Annual Oversight of Wall Street Firms (S. Hrg. 117-364, May 26, 2021)
Summary
S. Hrg. 117-364, Annual Oversight of Wall Street Firms, the printed record of a hearing before the Committee on Banking, Housing, and Urban Affairs of the United States Senate, 117th Congress, First Session, on May 26, 2021 via Webex with Chairman Sherrod Brown presiding. The witnesses listed are Charles W. Scharf of Wells Fargo & Company, David M. Solomon of Goldman Sachs, Jane Fraser of Citigroup, Jamie Dimon of JPMorgan Chase & Co., Brian Moynihan of Bank of America, and James P. Gorman of Morgan Stanley. In his opening statement Chairman Brown says it is the first time the CEOs of the Nation's six largest banks have appeared together before the Committee. Senator Patrick J. Toomey's opening statement discusses the resilience of the banking system during COVID and the Paycheck Protection Program.
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“Annual Oversight of Wall Street Firms (S. Hrg. 117-364, May 26, 2021).”
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S. HRG. 117–364
ANNUAL OVERSIGHT OF WALL STREET FIRMS
HEARING
BEFORE THE
COMMITTEE ON
BANKING, HOUSING, AND URBAN AFFAIRS
UNITED STATES SENATE
ONE HUNDRED SEVENTEENTH CONGRESS
FIRST SESSION
ON
EXAMINING HOW TO CHANGE THE WALL STREET SYSTEM, TO MAKE OUR
ECONOMY WORK FOR EVERYONE
MAY 26, 2021
Printed for the use of the Committee on Banking, Housing, and Urban Affairs
(
S. HRG. 117–364
ANNUAL OVERSIGHT OF WALL STREET FIRMS
HEARING
BEFORE THE
COMMITTEE ON
BANKING, HOUSING, AND URBAN AFFAIRS
UNITED STATES SENATE
ONE HUNDRED SEVENTEENTH CONGRESS
FIRST SESSION
ON
EXAMINING HOW TO CHANGE THE WALL STREET SYSTEM, TO MAKE OUR
ECONOMY WORK FOR EVERYONE
MAY 26, 2021
Printed for the use of the Committee on Banking, Housing, and Urban Affairs
(
Available at: https: //www.govinfo.gov /
U.S. GOVERNMENT PUBLISHING OFFICE
48–562 PDF WASHINGTON : 2022
COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS
SHERROD BROWN, Ohio, Chairman
JACK REED, Rhode Island PATRICK J. TOOMEY, Pennsylvania
ROBERT MENENDEZ, New Jersey RICHARD C. SHELBY, Alabama
JON TESTER, Montana MIKE CRAPO, Idaho
MARK R. WARNER, Virginia TIM SCOTT, South Carolina
ELIZABETH WARREN, Massachusetts MIKE ROUNDS, South Dakota
CHRIS VAN HOLLEN, Maryland THOM TILLIS, North Carolina
CATHERINE CORTEZ MASTO, Nevada JOHN KENNEDY, Louisiana
TINA SMITH, Minnesota BILL HAGERTY, Tennessee
KYRSTEN SINEMA, Arizona CYNTHIA LUMMIS, Wyoming
JON OSSOFF, Georgia JERRY MORAN, Kansas
RAPHAEL WARNOCK, Georgia KEVIN CRAMER, North Dakota
STEVE DAINES, Montana
LAURA SWANSON, Staff Director
BRAD GRANTZ, Republican Staff Director
ELISHA TUKU, Chief Counsel
COREY FRAYER, Professional Staff Member
DAN SULLIVAN, Republican Chief Counsel
JOHN CREWS, Republican Policy Director
CAMERON RICKER, Chief Clerk
SHELVIN SIMMONS, IT Director
CHARLES J. MOFFAT, Hearing Clerk
(II)
C O N T E N T S
WEDNESDAY, MAY 26, 2021
Page
Opening statement of Chairman Brown ................................................................ 1
Prepared statement ................................................................................... 57
Opening statements, comments, or prepared statements of:
Senator Toomey ................................................................................................ 4
Prepared statement ................................................................................... 59
WITNESSES
Charles W. Scharf, Chief Executive Officer and President, Wells Fargo &
Company ............................................................................................................... 6
Prepared statement .......................................................................................... 60
Responses to written questions of:
Chairman Brown ....................................................................................... 184
Senator Tester ........................................................................................... 197
Senator Warren ......................................................................................... 201
Senator Cortez Masto ................................................................................ 204
Senator Smith ............................................................................................ 214
Senator Warnock ....................................................................................... 216
Senator Crapo ............................................................................................ 218
David M. Solomon, Chairman and Chief Executive Officer, Goldman Sachs ..... 8
Prepared statement .......................................................................................... 71
Responses to written questions of:
Chairman Brown ....................................................................................... 219
Senator Tester ........................................................................................... 226
Senator Warren ......................................................................................... 230
Senator Cortez Masto ................................................................................ 231
Senator Smith ............................................................................................ 233
Senator Warnock ....................................................................................... 234
Jane Fraser, Chief Executive Officer, Citigroup ................................................... 10
Prepared statement .......................................................................................... 85
Responses to written questions of:
Chairman Brown ....................................................................................... 235
Senator Tester ........................................................................................... 248
Senator Warren ......................................................................................... 251
Senator Cortez Masto ................................................................................ 253
Senator Smith ............................................................................................ 259
Senator Warnock ....................................................................................... 261
Senator Crapo ............................................................................................ 263
Jamie Dimon, Chairman and Chief Executive Officer, JPMorgan Chase &
Co. .......................................................................................................................... 11
Prepared statement .......................................................................................... 95
Responses to written questions of:
Chairman Brown ....................................................................................... 265
Senator Tester ........................................................................................... 274
Senator Warren ......................................................................................... 278
Senator Cortez Masto ................................................................................ 280
Senator Smith ............................................................................................ 285
Senator Warnock ....................................................................................... 286
Senator Crapo ............................................................................................ 288
(III)
IV
Page
Brian Moynihan, Chairman and Chief Executive Officer, Bank of America ...... 13
Prepared statement .......................................................................................... 101
Responses to written questions of:
Chairman Brown ....................................................................................... 289
Senator Tester ........................................................................................... 302
Senator Warren ......................................................................................... 305
Senator Cortez Masto ................................................................................ 307
Senator Smith ............................................................................................ 312
Senator Warnock ....................................................................................... 313
Senator Crapo ............................................................................................ 315
James P. Gorman, Chairman and Chief Executive Officer, Morgan Stanley ..... 15
Prepared statement .......................................................................................... 166
Responses to written questions of:
Chairman Brown ....................................................................................... 316
Senator Tester ........................................................................................... 324
Senator Warren ......................................................................................... 327
Senator Cortez Masto ................................................................................ 330
Senator Smith ............................................................................................ 333
Senator Warnock ....................................................................................... 334
Senator Crapo ............................................................................................ 335
ADDITIONAL MATERIAL SUPPLIED FOR THE RECORD
Letter submitted in support of the Veterans and Consumers Fair Credit
Act ......................................................................................................................... 336
ANNUAL OVERSIGHT OF WALL STREET FIRMS
WEDNESDAY, MAY 26, 2021
U.S. SENATE,
COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS,
Washington, DC.
The Committee met at 10 a.m., via Webex, Hon. Sherrod Brown,
Chairman of the Committee, presiding.
OPENING STATEMENT OF CHAIRMAN SHERROD BROWN
Chairman BROWN. The Senate Committee on Banking, Housing,
and Urban Affairs will come to order.
This hearing is in the virtual format. A few reminders as we
begin. Once you start speaking, there will be a slight delay before
you are displayed on the screen. To minimize background noise,
please click the mute button until it is your turn to speak or ask
questions.
You should all have one box on your screens labeled ‘‘Clock’’. For
witnesses, you will have 5 minutes for opening statements. For all
Senators, the 5-minute clock still applies for questions. At 30 sec-
onds remaining, you will hear a bell ring to remind you your time
has almost expired. It rings again 30 seconds later.
If there is a tech issue, we will move to the next witness or Sen-
ator until it is resolved. And, finally, to simplify the speaking order
process, Senator Toomey and I have agreed to go by seniority for
this hearing.
Today is the first time we have ever had the CEOs of the Na-
tion’s six largest banks together before the Committee.
Over a century ago, Louis Brandeis wrote about the concentra-
tion of corporate power and how it distorts the market. He called
his book ‘‘Other People’s Money and How the Bankers Use It’’. It
is a subject Americans continue to have a stake in: how you, the
Nation’s largest financial institutions, use other people’s money.
You are the six most powerful business leaders in this country.
Your decisions affect the lives of millions of Americans—their pay-
checks, their opportunities, their retirement savings.
And your power is so much greater than that of your prede-
cessors 30, 40, 50 years ago.
Look what has happened to our country during that time.
Profits have gone up, stock prices have soared, your own com-
pensation is stratospheric; but workers are getting a smaller and
smaller share of the wealth they create, and they are working
harder than ever.
We have a racial wealth and income gap that has barely budged
since we passed the Civil Rights Act.
(1)
2
In the aftermath of the 2008 Great Recession where millions lost
their jobs, Wall Street still made record profits.
In a pandemic where half-a-million Americans died and we had
the highest unemployment since the Great Depression, Wall Street
still made record profits.
I sense a pattern.
Like most Americans, I want businesses to make money. I do not
mind that bankers are rich. Some people are going to be wealthy,
and that is fine with me.
Here is the problem, though. Under the current system, Wall
Street profits no matter what happens to workers, because those
profits now come at the expense of workers.
Your banks are the ones that largely built that system.
We often hear about the ‘‘invisible hand.’’ But the economy is not
physics. It is not governed by scientific laws outside our control. It
is made up of people making choices about our values and about
the society we want to live in.
The ‘‘invisible hand’’ does not lay off workers. The ‘‘invisible
hand’’ did not invent credit default swaps. The ‘‘invisible hand’’
does not decide to invest in private equity firms that buy up mobile
home parks in Iowa and across the country and then jack up the
rent.
Your banks—your lobbyists, your fellow CEOs at some of the
other largest companies in America—you make those choices that
dictate how our economy works.
Wall Street built this system. They did not build it for everyone.
They built it for themselves.
When companies lay people off, when they move jobs to low-wage
countries, when they cut paychecks, when they bust unions, when
they subcontract work to lower-paying companies with fewer bene-
fits, when all that is done, Wall Street analysts yell, Buy, buy,
buy.’’
And what you do sends a signal to every other company. If busi-
nesses want investment, they emulate you. They know they will
not attract investment unless they repurpose all their funds into
short-term profits for shareholders.
As you all know, when you started your businesses, it has not
always been like this.
When I was growing up, the CEO-to-median worker pay ratio
was 20:1. That was pretty good money and a pretty good lifestyle
for management, as it should have been.
Today that ratio is closer to 320:1.
From the mid-20th century through the early 1980s, the finan-
cial sector made up 10 to 15 percent of corporate profits. Today it
is 25 percent, yet it makes up only 4 percent of jobs.
A few decades ago, a majority of Wall Street capital funded the
real economy—wages, machinery, research, new construction.
Today much of that capital goes to stock buybacks, dividends, and
complex financial instruments. Only about 15 percent goes to the
real economy.
