixture of no and held no. we were faced with voting for 700 billion of taxpayer money and at the time the cbo estimated half of that would be a debt loss. some on the trip back dig up the rollcall vote who voted to save the economy and who did not many of them are still in politics it is a moment where a lot of members characters were revealed you see a lot of hand wringing about the lack of heroes and government but especially those that voted to rescue the economy knowing what it would cost them like the patrick murray of
pennsylvania who lost their seat after taking a vote they knew would be very destructive that's only once or twice in your career when the chief of staff comes in. i know how you will float but it is my job to tell you you are putting your reelection at risk and that is what happened as a result. so those members was there even perlmutter everyone behind me so look over that list particularly democrats who were willing to put their careers at risk.
so i would like to ask about the effects that you feel as a result with dodd frank. with head of the risk counsel he described the first meeting having to come up with the orderly liquidation plan and the first reaction was i cannot believe we have this many thousands of business and one of the main results was to be simplified significantly as a result is that one of the effects you looked hard at the complexity of your business model? >> yes. for a whole host of reasons , the liquidation living will as it is called you can get capital two ways earn it and retain it but that is another
reason we did that but that was good for the industry and the company. i agree. the aftermath to make them more precise. >> i believe it is your institution for the policy to have the risk officer having a 51 percent vote and how many of you have that as a policy? how many have that as a policy? >> it isn't a formal policy but it is a most unusual situation for the operating committee to go against the recommendation. >> we don't have a policy like that but.
>> the same. the decision would come to me. >> that's why you have a risk officer to make that decision. >> the other thing that is significant you pay those officers the same the highest paid salaries is that also a general policy? >> you are talking about empowerment of control and that is paramount to have that power within the organization. >> the congressman is recognized for five minutes. >> i appreciate your testimony this far so earlier a good friend of mine he talked about systemic risk. i believe each and every one
of you with shadow banking the service activity now done in the unregulated market that used to be done in a regulated market i will not ask you to opine on old regulations but as policymakers what are the specific regulations and legal liabilities of financial services activity to be moved and migrated from the regulated world just those particular items.