Instead of investing in businesses that actually make things or
provide useful services and that create real jobs in towns all over
the country, companies spend billions buying back stocks and
handing out CEO bonuses.
3
Stock buybacks used to be illegal market manipulation. Today
they are routine.
Wall Street’s interests and Main Street’s interests no longer
match up. The current system treats workers as a cost to be mini-
mized instead of the engine behind our success.
Look at what has happened to places like where I grew up, in
Mansfield, Ohio.
Jobs shipped overseas to countries where companies can pay
workers less. Declining union membership—by design. Crumbling
roads, shuttered storefronts, and workers forced to choose between
a hometown they love, and leaving in search of opportunity.
And that was before 2008. You know what happened to Ameri-
cans then.
And Congress and too many in Washington have been willing ac-
complices—tax break after tax break. Gutting consumer protec-
tions. Trade deals written by corporate lobbyists.
So I come back to this. There is a reason towns across the coun-
try like Mansfield look the way they do. It is because our economy
is no longer about workers and communities and real investment
in both of these.
The six of you before us today are the most powerful economic
titans in our country.
Your banks, and the systems they built and uphold, bear some
responsibility.
At the end of last month, we held our first-ever worker listening
session. We heard from workers from all kinds of backgrounds,
working all kinds of jobs—including as a former teller at one of
your banks.
They talked about wage theft, about being laid off during a pan-
demic with no severance, about how dangerous their workplaces
could be, about how companies busted their unions.
There was a common thread through their stories. Their hard
work simply does not pay off—certainly not the way yours does.
Pamela Garrison, a worker from West Virginia, said something
that stuck with me. ‘‘ ‘Working poor,’’ she said, ‘‘are two words that
should not go together.’’
I know you cannot snap your fingers and fix all these workers’
problems. But you also cannot tell me the decisions you make have
no effect on the factors that determine their job opportunities and
their wages.
And yes, I know you work hard, too. We all do. Work is some-
thing that unites all of us. We are all trying to do something pro-
ductive for our families, for our businesses, and, yes, for our com-
munities and our country.
Here is the difference, though. For most people, no matter how
hard they work, if one thing goes wrong in their life—they get in
a car accident, the plant where they work shuts down, their spouse
gets sick—they are on their own.
They do not get a taxpayer bailout. They all remember that Wall
Street did.
And it has not only been the bailouts. No one can deny that this
Nation has been good to the financial industry—deposit insurance,
the Federal payments system, the whole financial infrastructure
you all rely on.
4
But your banks have not held up your end of the deal.
As far as I can tell, you have not at all rethought this Wall
Street system built on short-term profits at the expense of long-
term growth for everyone.
In fact, you continue to perpetuate it.
Wall Street gets second chance, after second chance, after second
chance. Most workers do not even get one.
It is past time for the financial industry to be as good to the
American people as the Nation has been to you, the financial in-
dustry.
The purpose of today’s hearing is to show Americans their Gov-
ernment is finally looking out for them, that we understand this
economic system has betrayed millions of workers, that it holds our
country back.
Here is what we want to hear from you today: What are you and
the companies you run going to do—not just say, but actually do—
to change?
We want to hear what concrete actions you will take to change
the incentives on Wall Street, to reward work instead of just re-
warding wealth.
To pay for and work to undo the damage that Wall Street has
done, and continues to do, to communities of color.
To stop investing in corporations that fuel climate change,
threatening people’s communities and livelihoods.
To channel your vast resources into businesses that employ ac-
tual people in cities and towns, from my father’s hometown of
Mansfield, Ohio, to my mother’s hometown of Mansfield, Georgia.
To invest in our country’s greatest asset: the American people.
I have heard many of you argue that you do not need Govern-
ment rules forcing you to make changes to your business model.
So today start, show us some proof. Prove to us that you are
going to use your positions to change the Wall Street system, to
make our economy work for everyone—not just for CEOs and the
wealthy.
Senator Toomey.
OPENING STATEMENT OF SENATOR PATRICK J. TOOMEY
Senator TOOMEY. Thank you, Mr. Chairman.
Today’s hearing is about the U.S. financial system, and this fi-
nancial system proved to be remarkably resilient during COVID,
but I am concerned about increasing pressure on banks to embrace
‘‘wokeism’’ and appease the far left’s attacks on capitalism. And I
worry that continuing down this path could lead to distorted credit
allocation, activists seeking to make political change through the fi-
nancial system instead of through the democratic process, and ulti-
mately diminished prosperity for Americans.
So, first, let us observe that the banking system did, in fact,
prove to be very resilient. Last year, we had the worst pandemic
in more than 100 years, the Government shut down almost the en-
tire economy. We had the most severe recession since the Great De-
pression. And despite all that, banks remained stable, responded to
their customers’ needs for credit. Because they were so well capital-
ized, they were able to do so.
5
In fact, one of the best decisions we made during COVID prob-
ably was administering the Paycheck Protection Program through
the banking system because there was no other system that had
the scale or agility to run this program, and banks leveraged their
relationships to deliver hundreds of billions of PPP dollars to mil-
lions of small businesses so they could keep their workers em-
ployed.
So the financial system’s contributions to America’s economic
growth—before and during the pandemic—are really part of the
larger success story of our capitalist system. No economic system
has lifted more people out of poverty, created more opportunity,
and produced a higher standard of living than democratic cap-
italism.
Thanks to capitalism, life is better for the vast majority of Amer-
icans today than it has ever been. In fact, before COVID, just be-
fore COVID, we had the best economy of my lifetime—as measured
by the very metrics that my Democratic colleagues believe are very
important. We had the lowest unemployment rate in 50 years for
all Americans. We had all-time record low unemployment rates for
African Americans and Hispanics. We had more jobs than people
looking for work, and we had a record low poverty rate.
And contrary to the characterizations we sometimes see, we had
across-the-board wage growth, and the wage growth was growing
fastest for the lowest income earners, so we were narrowing the in-
come gap. In fact, the very system of economic freedom that my col-
leagues sometimes criticize was actually creating unprecedented
and shared prosperity across America.
That is why I am surprised and troubled to see some leaders of
some banks taking actions that I think undermine the property
rights that are at the very heart of our system and can lead to po-
liticized lending. Some bank leaders have embraced so-called stake-
holder capitalism, which really diminishes the primacy of share-
holders in our economy and enables or encourages corporations to
pursue a social agenda rather than prioritize its responsibilities to
its owners.
Now, it is a fact that a well-run business always benefit their
stakeholders. That is the nature of business. But management’s re-
sponsibility is to do so in service to shareholders, because they own
the company. The people who own a company—whether it is
through shares in their retirement accounts, pension plans, college
savings accounts, or anything else—they rely on a firm’s officers to
look out for their financial interests.
Making decisions based on social policy objectives—rather than
profit maximization—deprives these shareholders of their rightful
property. And worse yet, once shareholders’ rights are reduced to
the level of all other stakeholders, how does a company’s manage-
ment decide whose interest to prioritize?
Now, some believe the Government should step in and make
those decisions. For example, there are people who would favor a
prohibition on stock buybacks. After all, if the shareholders’ inter-
est is no longer paramount, then the Government can determine
that that capital would be more appropriately allocated to employ-
ees or the environment or some other special interest group.
6
It is a fallacy to think that if you are seeking profits, you are not
serving people. In fact, it is the exact opposite. A business can only
profit when it satisfies its customers, and that can only be achieved
with a satisfied workforce and good relationships with the commu-
nity.
Finally, let me close with just a suggested word of unsolicited ad-
vice. If there is an issue in the political realm that affects your
bank, like taxes or regulatory policy, I would hope you would ar-
ticulate your views on behalf of your shareholders. But if there is
a highly charged social or political issue that involves balancing
competing values, such as balancing access to voting with election
security, both of which are important, sometimes competing values,
that ought to be left to elected lawmakers. Those are the folks who
were elected to make these difficult policy decisions, and most im-
portantly, they are the people who are directly accountable to the
American people who hire and fire them: the voters in their juris-
dictions.
Thank you, Mr. Chairman.
Chairman BROWN. Thank you, Senator Toomey.
We have six witnesses today. I will introduce each now, then call
on them in the order in which they have been introduced.
Our witnesses are Mr. Charles Scharf, who worked for Salomon
Smith Barney, Citigroup, Bank One, Visa, and Bank of New York
Mellon before being named CEO of Wells Fargo in October 2019.
Welcome, Mr. Scharf.
Mr. David Solomon worked at Irving Trust Bank of New York
Mellon, Drexel Burnham, and Bear Stearns before joining Goldman
Sachs, where he has served as CEO since October of 2018. Wel-
come, Mr. Solomon.
Ms. Jane Fraser worked in mergers and acquisitions at Goldman
Sachs before joining Citi in 2004. She took over as CEO of
Citigroup in March 2021. Welcome, Ms. Fraser.
Mr. Jamie Dimon began his career at the stock brokerage
Shearson, Hammill & Company and interned at Goldman Sachs
before working in American Express and Citigroup. He served as
CEO of Bank One until it merged with JPMorgan Chase where he
has served as CEO since 2005. Welcome, Mr. Dimon.
Mr. Brian Moynihan served at Fleet Boston Bank and as CEO
of Merrill Lynch until it merged with Bank of America where he
was named CEO in 2010. Welcome, Mr. Moynihan.
And, finally, Mr. James Gorman worked as a bank consultant for
McKinsey before joining Merrill Lynch. He went on to work for
Morgan Stanley where he was named copresident in 2007. He has
served as CEO since 2010. Welcome, Mr. Gorman.
Mr. Scharf, you are recognized for 5 minutes. Thank you for join-
ing us.
STATEMENT OF CHARLES W. SCHARF, CHIEF EXECUTIVE
OFFICER AND PRESIDENT, WELLS FARGO & COMPANY
Mr. SCHARF. Chairman Brown, Ranking Member Toomey, Mem-
bers of the Committee, good morning, and thank you for the oppor-
tunity to be here today.
Just over a year ago, when I last appeared before Congress upon
assuming my role as CEO, we were on the verge of a global pan-
7
demic. I cannot help but look back and think how little we under-
stood then of what 2020 would bring. When the pandemic struck,
we all came together to stand up unprecedented assistance at a
scale and speed that had never been done before. Though the proc-
ess was not perfect, we, the Government, and others rallied to do
what needed to be done, and now we must continue to work to-
gether to ensure a fair and equitable recovery.
As we begin taking steps toward recovery, I am proud of Wells
Fargo’s efforts to support our customers, our employees, and the
communities we serve—all while continuing to transform our orga-
nization. I believe our country and communities benefit from a
strong Wells Fargo, and I am proud that we have been a source
of strength for our customers and communities during the toughest
of times. They are our core and must remain our priority in all we
do.
To support our customers during the pandemic, we deferred pay-
ments and waived fees for more than 3.7 million consumer and
small business accounts to help people to make ends meet. We pro-
vided over 1 million mortgage forbearances and suspended residen-
tial property foreclosures and evictions to keep Americans in their
homes. And we acted as a leading lender in the Paycheck Protec-
tion Program, funding more than $13.7 billion in aid to small busi-
nesses. Over 40 percent of our loans were made to businesses lo-
cated in low- to moderate-income or majority–minority census
tracts.
Recognizing that the goal of the PPP was to provide a lifeline to
struggling small businesses, we also took the more than $400 mil-
lion in fees generated by the program in 2020 and are donating
them to our Open for Business Fund, which is allowing us to en-
gage CDFIs, not-for-profits, and others to help businesses manage
the economic effects of COVID–19. And we will continue to do our
part by working on solutions to tackle the problem of unbanked
and underbanked individuals and other efforts to foster an inclu-
sive recovery.
We look forward to defeating the impact of the pandemic to-
gether and believe Wells Fargo will play an important role in help-
ing rebuild a stronger America.
To our employees, I am proud of the work you have done over
the past year to support our customers and communities during
these uncertain times. We prioritize safety and well-being, and my
deepest gratitude goes out to our frontline workers who made it
possible to keep branches open safely.
We transitioned more than 200,000 employees to remote work
last March, and we understood the tremendous strain the pan-
demic would place on all of our employees and their families. We
made special cash awards to approximately 165,000 employees, of-
fered enhanced support for employees who are parents or care-
givers, provided free, voluntary COVID–19 testing for all employ-
ees working in a Wells Fargo location, and offered paid time off to
employees for vaccination appointments.
For the communities we serve, we have continued to invest in
the institutions critical to their success. While we are very encour-
aged to be seeing signs of improvement, we realize that not all of
our communities are benefiting equally in the recovery. This is why
8
Wells Fargo has been working to support a more inclusive economic
recovery, with a focus on racial and social equity, economic mobil-
ity, and investments in low- and moderate-income communities.
For example, we are investing in Black-owned minority deposit
institutions across the country as part of our $50 million commit-
ment to support MDIs, and we have given more than $150 million
to CDFIs around the country who are providing grants to hard-hit
small businesses.
Additionally, just last week, we announced our Banking Inclu-
sion Initiative, a 10-year commitment to accelerate unbanked indi-
viduals’ access to affordable mainstream accounts and helped
unbanked communities have easier access to low-cost banking.
We are also committed to helping transition to a low-carbon
economy and have set a goal of achieving net-zero greenhouse gas
emissions, including our financed emissions, by 2050. And, finally,
for our company, while we still have significant work to do, we are
committed to devoting the resources necessary to operate with
strong business practices and controls and maintain the highest
level of integrity and have an appropriate culture in place.
Thank you again for having me, and I look forward to answering
your questions.
Chairman BROWN. Thank you, Mr. Scharf.
Mr. Solomon, you are recognized for 5 minutes.
STATEMENT OF DAVID M. SOLOMON, CHAIRMAN AND CHIEF
EXECUTIVE OFFICER, GOLDMAN SACHS
Mr. SOLOMON. Chairman Brown, Ranking Member Toomey, and
Members of the Committee, thank you for giving me the oppor-
tunity to speak today.
These last 14 months have been an incredibly challenging time
as the pandemic has swept across the world, killing almost 600,000
Americans, and plunging us into a steep economic retraction. Even
today our hearts go out to the people of India and others around
the world who continue to suffer from this virus. However, because
of the swift actions taken by Congress, the Federal Reserve, and
others to combat this health and economic crisis, I am very opti-
mistic about our future. As more people are vaccinated, the U.S. is
poised for a strong recovery. I would be remiss if I did not thank
Moderna, Pfizer, Johnson & Johnson, and AstraZeneca for the
amazing work they have done on life-saving vaccines.
The banking industry performed well during the crisis, as the
Fed’s two stress tests in 2020 confirmed. This is due in part to the
Dodd–Frank Act and other financial regulations put in place since
the 2008 crisis. Goldman Sachs remained well capitalized both
leading up to and throughout the pandemic. Goldman Sachs has
more than 40,000 employees, and I continue to be in awe of their
resilience. To help them through the pandemic, we gave our people
an additional 10 days of paid family leave, expanded access to child
and adult care, offered free telemedicine, and rolled out a global
COVID testing regime.
In addition, we have continued to pay our onsite vendor staff
whether they worked or not. That includes our mailroom staff, caf-
eteria workers, security guards, and janitorial staff.
9
Over the last year, we experienced historically elevated levels of
client demand, and because we were well capitalized, we were able
to help our corporate clients weather the impact of COVID–19 and
position themselves for a postpandemic recovery.
For our digital bank customers, we launched a COVID Customer
Assistance Program which allowed customers to defer loan pay-
ments for 4 months and credit card payments for 6 months at no
extra cost. We also found innovative ways to support small busi-
nesses. We are not an SBA lender, so we did not participate di-
rectly in the Paycheck Protection Program. Instead, we committed
$1.25 billion in capital to community development financial institu-
tions and mission-driven lenders who facilitated PPP loans across
the country.
The capital we deployed with our CDFI partners reached very
small businesses, nearly half of which are in minority communities.
The average loan size is around $43,000, and the median employee
count is two.
In addition, last week we committed another $1 billion in part-
nership with the SBA and our CDFI partner Lendistry to fund ap-
proximately 40,000 PPP loans, over half of which will benefit mi-
nority-owned businesses. we did this to ensure these applicants
were able to have their loans processed and approved before the
PPP funds are exhausted.
We also continue to support small businesses through our 10,000
Small Businesses Program, launched in 2010. Through this pro-
gram we provide education by partnering with community colleges
and greater access to capital to thousands of small businesses. Last
year, we committed an additional $250 million to serve another
10,000 small business owners. We have also committed an addi-
tional $500 million to our program for diverse entrepreneurs and
investors, Launch With GS.
I now want to focus on three other initiatives that are incredibly
important to us.
First, we have already achieved more than a fifth of our 10-year
target of $750 billion in financing, investing, and advisory activity
focused on climate transition and inclusive growth. We have been
carbon neutral across our own operations since 2015, and we re-
cently set a goal of net-zero carbon emissions in our supply chain
by 2030.
Second, we commissioned extensive research on how to mitigate
income inequality which showed that Black women are one of the
most marginalized groups in this country. It found that if we can
reduce the earnings gap for Black women, we could see U.S. GDP
increase by $300 billion a year. In response, we developed a new
initiative called ‘‘One Million Black Women,’’ where we will invest
$10 billion over the next 10 years to narrow opportunity gaps for
at least 1 million Black women in the United States.
The final initiative relates to improving our diversity and inclu-
sion. When I became CEO 21⁄2 years ago, I said this would be one
of my top priorities. Since I last testified before Congress, we have
made progress. Our board will now have 6 out of 13 directors who
are women and will be 62 percent diverse by race, gender, or sex-
ual orientation. Our newest partner class includes the highest per-
centage of women and Black partners in our history. In addition,
10
our 2020 campus analyst class in the Americas was 55 percent
women and Black talent, our highest ever. However, I am not satis-
fied with this, and we continue to work to address this.
Thank you. I would be happy to answer any questions that you
have.
Chairman BROWN. Thank you, Mr. Solomon.
Ms. Fraser, you are recognized for 5 minutes. Welcome.
STATEMENT OF JANE FRASER, CHIEF EXECUTIVE OFFICER,
CITIGROUP
Ms. FRASER. Thank you very much, Chairman Brown, Ranking
Member Toomey, and Members of the Committee, and thank you
for the opportunity to represent Citi today. By way of introduction,
my name is Jane Fraser. I joined the bank 17 years ago, and I be-
came CEO in March.
I grew up in a small village in Scotland, but first came to the
U.S. in 1987, and I proudly became a U.S. citizen in 2001. My hus-
band immigrated to the U.S. from Cuba when he was a young boy,
and he is also a proud citizen of our country. So we feel very fortu-
nate about the opportunities the U.S. has created for our family,
and we believe we have an obligation to ensure that everyone can
participate in the American dream.
At Citi, we also recognize this has been a very challenging time
for Americans, millions of whom we are very proud to call our cus-
tomers.
The origins of this global crisis are unlike the last one. This is
a public health crisis with severe economic consequences, and
through this pandemic, Citi has shown we are a very different
bank than the one that entered the financial crisis more than a
decade ago. We are smaller, we are safer, we are stronger, and we
are far less complex. And we have had the financial resources to
support our clients and communities through this crisis, and we
are laser-focused on driving a sustainable and equitable recovery
from the pandemic.
I will always be proud that we were the first bank to provide re-
lief programs for retail and small business customers in the United
States. We are also proud to be a reliable conduit for the extraor-
dinary consumer and business aid that Congress and the Federal
Reserve have provided. We also helped deliver this aid across many
Government-sponsored programs, including the Paycheck Protec-
tion Program. And as a result of the tremendous need from small
businesses, we went from being a pretty small SBA lender to so far
funding more than $5 billion in PPP loans to the hardest-hit small
businesses, with nearly 80 percent of the loans going to businesses
with ten or fewer employees. And we are donating all of the net
profits that we have made from the program to further support vul-
nerable small businesses and communities in the United States.
At the same time, we made our own people and their safety a
priority and provided special compensation awards and many bene-
fits to our many colleagues to help ease their financial burden and
concerns.
As the world’s most global bank, we will continue to support
many of the most iconic American businesses as they navigate the
uncertainty of operating in markets abroad. Working in concert
11
with Federal assistance programs, we will also continue to serve as
a source of strength for our customers and communities here at
home.
We have a smaller branch footprint than many of our peers, but
we will harness the full power of our bank’s capabilities to extend
our reach and help make sure the recovery leaves no one behind.
We are proud of our record of enabling opportunity in communities.
For 11 straight years, we have been the number one lender for af-
fordable housing in the United States.
In 2020 alone, we worked with State and local governments to
finance over $27 billion in vital capital projects such as roads and
schools, hospitals, and utilities. And through low-cost and no-fee
products, we continue expanding financial services in underbanked
neighborhoods.
Almost exactly a year ago, as calls for social justice rang out in
the wake of George Floyd’s murder, Citi answered those calls with
action. We launched a firmwide effort, including $1 billion in stra-
tegic initiatives, to help close the racial wealth gap in the United
States. We are not alone in our commitment to equity, but what
distinguishes us is in how we hold ourselves accountable for re-
sults, and where we have more work to do, we are very up front
about it. This transparency has defined our representation goals
and our efforts to close our gender pay gap.
It is also part of our sustainability agenda and our commitment
to net-zero emissions by 2050, which I announced on my first day
as CEO. Helping our clients transition to a low-carbon economy is
going to be central to this work.
I am determined for Citi to continue leading on these issues.
They are central to our mission of enabling growth and progress.
I want us to build a reputation for excellence in everything we do.
I want to say thank you again for the opportunity to talk about
Citi’s efforts to be part of the solution and recovery to the pan-
demic.
Chairman BROWN. Thank you, Ms. Fraser.
Mr. Dimon is recognized for 5 minutes. Mr. Dimon, you are rec-
ognized for 5 minutes.
STATEMENT OF JAMIE DIMON, CHAIRMAN AND CHIEF
EXECUTIVE OFFICER, JPMORGAN CHASE & CO.
Mr. DIMON. Chairman Brown, Ranking Member Toomey, and
distinguished Members of the Committee, I appreciate the invita-
tion to appear before you to talk about JPMorgan Chase, the peo-
ple, the businesses, and the communities we serve.
We are living through unprecedented times, which history will
judge leaders of Government and industry by the actions we take
to address the health and economic crises and longstanding struc-
tural inequities.
At JPMorgan Chase, we entered this crisis from a position of
strength and leveraged our size and scale to contribute to stability
in our country and ongoing support for the ‘‘real economy’’: our cus-
tomers, employees, and communities impacted by the global crisis.
In 2020, we extended credit and raised capital totaling $2.3 tril-
lion for consumers and businesses of all sizes, helping them meet
payrolls, avoid layoffs, and support operations.
12
We delayed payments for 2 million mortgage, auto, and credit
card accounts and refunded $120 million in fees for more than 1
million customers—no questions asked.
We funded over 400,000 Paycheck Protection Program loans to
small businesses supporting over 3 million jobs, for more than $40
billion in total funding. About 90 percent went to businesses with
fewer than 20 employees, and around one-third went to businesses
in communities of color.
Outside of PPP, we provided an additional $18 billion in new and
renewed credit for small businesses.
We committed $250 million in business and philanthropic initia-
tives with a particular focus on helping underserved small busi-
nesses and not-for-profits.
And we supported our employees, especially our frontline work-
ers who continued to show up to their jobs in branches, call cen-
ters, lock boxes, and for other roles that could not be performed at
home. We gave special payments, provided additional paid time off,
and continued to pay for their regularly scheduled hours, even if
hours were reduced or zero.
There is no doubt that the bold and swift actions taken by Con-
gress, the Federal Reserve, and the Administrations over the past
15 months was instrumental in reversing the financial panic and
avoiding a deep and lasting economic crisis. But the last year exac-
erbated longstanding inequality, particularly among Black and
Latinx families, increasing barriers to wealth creation and holding
us back as a country. That is why JPMorgan Chase recently com-
mitted an additional $30 billion over 5 years to address racial eco-
nomic inequality, focusing on expanding affordable housing and
ownership, growing Black and Latinx owned businesses, and im-
proving access to banking.
These are new business commitments that will help to drive real
change. We have made solid progress since our announcement late
last year and are on track for our 5-year commitment. We have al-
ready refinanced $2 billion in mortgages for Black and Latinx
households and have funded investments and loans for an incre-
mental 5,500 multifamily affordable housing units. We have funded
over $60 million in investments in nine minority depository institu-
tions, and we are building the foundation that will help us grow
new relationships in communities of color to meet our mortgage
and small business commitments.
We opened Community Center branches in areas like Crenshaw,
Chicago, Minneapolis, and Harlem, with many more coming in the
next year.
At JPMorgan Chase we consider our global workforce a competi-
tive advantage and our people our greatest strength. Our 160,000
U.S. employees work in offices and branches located in 38, soon to
be 48 States this summer. Thirty percent of the new branches
opening in new markets are located in low- to moderate-income
neighborhoods, and nearly one-third of all branches are minority
census tracts.
For the third time in 5 years, this year we increased entry-level
wages to $16 to $20 an hour, and we provide annual benefit pack-
ages including medical and retirement of $13,000 per person. Near-
ly 70 percent of the employees who started before 2017 with a sal-
13
ary of less than $40,000 are still at the company and have experi-
enced an average increase of 40 percent.
We have made progress in recruiting, retaining, and promoting
ethnically diverse employees. Over the past 5 years, for example,
we have increased the number of Black senior leaders by more
than 50 percent and established a new program that holds manage-
ment accountable for their diversity and inclusion priorities
through compensation and performance evaluations.
Our country is poised for a strong economic rebound. But we
must ensure that the economic recovery benefits all and that we
address longstanding inequities that threaten the promise of Amer-
ica. Access to affordable health care, an education system failing
too many of our children, crumbling infrastructure, climate change,
and racial inequality are just some of the problems facing our great
Nation. All of us—Government, business, and civic society—must
work with a common purpose to address these challenges. The ac-
tions we take together will determine the future of our country for
generations.
I want to close by thanking our employees for their tireless work
and singular focus on doing right by our customers. They have per-
formed their jobs with integrity and commitment, often remotely,
while navigating personal challenges.
I look forward to working with all of you and look forward to
helping our country. Thank you.
Chairman BROWN. Thank you, Mr. Dimon.
Mr. Moynihan, you are recognized for 5 minutes. Thank you.
STATEMENT OF BRIAN MOYNIHAN, CHAIRMAN AND CHIEF
EXECUTIVE OFFICER, BANK OF AMERICA
Mr. MOYNIHAN. Thank you, Chairman Brown, Ranking Member
Toomey, and distinguished Committee Members.
Coming out of the financial crisis, my 200,000-plus teammates
helped transform Bank of America into a strong, straightforward,
client-centric company. We focus on what we call ‘‘responsible
growth.’’ That positioned us well to be a source of strength when
the health care crisis hit. We were able to help our clients and ulti-
mately the U.S. economy through the worst economic shock in re-
cent history, while at the same time increasing investments in sup-
port of our teammates and our communities.
For our clients, that included financial assistance through our
business as usual work and also helping deliver the timely Federal
relief programs across the board. We helped nearly 2 million con-
sumers and small businesses defer payments on credit cards, vehi-
cle loans, and home loans. Even with a deferral, the vast majority
of those clients remained current on their payments, which is a
good thing. We provided nearly half-a-million PPP loans to small
businesses; 83 percent of those loans have gone to businesses with
ten or less employees, and nearly 40 percent have gone to busi-
nesses in majority–minority communities. We sent millions of
emails to help clients understand the program and encourage them
to apply, including targeted outreach to drive awareness to all com-
munities.
Apart from PPP, we remain the largest lender to small busi-
nesses, according to the FDIC. We have $35 billion in small busi-
14
ness loan balances, and 60 percent of our small business lending
is in LMI communities. We also processed more than $73 billion in
stimulus payments and took additional actions to help overdrawn
clients access their full payment without offset. We deliver through
our nationwide branch network, one-third of which are in LMI
neighborhoods, and also through our digital capabilities. In 2020,
as a complement to our successful SafeBalance checking account,
we launched Balance Assist, a low-cost, digital-only alternative to
payday type loans, allowing clients to borrow up to $500 for a $5
flat fee.
We also increased investments in our team during the pandemic.
We expanded many of the benefits, including support for mental
health, free virtual medical consultations, and no-cost coronavirus
testing. We offered teammates $100 per day to hire someone to
come into their home and take care of their children or their adult
dependents during the crisis. We have funded more than 4 million
days for our teammates.
We implemented coronavirus testing and daily health screenings
and installed more than 44,000 wellness barriers in our branches.
We provided special compensation programs for teammates, includ-
ing supplemental pay, enhanced overtime pay, as well as transpor-
tation and meal subsidies, and we had no layoffs in 2020.
We ensured that all employees are compensated well. Last year,
we increased our minimum hourly wage to $20, a year earlier than
we had planned, and we will raise this to $25 an hour by 2025.
Vendors within the U.S. also are required to provide wages at or
about $15 per hour. To date, thousands of vendor employees have
also benefited by this.
Since 2012, we have not increased medical premiums for team-
mates earning less than $50,000. For 2020, we provided special
compensation awards to 97 percent of our talented team globally,
the fourth year we have done so in a row.
Maintaining our diverse and inclusive workplace continues to be
a priority. Fifty percent of our management team and 50 percent
of our board is diverse. More than half our global workforce is
women, and 45 percent of our U.S.-based teammates are people of
color.
We hired and trained more than 10,000 employees from LMI
communities in the last 3 years alone. And, finally, over the last
year, we increased our investment to support our communities in
a time of stress. In June 2020, we accelerated our longstanding
work to promote racial equality and economic opportunity to drive
investments in jobs, small business, housing, and health care in
local communities.
We have committed $1.25 billion over 5 years and have already
deployed $350 million of that, including equity capital investments
in 17 MDIs and CDFIs, investments in 90 private equity funds run
by majority–minority and women entrepreneurs, and focused on
minority- and women-owned businesses, and donated 29 million
masks and other PPE to underserved community centers.
We increased our home ownership program to help more than
60,000 Americans get into their homes in LMI neighborhoods. We
raised that goal from $5 billion to $15 billion this year.
15
We are also helping to accelerated the transition to a low-carbon
economy. We are committed at Bank of America to achieve net-zero
greenhouse gas emissions before 2050. We are working alongside
and supporting our clients in every industry to help them make
that transition.
We at Bank of America believe in capitalism, and it is the best
way to solve the challenges that are facing society. We operate by
delivering great returns for our shareholders and delivering for so-
ciety. We call that responsible growth. Thank you.
Chairman BROWN. Thank you, Mr. Moynihan.
Mr. Gorman, you are recognized for 5 minutes. Thank you for
joining us.
STATEMENT OF JAMES P. GORMAN. CHAIRMAN AND CHIEF
EXECUTIVE OFFICER, MORGAN STANLEY
Mr. GORMAN. Thank you, Chairman Brown, Ranking Member
Toomey, Members of the Committee. Thank you for having me
here.
Last year, none of us could have predicted the extraordinary pub-
lic health crisis that would unfold around the world.
We remain in the midst of this crisis, and it has caused incred-
ible humanitarian and economic issues, leaving an indelible mark
on many of us. Our hearts go out to all of those directly and indi-
rectly impacted by the crisis.
In response to these extraordinary and challenging times, we
were focused on serving our clients and our communities, and tak-
ing care of our employees.
We helped our corporate and institutional clients raise additional
liquidity and obtain financing for their stability. We raised over
$50 billion of capital for the industry sectors most affected by the
COVID crisis: the airline, the cruise, the travel industries. Our
team also helped raise health care capital for both Moderna and
Pfizer, including a sustainable bond issuance by Pfizer to support
patient access to medicines and vaccines, especially among under-
served populations.
For our retail clients, we guided them to manage their invest-
ment portfolios amidst extreme volatility.
Today Morgan Stanley, through its three businesses, provides a
stable foundation of support in any market environment.
In the institutional business, we are a financial advisor to com-
panies. We help them raise equity and debt capital—from taking
them public to helping them issue bonds so they can grow and cre-
ate jobs. We help public sector entities raise municipal financing.
We also help pension funds, mutual funds, and other financial in-
stitutions trade and manage their assets.
In our other two businesses—wealth and asset management—we
are managing over $5.6 trillion of assets for households and institu-
tions, including endowments and pension funds that manage the
retirements of our teachers, our firefighters, and our public employ-
ees. For millions of U.S. households, our services help families save
money—whether it is for college, retirement, or to put a downpay-
ment down on their mortgage.
16
Beyond our day-to-day core businesses, we also support the more
vulnerable in our communities through philanthropy and employee
engagement.
A number of well-publicized events last year led to a heightened
and necessary focus on racial and social justice and a recognition
that explicit support and purposeful collective action will be re-
quired. Some of our efforts over the past year include:
Providing grants to minority depository institutions to bolster
their loan loss reserves in the wake of the pandemic, and to assist
minority- and women-owned businesses to ensure an equitable re-
covery.
Most recently we started a program to provide 60 students with
4-year full-time scholarships to Howard University, Morehouse Col-
lege, and Spelman College—three of America’s leading historically
Black colleges and universities.
In addition, we are concerned that how we deal with climate risk
over the next decades will have a profound socioeconomic effect on
our communities. Morgan Stanley recognizes the threat that cli-
mate change poses, and we are working with all of our clients to
find ways to mitigate its effect.
Finally, early in the pandemic, we committed to making no re-
ductions in our workforce through all of 2020, and we stuck with
it. We thereby provided reassurance to our over 70,000 employees
in this most extraordinarily difficult time. I am proud of the com-
mitment all our employees showed to their clients and to our firm
to navigate this past year.
Chairman Brown, in your letter dated May 7 of this year, you
asked us to provide information on additional topics, and we have
included that in the attached addendum. for brevity for this hear-
ing.
I now look forward to your questions.
Chairman BROWN. Thank you, Mr. Gorman. And thanks for an-
swering that letter.
All of you spoke about lending to small business over the past
year, yet over the past year in the middle of the pandemic, when
small businesses and families have been desperate for loans, the
amount of loans that your banks made has dropped. Instead of
lending, instead of putting money back into the economy, you have
all said publicly you plan to spend billions on buybacks and divi-
dends.
My question starts with Mr. Moynihan. Your bank’s lending fell
14 percent over the last year. You just announced $25 billion in
stock buybacks. Why not lend that money to small businesses and
families?
Mr. MOYNIHAN. Well, the good news, Chair Brown, is that we can
do both. We can return capital to our shareholders to help them en-
hance their returns at the same time lending to small business. For
the month of May, we did $1 billion in the first 3 weeks of May.
We have done $1 billion in new commitments to small business.
That is up 29 percent, not over 2020 but over 2019. We have—we
have a $35 billion small business portfolio, and remain the largest
lender to small business, according to the FDIC, and we continue
to work closely with small business. The reasons why loans fell in
the crisis are businesses did not need the credit, but also remember
17
the PPP had a tremendous impact on demand for our clients, and
as we did $35 billion of PPP loans, that obviously caused less bor-
rowing from our lines of credit to small business.
Chairman BROWN. Well, Mr. Moynihan, you say you can do both,
but you have not done both. During the pandemic, 5,000 commu-
nity banks across the country, their lending went up 10 percent.
Your job is to spur innovation and create jobs. You supposedly em-
ploy some of the best economic experts in the country. You just
cannot tell me you cannot find a better way to spend $25 billion.
You could pay your workers more. You could do a variety of things
to serve the community a little better than stock buybacks.
Let me shift to Mr. Dimon. Mr. Dimon, at most of your banks,
the CEO makes—for all of you, at most of your banks the CEO
makes 800 or 900 times your lowest-paid worker. So, Mr. Dimon,
help me understand this. I do not think any of us on this panel or
any of the Senators asking questions thinks that you work 900
times harder than the tellers and customer service agents at
JPMorgan Chase. So help me understand this. How did we end up
here where CEOs are making 900 times what some of their work-
ers are making?
Mr. DIMON. We are very proud of the opportunity we give to all
of our people here. Our starting wage is approximately $35,000
plus medical benefits, retirement benefits. We take very good care
of our people in terms of training and all that.
My compensation is set by the board. They look at multiple fac-
tors, and that is how it takes place.
Chairman BROWN. But these are workers that I fight for every
day, the people that work at JPMorgan Chase in Columbus and
around the country. But 900 times, there is just really no expla-
nation.
Let me ask it to each of you in another way. This will be a sim-
ple yes-or-no question. I appreciate many of you have raised wages.
A number of you mentioned that. I appreciate when you raise your
wages for contractors, too. But your essential workers also need a
voice in the workplace, so my question, yes or no, will each of you
set an example to every other company in America, companies that
usually follow Wall Street’s lead, by pledging to remain neutral if
your employees want to form a union? Yes or no. Mr. Scharf, we
will start with you.
Mr. SCHARF. Chairman, we would work with our employees to
make sure that their voice is heard and do everything we can to
ensure that that voice is loud and clear.
Chairman BROWN. Will you remain neutral if they want to form
a union?
Mr. SCHARF. As I said, I think we’d want to engage with them
and understand what their concerns are and have a deep under-
standing of that before we make any decision.
Chairman BROWN. Ms. Fraser, would you remain neutral if they
want to form a union?
Ms. FRASER. We would certainly be supportive of our employees
having as many opportunities as they possibly can.
Chairman BROWN. Mr. Dimon.
Mr. DIMON. No.
Chairman BROWN. Mr. Moynihan.
18
Mr. MOYNIHAN. No, we would allow them to have their voice
heard and see what happens.
Chairman BROWN. Mr. Solomon.
Mr. SOLOMON. We would allow their voice to be heard.
Chairman BROWN. Does that mean you would be neutral on
forming a union?
Mr. SOLOMON. We would allow their voice to be heard.
Chairman BROWN. Mr. Gorman.
Mr. GORMAN. Like the others, we listen to and respect what our
employees want to do, and we would work with them on that.
Chairman BROWN. We know unions can do much to give women
and people of color some power in the workplace. The decisions you
make affect workers all over the country, workers whom your com-
panies could not function without. You have acknowledged that.
But the leaders make those decisions, do not reflect your workers,
they do not reflect the country. A couple years ago, Congressman
Al Green asked in a House hearing when your companies would be
led by women and people of color. Your banks have clearly not
made enough progress.
Mr. Gorman, you are one of only two CEOs who did not believe
there would be a woman or person of color leading your bank in
the next decade. Don’t you have a responsibility to do something
about that?
Mr. GORMAN. Absolutely, but I was asked a question. I answered
it truthfully. The senior leadership at that point in time happened
to be men. But we have since installed a woman as our CFO, just
last week. We have a woman who is cohead of banking; we have
a woman cohead of Asia. We have a woman who is head of all of
Europe, Middle East, and Africa. Our chief audit officer is a
woman. Our vice chairman covering sustainability is a woman. And
6 of my 13 indirect reports are people of diversity. So I absolutely
am committed to it, Chair, but I also happen to reflect the reality
that this organization has been built over many decades, and it
takes a long time for talent to rise to the top.
Chairman BROWN. So I will re-ask the question. In the next dec-
ade, will one of those women be the CEO?
Mr. GORMAN. I think there is a distinct possibility, but I cannot
guarantee it. That is for the board. What I am doing is giving the
board choices, not just who replaces me but who replaces that per-
son.
Chairman BROWN. OK. Thank you. You all need to do more, and
we want to see permanent change, of course, as the country—the
diversity of this country needs to be reflected in the Senate, in
board rooms, and in CEO job positions.
Senator Toomey, you are recognized.
Senator TOOMEY. Thank you, Mr. Chairman.
So I would like to start with a simple direct question, and I hope
you will understand in the interest of time, I would love to get a
yes or no answer, although Mr. Moynihan already answered this
question in the opening statement that he made, and he answered
in the affirmative. The question is simply: Do you believe that cap-
italism is the best economic system for producing the most pros-
perity for the greatest number of people? Mr. Scharf.
Mr. SCHARF. Yes, I do.
19
Senator TOOMEY. Thank you. Mr. Solomon.
Mr. SOLOMON. Yes.
Senator TOOMEY. Thank you. Ms. Fraser.
Ms. FRASER. Yes, I do.
Senator TOOMEY. Thank you. Mr. Dimon.
Mr. DIMON. Absolutely.
Senator TOOMEY. Thank you. And, Mr. Gorman.
Mr. GORMAN. Yes, I do.
Senator TOOMEY. Great. And, of course, obviously I agree on this.
I am concerned that sometimes rather than defending this prin-
ciple of capitalism, some of you have embraced so-called stake-
holder capitalism, which really is something different than true
capitalism. And I would just ask you to reconsider this, because
stakeholder capitalism is meant to diminish the importance of a
company’s obligation to shareholders relative to other stakeholders.
And I think that is a contradiction of the fundamental aspect of
capitalism.
One of the reasons I am concerned about this is because the im-
plied criticism of capitalism inherent in stakeholder capitalism also
lends credence to these ongoing attacks that we hear. So, for exam-
ple, in March, our Committee held a hearing entitled, ‘‘Wall Street
v. Workers: How the Financial System Hurts Workers and Widens
the Racial Wealth Gap’’. And we had a witness who argued to us—
and I will quote—‘‘Credit debt itself provides a channel through
which wealth drains from marginalized communities toward more
affluent entities. Its burdens are not equally distributed, which ex-
acerbates the racialized and gendered wealth gap.’’
So I would like to ask each of you, but in the interest of time,
I think I will just go to Mr. Dimon, if I could, and ask you to—
I mean, is it your view that the credit that your institution pro-
vides drains wealth from marginalized communities and exacer-
bates the racialized and gendered wealth gap?
Mr. DIMON. No, I think you have heard from all the CEOs here
that we are making an enormous effort to try to get credit to
marginalized, lower/middle-income, majority–minorities, Black
small businesses, women of color, et cetera, and we are doing a
good job. We could always do more. We can acknowledge there are
some problems that need to be fixed, and I think we are all trying
to do it the right way. But it absolutely was not caused by Wall
Street taking credit from those communities.
Senator TOOMEY. It seems to me, in fact, that access to credit is
a necessary precondition for poor people to move up to the middle
class, not the other way around.
Let me move on to an issue that is really important in my State.
As many of you probably know, Pennsylvania is now the second
largest producer of natural gas among all 50 States. And I have
heard directly from constituents in this field that they are finding
it more difficult to finance their business as a result, they believe,
of commitments that financial institutions have made to reduce
greenhouse gas emissions.
Now, this is particularly ironic because, of course, as we all
know, natural gas is the reason that the United States has out-
performed most of the rest of the world in reducing CO2 emissions.
20
But, nevertheless, they believe they are facing more difficulty get-
ting finance than ever before.
Also, no matter what one thinks about the eventual arrival of
more widespread use of electric vehicles, the fact is piston-driven
cars are going to be on the roads for quite a while, so we need a
certain amount of oil.
So let me start with Ms. Fraser. My understanding is that
Citigroup is committed to ending all financing for thermal coal
companies by 2030, and, frankly, there might still be a need for
some thermal coal after that date. But my real question for you is:
Have you established or do you plan to establish a similar policy
prohibiting the financing of either oil or natural gas, aside from if
the economics would dictate that you should not provide the financ-
ing?
Ms. FRASER. Thank you for the question, Senator Toomey. Our
goal is to support our clients responsibly and help them transition
to cleaner energy, create jobs in the future. This is going to require
investing in new technologies and helping them develop. So what
we are looking at doing is working with our clients in the transi-
tion and to support them in doing so, so that we can balance the
evolution——
Senator TOOMEY. I understand all that, and that is—but that is
separate from my question, which is: Do you now or do you plan
to have anytime soon a prohibition against financing the develop-
ment of oil or natural gas?
Ms. FRASER. We do not plan to have a prohibition against this,
no. We plan to help our clients in the transition to the cleaner car-
bon technologies.
Senator TOOMEY. OK. Thank you. I think I am out of time.
Chairman BROWN. Thank you, Senator Toomey.
Senator Reed from Rhode Island is recognized.
Senator REED. Thank you very much, Mr. Chairman. Let me wel-
come the panelists today and thank you for being with us today.
In 2006, I was fortunate to work on a bipartisan basis to pass
the Military Lending Act, which established a lending limit of 36
percent for all military personnel, and I had some firsthand experi-
ence since I commanded a paratrooper company and was appalled
at how my troops were taken advantage of downtown in trying to
buy vehicles and payday lending, et cetera. And this situation has
been exacerbated by the pandemic. People have been laid off. I
heard one story of a gentleman in his 40s who was laid off. He had
to take care of his mother. He had to take care of his partner and
her four children. And so he went out to a payday lender and got
a loan which had an annualized interest rate of 528 percent.
When I was a kid in Rhode Island, they did not call that ‘‘payday
lending.’’ They called it ‘‘loan sharking.’’ And the agents were par-
ticularly burly gentlemen with no last names. I think we have to
stop this.
And so Senator Brown and I have proposed legislation that
would extend this protection to all Americans, and I do not believe
any of your institutions even come close to 36 percent interest. But
in the spirit of trying to help unbanked people—and I believe your
efforts are very sincere—would you support this effort on our be-
half to extend the 36-percent limit?
21
Let me begin with Mr. Scharf and go down the list, but I under-
stand that Mr. Gorman does not have a retail operation, so I will
excuse him from answering. Mr. Scharf, please.
Mr. SCHARF. Senator, it is something that we certainly would
take a look at. I think it is important that we would want to under-
stand the way specific legislation is written and how we would ac-
count for potential changes in rates, including material movements,
but, most importantly, to understand that there is access to credit
in a responsible way is not lost, because we are as an institution
extremely focused on bringing the unbanked and the underbanked
into the financial mainstream.
Senator REED. Mr. Solomon, please.
Mr. SOLOMON. We have a relatively small consumer footprint,
Senator. We would want to work with you in ensuring that in a
materially different interest rate environment you are not closing
off lending to anyone where you wanted to get lending. But, in
principle, we think it is good to have this transparency and to look
carefully at this.
Senator REED. Thank you. Ms. Fraser, please.
Ms. FRASER. Let me start. We absolutely do not charge interest
rates that high for our customer bases. We would like to have a
look at the law just to make sure there are no unintended con-
sequences to it, but we appreciate the spirit of it and the intent be-
hind it.
Senator REED. And, Mr. Dimon, please.
Mr. DIMON. Yes, supportive, subject to a detailed review.
Senator REED. Thank you. And, Mr. Moynihan.
Mr. MOYNIHAN. Like my colleagues, we would have to see the
law itself, and, in fact, one of the reasons why we created the new
product we created is to help our clients be able to borrow from us
for no interest and a $5 fee on an emergency basis to avoid the
payday lenders. So we understand the spirit of it.
Senator REED. Thank you very much. And a final question to the
panel. We understand that the foreclosure protection is expiring
June 21, this June, very soon. And there are about 2.1 million peo-
ple who are 90 days behind in their payments, and they will be at
risk of foreclosure.
What are each of you doing—and I have very brief time—to en-
sure that this forbearance continues or at least to make aware your
borrowers of the rights they might have under the CARES Act for
support? Let me begin with—since I did not call on Mr. Gorman,
let me call on Mr. Gorman, and then go down the list.
Mr. GORMAN. Well, unfortunately, Senator, this is not a business
that we are in.
Senator REED. All right. You are excused. Thank you, Mr.
Gorman.
Can we start with—we will go in reverse order. Mr. Moynihan,
who I must confess is someone I have known for a while. Mr. Moy-
nihan.
Mr. MOYNIHAN. Senator Reed, we will work with the clients like
we have been working with them. The good news is the amount of
deferrals is way down, and most of the clients have become cur-
rent, and we continue to work with them every day. So irrespective
of the deadline passing, we will continue to work with the few cli-
22
ents we have left to help them modify their loans, attach the pay-
ments on the back end, and go forward.
Senator REED. Thank you. Mr. Dimon, please.
Mr. DIMON. I totally agree with Brian, Senator; obviously, no one
wants to go into a foreclosure. It is a terrible thing. And we have
extensive programs in place to help people that go beyond Govern-
ment programs, and we will work with each and every one of them
to try to avoid foreclosure.
Senator REED. Thank you. I believe I have extended past my
time, Mr. Chairman.
Chairman BROWN. Thank you, Senator Reed.
Senator REED. Thank you.
Chairman BROWN. Senator Rounds from South Dakota is recog-
nized. Thanks, Jack.
Senator ROUNDS. Thank you, Mr. Chairman. I appreciate the op-
portunity here. I would like to take a moment just to point out that
the largest banks in the world are not represented at the hearing
here today. As it turns out, the four largest banks in the world are
State-owned banks from China and the fifth largest by a small
margin is Japanese. So before the Banking Committee ties itself up
in knots about any of the controversial issues on the table today,
I would encourage my colleagues to keep in mind that we are all
Americans, as are the firms who are represented here. We have a
collective and strategic national interest in having a team of banks
that are globally active and international leaders, but who are
above all American. The last thing that any of us should want, at
least any of us should want to see is a global banking system that
is run by the Chinese Government. That is the road we will be con-
tinuing traveling down if we keep disparaging these firms or un-
fairly gold plating international banking standards while China,
Japan, and others run circles around us.
Mr. Dimon, I would like to preface my first question to you, sir.
As of last month, the consumer prices have been increasing by
more than 4 percent year over year. This is a level of inflation that
we have not seen in over a decade. I am concerned that the Gov-
ernment’s role in this could only be making the problem worse. Can
you share your thoughts on the outlook for inflation and what role
public spending and monetary policy are having?
Mr. DIMON. So, Senator, thank you for that. Also, thank you for
your comment in support of America’s large successful banks,
which are a critical part of having a large successful economy. I
will just add to what you said. There is no large successful economy
that does not have large successful companies, and financial serv-
ices is an extremely important part of that. Our competition, I am
not talking about next year but for the next 30 years, is going to
be Chinese, and thank you for pointing that out.
We support what the Government did early in the crisis. We
think it stopped a massive financial crisis and possibly a depres-
sion at one point. But now you are talking about unprecedented,
continued fiscal and monetary policy kind of on autopilot. I think
the good news is that we are going to have a very strong economy.
We are going to have it this year. It can easily go into next year
and maybe even 2023 as all that spending takes place. But, yes,
it will raise inflation. I think there was nothing wrong with 1.6
23
percent. I would expect it to go considerably higher than that.
Hopefully it will not be out of whack and the Federal Reserve will
be able to tamp it down. But, you know, we always plan for things
worse than that. So I do not know what the future portends. I hope
it does not go there.
I think the other very important part of this is, whatever money
we spend, that we spend wisely. If that money is wasted and is not
productively spent, we will have more inflation, less productivity,
slower growth, and the American democracy will have lost even
more credibility in the eyes of the world.
Senator ROUNDS. Thank you, sir. In a few days, voters in Harris-
burg School District in Lincoln County, South Dakota, will be going
to the polls to decide whether or not to approve a $60 million bond
to build a new school. If the voters choose to move forward, the
Federal Reserve will not simply be cutting the folks in Harrisburg
a $60 million check. It is a lot more complicated than that. The in-
stitutions represented before us here today are the plumbing in the
global financial system that make it possible for, just as an exam-
ple, a Japanese life insurance company to perhaps invest in safe
American municipal securities like the ones offered by the Harris-
burg, South Dakota, school district.
Ms. Fraser, you not only have a footprint in South Dakota with
Citibank, but you are one of the most globally active U.S.-based
banks. Can you tell me about how institutions like yours help
make public borrowing markets function?
Ms. FRASER. Yes, thank you. Thank you for the question on this.
As we have talked about, the American banks play a very critical
role in the global financial markets, and we support multinational
companies. We support investors around the world, providing core
services for their operations, and part of that is now making sure
that there are opportunities to invest in job-creating infrastructure
in different projects around the world and here in America. And it
would be a great shame if those jobs and that network were in
other hands than in American banks.
Senator ROUNDS. Thank you. I would like to thank all of our wit-
nesses here before us today, and I just think it is really important
that we focus on the fact that they are all in competition with one
another, but they are also in competition with other major banks
around the world. And the last thing in the world that we want to
see is the influence of the United States become less and less be-
cause of regulatory attempts to regulate them that would interfere
with their ability to be competitive with other major banks
throughout the world.
Thank you, Mr. Chairman. My time has expired.
Chairman BROWN. Thank you, Senator Rounds.
Senator Menendez of New Jersey is recognized for 5 minutes.
Senator MENENDEZ. Well, thank you, Mr. Chairman, and wel-
come to all of our guests today. Thank you for your appearance.
I would like to ask you each a simple yes-or-no question to start
off with. Do you think the economy as a whole would be better off
if low-income and underserved consumers were able to participate
more fully in the formal financial system, for example, if consumers
had a bank account, for example, rather than going to a check-
cashing place or a pawnbroker?
24
Mr. GORMAN. Yes.
Mr. DIMON. Yes.
Mr. MOYNIHAN. Yes.
Ms. FRASER. Yes
Mr. SOLOMON. I would say yes.
Ms. FRASER. Yes.
Senator MENENDEZ. OK. So, Mr. Moynihan, Mr. Scharf, Ms. Fra-
ser, Mr. Dimon, have you implemented any no-cost, no-fee initia-
tives to help unbanked consumers obtain bank accounts? A simple
yes or no.
Mr. MOYNIHAN. Yes, we have.
Ms. FRASER. Yes, we have.
Mr. SCHARF. Yes, we have.
Senator MENENDEZ. OK. What would those be? What would
those be?
Mr. MOYNIHAN. Senator, we introduced a no-overdraft account a
few years ago. It represents about 30 percent of our new sales, es-
pecially to young people. It provides no ability to overdraft, which
saves consumers, helps them manage their finances. It is available
for $5 a month as a flat fee, and for students and people under the
age of 24, it is free. And, you know, that is the type of account con-
sistent with the BankOn set of standards, we have about 2.5 mil-
lion of those outstanding so far. And as I spoke earlier about, we
have our Advantage borrowing product which allows $500 of emer-
gency borrowing for a $5 fee with no interest.
Senator MENENDEZ. Ms. Fraser.
Ms. FRASER. Yes, thank you, Senator. Similarly, back in 2014 we
introduced an account called the ‘‘Access Account,’’ which provides
no overdraft fees. It is a very affordable savings and checking prod-
uct. And we work with entities like the National Urban League to
make sure that this gets driven into some of the underserved and
unbanked communities and do a big push to make sure that there
is awareness of this product.
Senator MENENDEZ. We will be happy to look at some of your
programs because this is a critical element of getting a very large
part of the American society to be able to be banked instead of
going to the check-cashing place, the payday lender, or the pawn-
broker.
Mr. Scharf, Ms. Fraser, Mr. Dimon, do you have a small-dollar
loan product of $500 or less similar to Bank of America?
Mr. DIMON. We do not.
Mr. SCHARF. I do not believe we have one, Senator.
Ms. FRASER. We do not.
Senator MENENDEZ. This is one of the critical elements of being
able—I share Senator Rounds’ views that you are all important in-
stitutions, not only in our financial system but in our economy. I
share that from my perspective also as the Chairman of the Senate
Foreign Relations Committee. I know our global competition. But
I think that all of you have both the ability and, in my view, a re-
sponsibility to bring more people into our financial system as a por-
tal of entry instead of where they are, which relegates them to far
lower opportunities in the future, and I hope you will do that.
Let me ask you, I looked at the lending that you all did, and par-
ticularly as it relates to COVID-related. Are you taking any serious
25
and comprehensive measures to expand your relationships with
small businesses? Any of you.
Mr. DIMON. I think we are, almost all of us, making extensive
efforts, particularly making sure we open branches. I think most of
us have 25 or 30 percent of our branches in LMI majority–minority
neighborhoods. Most of us have small business programs with out-
reach on the part of the CDFIs. Most of us have put money into
equity or loans into MDIs who are in those communities, so, yeah,
we are all making extensive efforts and hope to do more.
Senator MENENDEZ. Well, I looked at your PPP lending, and, in
fact, there is a disconnect between what I am being told and the
number and distribution of PPP loans, especially as it relates to
minority-owned small businesses. So I would like to call that all to
your attention. Maybe you are not getting the right information in-
ternally.
Let me ask you two final questions. I have been the biggest
champion of diversity and disclosure. Do you all believe that it is
necessary to seek diversity, particularly for the bottom line? From
my perspective, study after study has shown that. And do you be-
lieve in the public disclosure of your companies in terms of diver-
sity on corporate board and senior executive management? Yes or
no would suffice.
Mr. GORMAN. Yes.
Mr. MOYNIHAN. Yes.
Mr. DIMON. Yes.
Ms. FRASER. Yes.
Mr. SOLOMON. Yes.
Mr. SCHARF. Yes.
Senator MENENDEZ. And, finally, do you believe that comprehen-
sive immigration reform would help us build a more robust, strong-
er economy?
Mr. DIMON. Absolutely.
Mr. MOYNIHAN. Yes.
Mr. SCHARF. Absolutely, yes.
Ms. FRASER. Yes.
Senator MENENDEZ. Thank you, Mr. Chairman.
Chairman BROWN. Thank you, Senator Menendez. You got more
questions in 5 minutes than I have ever seen any Member of this
Committee get.
Senator Tillis from North Carolina is recognized for 5 minutes.
Senator TILLIS. Thank you, Mr. Chairman, and thank you all for
being here today.
I first want to thank you all for the mobilization effort for the
Paycheck Protection loans. I think it was Herculean. I know that
financial institutions across this country saved countless businesses
and millions of jobs. So I thought it was particularly extraordinary
that you did it and were underwriting or taking applications before
you really even knew the full rules of the road. So thank you for
doing your part and helping us bridge the gap with COVID–19.
I would normally in these committees like to talk abut business
issues like some of the Fed supervisory functions that I think are
inherently unfair, where you are asked to—you are basically deal-
ing with a Fed supervisor who is judge, jury, and executioner with-
out any due process. That is something I took up with Chair
26
Quarles yesterday. But today I want to talk about a subject that
I would seldom bring up in these committees. Goldman Sachs,
Bank of America, Citigroup, and Wells Fargo signed a political
statement which ran in the newspapers. It read in part, ‘‘We
should feel a responsibility to defend the right to vote and oppose
any discriminatory legislation or measures that restrict or prevent
eligible voters from having an equal and fair opportunity to cast a
vote.’’
I do not think the statement specifically referenced the Georgia
law, but that was what was being talked about in the press at that
time. It was roughly the same time we were having a debate about
the validity of the arguments, and I think that there is a fair basis
for saying that that characterization, if it related to the Georgia
law, may have been unfair and more of a political statement than
an empirical observation of the statute.
Look, the right to participate in politics without Government re-
prisal is the cornerstone of an equal and fair opportunity to cast
a ballot. Efforts to reduce political protections or allow a Govern-
ment to stifle dissent certainly seem antithetical to your statement
when it comes to some of your global operations.
All six of your companies have significant presence in Hong
Kong, yet over the years, the Chinese Communist Party has sys-
tematically chipped away at electoral rights for Hong Kong. Take,
for instance, the national security law just passed last year under
the direction of the Chinese Communist Party. Under this law, if
an individual engaged in activities aimed at dividing China, sub-
verting the State, or generally endangering national security, they
face harsh penalties, often life in prison. This is enforced solely by
the Community Party-aligned National Security Committee and
does not allow a defendant to take their case through the regular
judicial system, if there is such a thing in China.
This law is meticulously designed to prevent equal and fair op-
portunity to cast a ballot in Hong Kong. Hundreds of thousands in
Hong Kong took to the streets to protest this law, and correct me
if I am wrong, but I have not seen any statements from your com-
panies on this. It was announced last week that the first person
will be charged under the national security law, and they are going
to face a trial without a jury. Instead of the individual going before
a jury trial, they are going to go before a three-judge tribunal
under the direction of the National Security Committee, a shocking
departure from the common law traditions of Hong Kong.
I am curious if any of you would make a statement today defend-
ing the right of the accused to a fair trial by jury and not a politi-
cally suspect tribunal in Hong Kong. That national security law is
clear that it applies to all residents of Hong Kong, including expa-
triates and foreign nationals.
You have an obligation to defend your employees. So I wondered,
if an employee found themselves charged under this law, would you
speak up? Several of your companies are in the process of expand-
ing operations in Hong Kong, even after the Communist Party has
destroyed any semblance of democracy. Now the Hong Kong Legis-
lature is working on bills to provide tax breaks, limit disclosure re-
quirements, and eliminate taxes on carried interest. These meas-
27
ures are clear efforts by the Communist leaders to persuade busi-
nesses to remain in Hong Kong despite the political upheaval.
The Hong Kong finance professor went so far as to say, ‘‘To keep
these people around, we have to give them a tax benefit.’’ The Hong
Kong lawmaker said, ‘‘The signal to the business community is
very simple: Stay out of politics.’’
This is the stance of the Communist Party and apparently the
cost of doing business in China. Whatever our failings, the United
States clear and unequivocally does not assert these costs to busi-
ness who operate within our borders. The United States does not
set up extrajudicial systems to deprive citizens of their right to en-
gage in politics. And the United States does not seek to quash dis-
sent; we protect it.
I hope you all keep these undeniable facts in mind should you
choose to weigh in on American political issues in the future. But
if you do, I expect consistency across the global.
Thank you, Mr. Chair.
Chairman BROWN. Thank you, Senator Tillis.
Senator Warren from Massachusetts is recognized for 5 minutes
Senator WARREN. Thank you, Mr. Chairman.
As the pandemic swept across our Nation, bank regulators wor-
ried about the health of our biggest banks. So the regulators were
generous. They gave the banks all kinds of help. They delayed com-
pliance for important regulations. They relaxed standards. They
even allowed banks to avoid paying overdraft fees if their accounts
at the Federal Reserve had a negative balance.
Now, when asked why they were being so generous to the banks,
the regulators explained that the banks would, in turn, help their
customers. So how exactly did that work out?
At the start of the pandemic, bank regulators issued joint guid-
ance that recommended that banks waive overdraft fees for their
own customers. In other words, if someone was laid off, for exam-
ple, and bounced a check, the regulators recommended that the
bank automatically waive the fees and let people get caught up
without paying $35 every time they stumbled, the same way a
bank could do at the Fed if it overdrew its account.
So let me ask the CEOs of the four banks—Citibank, Bank of
America, Chase, and Wells Fargo, the four banks that collectively
managed tens of millions of checking accounts for customers. While
you automatically and at no cost got complete protection from over-
draft fees at the Federal Reserve, could you please raise your hand
if you gave the same automatic protection to your customers and
automatically waived all of their overdraft fees?
OK. I am not seeing anyone raise a hand, and that is because
none of you gave the same help to your customers that the bank
regulators extended to you, help that the bank regulators rec-
ommended that you give.
So let me focus in on this just a little bit here. Let me start with
you, if I can, and ask the question about whether or not any of
you—you did not automatically waive. I just want to take this on
down. So let us take a look at who actually paid these fees. Accord-
ing to Pew Charitable Trusts, it is disproportionately working peo-
ple making less than $50,000 a year, African Americans, Hispanics,
28
people who are struggling to get by. And how much did they pay
in overdraft fees? They paid a combined $4 billion.
So let me start with you. Mr. Dimon, you are the star of the over-
draft show. Your bank, JPMorgan, collects more than seven times
as much money in overdraft fees per account than your competi-
tors. So, Mr. Dimon, how much did JPMorgan collect in overdraft
fees from their consumers in 2020?
Mr. DIMON. Well, I think your numbers are totally inaccurate,
but we will have to——sit down privately to go through that.
Senator WARREN. These are public numbers.
Mr. DIMON. And I also want to point out——
Senator WARREN. Can you just answer my question? How much
did JPMorgan collect——
Mr. DIMON. We did not overdraft the Fed account, and at——any
request when someone said they needed COVID relief they got
$120 million in COVID relief.
Senator WARREN. So whoever—I am sorry, Mr. Dimon.
Mr. DIMON. They needed COVID relief——
Senator WARREN. That was—Mr. Dimon, that was not the ques-
tion. Did you have an automatic protection—so I am asking, you
were recommended, the regulators recommended you offer that
same kind of protection to your customer.
Mr. DIMON. And we did.
Senator WARREN. How much, in fact, did JPMorgan——
Mr. DIMON. And we did.
Senator WARREN. ——collect in overdraft fees from their cus-
tomers in 2020? Do you know the number?
Mr. DIMON. I do not have the number in front of me, but——
Senator WARREN. Well, I actually have the number.
Mr. DIMON. Upon request——
Senator WARREN. $1.463 billion. That is nearly $1.5 billion that
you collected from your customers.
Now, do you know how much JPMorgan’s profit would have been
in 2020 if you had followed the recommendation of the regulators
and waived overdraft fees to help struggling consumers? In other
words, without that overdraft money, would your bank have been
in financial trouble?
Mr. DIMON. We waived the fees for customers upon request if
they were under stress because of COVID.
Senator WARREN. I appreciate that you want to duck this ques-
tion. Do you know how much your profits would have been if you
had actually waived all the fees, as the regulators recommended?
Mr. DIMON. We waived the fees every time the customer
asked——
Senator WARREN. The answer is your profits would have been
$27.6 billion. I did the math for you.
So here is the thing. You and your colleagues come in today to
talk about how you stepped up and took care of customers during
the pandemic, and it is a bunch of baloney. In fact, it is about $4
billion worth of baloney. But you can fix that right now.
Mr. Dimon, will you commit right now to refund $1.5 billion you
took from consumers during the pandemic?
Mr. DIMON. No.
Senator WARREN. Right now.
29
Mr. DIMON. No.
Senator WARREN. No. That is right. Over the past year, you could
have passed on the breaks that you got from the Fed to your cus-
tomers, but you did not do it.
Everybody else here, those other three bankers, will any of you
agree to refund the overdraft fees that you collected?
[No response.]
Senator WARREN. I did not think so. So no matter how you try
to spin it, this past year has shown that corporate profits are more
important to your bank than offering just a little help to struggling
families, even when we are in the middle of a worldwide crisis.
Thank you, Mr. Chairman.
Chairman BROWN. Thank you, Senator Warren.
Senator Kennedy from Louisiana is recognized for 5 minutes.
Senator KENNEDY. Mr. Chairman? Mr. Chairman, can you hear
me now?
Chairman BROWN. Yeah, we can hear you now, Senator Kennedy.
Go for it. Thank you.
Senator KENNEDY. OK. Thank you, sir.
Mr. Solomon, did Goldman Sachs underwrite Saudi Aramco’s
IPO?
Mr. SOLOMON. We were one of the underwriters in Saudi
Aramco’s IPO. Yes, we were.
Senator KENNEDY. How much did you make?
Mr. SOLOMON. I do not know off the top of my head what our un-
derwriting fees are, but we can certainly come back to you. It
would have been millions of dollars, but I do not know the precise
number.
Senator KENNEDY. OK. Mr. Moynihan, was Bank of America one
of the underwriters of the biggest oil and gas company in the
world?
Mr. MOYNIHAN. Sir, I do not know off the top of my head, but
like Mr. Solomon, we will get back to you with the details.
Senator KENNEDY. I think you were. I will save you some time.
Mr. Scharf, Wells Fargo, were you one of the underwriters for
Saudi Aramco?
Mr. SCHARF. I do not know the answer to the question, Senator.
Senator KENNEDY. You were. I will save you some time.
Ms. Fraser, how about Citigroup? Do you know?
Ms. FRASER. Yes, we were one of the underwriters, sir.
Senator KENNEDY. How much did you make, do you know?
Ms. FRASER. I am afraid I do not know how much that was, sir.
Senator KENNEDY. OK. Mr. Dimon, was JPMorgan Chase one of
the underwriters?
Mr. DIMON. Yes, we were.
Senator KENNEDY. OK. How about, Mr. Gorman, Morgan Stan-
ley?
Mr. GORMAN. Yes, we were.
Senator KENNEDY. OK. Thank you.
I wanted to ask Mr. Dimon a question, if I could. I want to talk
economics a second. Could we agree, Mr. Dimon, that firms ought
to be taxed where they conduct their business and produce their
profits as a general principle?
30
Mr. DIMON. Well, global taxation is very complex, but, yes, as a
general principle.
Senator KENNEDY. OK. And I am not holding you responsible,
Mr. Dimon, but how do you account for the fact that today about
63 percent of American multinationals’ profits are booked in coun-
tries where they have only 15 percent of their employees?
Mr. DIMON. I honestly do not know the number, so I cannot com-
ment on it.
Senator KENNEDY. I am not trying to put words in your mouth,
but obviously what is happening is that American multinational
companies are shifting their profits to so-called tax havens to mini-
mize their taxes. Do you think that is a sound economic principle?
Mr. DIMON. I do not. I think that the last tax reform that was
done actually stopped a lot of companies from doing that. I do not
know what——
Senator KENNEDY. Yeah, except—I am sorry. Excuse me.
Mr. DIMON. Except I do not know what year you are looking at,
but it did change substantially after 2017.
Senator KENNEDY. Well, it did not change that substantially. I
thought it did, too, Mr. Dimon, but I looked it up. Today, right now,
if you take American multinational companies and take a look at
their taxes, 63 percent of their profits, the big boys and girls, have
booked profits in tax havens where they only have 15 percent of
their employees. Does that make sense to you? Or is that——
Mr. DIMON. I do not know the numbers. I will take your word
for it. And I do not know if it makes sense. I would have to do a
lot more analysis of that.
Senator KENNEDY. OK. Let me ask you this—I do not mean just
to dwell on you. Let me ask Ms. Fraser. Ms. Fraser, as you know,
the Tax Cuts and Jobs Act, we passed it in 2018, and we cut Fed-
eral income tax from 38 percent to, I believe, 21 percent. Now, if
you look at the Fortune 500 U.S. companies, the biggest companies
in America, the top 500, of those that were profitable, what is their
average tax rate?
Ms. FRASER. I can only speak to our own tax rate, Senator. I am
afraid I do not know the numbers for other multinationals.
Senator KENNEDY. What is your tax rate?
Ms. FRASER. Our tax rate is about 19 percent globally.
Senator KENNEDY. All right. I looked it up, and the average tax
rate in 2018—that is when the Tax Cuts and Jobs Act took effect.
That was the first year. And, remember, the TCJA cut the Federal
corporate tax rate from 35 percent to 21 percent. The average rate
of the Fortune 500 companies that paid taxes was 11.3 percent.
That surprised me. Does that surprise you?
Ms. FRASER. Yes. I am not familiar with the numbers, so it does
surprise me.
Senator KENNEDY. And in the tax subsidies in the bill, I looked
this up, too. Twenty-five companies claimed one-half of all of the
tax subsidies in the bill. Five companies claimed 22 percent of all
of the tax subsidies in the bill. I did not know this. Those five com-
panies are Bank of America, JPMorgan Chase, Wells Fargo, Ama-
zon, and Verizon. Does that surprise you?
Ms. FRASER. I can only speak for my own company, sir.
31
Senator KENNEDY. I am way over time. Did you Citigroup take
some of these subsidies?
Ms. FRASER. I do not know. I will have to get back to you, sir.
Senator KENNEDY. Can I ask one more question, Mr. Chairman?
Chairman BROWN. Yeah.
Senator KENNEDY. Mr. Solomon, here is my question. Not will
we—not will we—but should we in your opinion be using fossil
fuels 20 years from now? Not will we, but in your opinion should
we?
Mr. SOLOMON. There is no question we have a transition going
on with respect to companies trying to——
Senator KENNEDY. I know that, but I am going to run out of
time, and our Chairman is being real generous. Not will we, in
your opinion should we be using fossil fuels 20 years from now?
Mr. SOLOMON. If the technology available to allow us to user
fewer fossil fuels and make the planet greener and, therefore, safer
for everyone, and we can through those technologies have busi-
nesses and power and energy that allows us to operate our econ-
omy efficiently, yes, that is something we should strive for. Wheth-
er or not we will get there 20 years from now, you know, I cannot
predict.
Senator KENNEDY. Thank you, Mr. Chairman.
Chairman BROWN. Thanks, Senator Kennedy.
Senator Van Hollen from Maryland is recognized for 5 minutes.
Senator VAN HOLLEN. Thank you, Mr. Chairman.
A number of you have been taking positive steps in a number of
areas, and I want to see if we can use this hearing to encourage
all of you and your banks to follow the best practices of some of
the leaders. And I want to start with CDFIs and MDIs because all
of you have made statements supportive of CDFIs and MDIs.
We are hearing increasingly from those institutions that debt
capital is much less useful to them than equity capital. And I know
in the case of Wells Fargo that you recently announced equity in-
vestments in Harbor Bank in Baltimore. I just want to ask each
of you whether you have recently made equity investments in
CDFIs or MDIs, and if you have, the magnitude of that amount.
Mr. DIMON. Speaking for JPMorgan, we have invested $70 mil-
lion into 9 of the 18 black MDIs. CDFIs are different because they
do not have equity per se.
Senator VAN HOLLEN. All right.
Mr. MOYNIHAN. At Bank of America, we have taken 5 percent
common equity positions, up to 5 percent in 17 MDIs, and we are
in the process of going through the other ones to see if they need
the money. And then on top of that, we have $120 million deposits
with the MDIs that provide their capacity and $1.8 billion balances
into the CDFIs up from $1.5 billion a year-and-a-half ago.
Senator VAN HOLLEN. OK.
Mr. SCHARF. At Wells Fargo, we have invested in 13 MDIs al-
most $50 million and have provided an extensive amount of financ-
ing to the CDFIs. We have committed $250 million of our Open for
Business Fund from the PPP fees. Over $150 million of that has
already been distributed, and they in turn can lever that up.
Senator VAN HOLLEN. OK.
32
Ms. FRASER. And at Citigroup, we have invested $50 million in
equity into MDIs, and we work with MDIs and CDFIs across the
country in different protégé programs provide technical support to
them, marketing, and other talent-based investments as well.
Senator VAN HOLLEN. OK. There is no easy standardized way
for, you know, the public to determine how much you all are invest-
ing in terms of equity in MDIs or other investments, loans to
CDFIs. Would any of you object to reporting to our Committee on
a regular basis—we can figure out what the interval would be—as
to where you are in making the kind of investments we are talking
about? Any objections to that?
Mr. SOLOMON. No.
Voices. No objection.
Senator VAN HOLLEN. So let me now turn quickly to the issue
of stock buybacks. I know as we come to the end of this limitation
period many of you are talking about instituting stock buybacks.
My question relates to wages paid. You know, I think if you have
the capacity and the profits to reward investors, I think at the very
least we should also be making sure that all your employees are
being fairly compensated. I know that Bank of America has
pledged to raise their minimum hourly wage for all employees to
$25 by the year 2025. I just want to ask the rest of you if you are
willing to make that kind of commitment.
Mr. GORMAN. Well, speaking on behalf of Morgan Stanley, we are
certainly going to take a look at it. I discovered last night for the
first time we had one employee on minimum wage, one employee
of 70,000, at $7.50. I promise you that person is getting a raise.
But the vast majority of our employees are well above the min-
imum wage.
Senator VAN HOLLEN. I get that. I am just looking to see whether
people will make a commitment to raise the minimum wage to $25
an hour by the year 2025. If we could just go down the list, let me
know if you are prepared to do that or get back to us on it.
Mr. GORMAN. We are certainly prepared to look at it and get
back to you.
Mr. SOLOMON. Speaking for Goldman Sachs, Senator, we have
relatively few employees who earn below $25 an hour today, but we
are prepared to look at it and get back to you.
Senator VAN HOLLEN. Thank you.
Ms. FRASER. Speaking for Citigroup, similarly, we want to make
sure that our people are paid fairly and competitively, and I am
happy to get back to you on that specific question.
Senator VAN HOLLEN. OK.
Mr. DIMON. Speaking for JPMorgan, we take very good care of
our employees with training and medical and pension and dental
and health care and everything that they need, and we have done
a pretty good job going our own way. We are not going to imitate
anybody else. We will be competitive.
Senator VAN HOLLEN. OK. Well, listen, just again, you know, we
are in this period where people are talking about major stock
buybacks. It seems to me this is also an opportunity not just to
demonstrate to your shareholders your ability to reward their in-
vestments, but also to show your employees that you value their
33
service. And I think the $25 by 2025 is a very reasonable target
for all of your institutions.
Let me turn finally to the issue of climate change and invest-
ments. I want to commend Ms. Fraser on her decision soon after
she took over to establish a new, important coal policy, stating that
in terms of realizing Citi’s net-zero commitment by 2050 that they
will exit all financing for coal power by 2030 in the OECD and EU
and by 2040 in the rest of the world. If I could just ask all of the
other CEOs here today whether you would be prepared to follow
the lead that Citi’s CEO has made in terms of protecting our cli-
mate. Mr. Dimon, if we could start with you?
Mr. DIMON. I think we need really a mature conversation around
climate. We need a carbon tax. We need industry policy. It is not
just about banks stopping financing. We are going to need oil and
gas for a long time. It could be made a lot cleaner. So the conversa-
tion should be about how we are going to accomplish this in the
right way. We can either accomplish reducing CO2 dramatically at
no cost to having a healthy economy. If we do it the wrong way,
we will not reduce CO2 going down because it will simply move
elsewhere, and we can damage the economy.
So I just beg you let us have a rational conversation, mature and
thoughtful, how to go about it.
Senator VAN HOLLEN. Well, and we have been trying, I have
been trying as one to have a rational conversation for 15 years on
this, and until recently I have not heard the CEOs of major banks
endorse the idea of a price on carbon. I know that has changed be-
cause of alternatives that are out there.
So, look, I think all of us have a part to play here, and I just
want to ask that your other colleagues up here if the kind of exam-
ple that Citi made in this particular area—and I understand there
is oil and gas and other areas, but with respect to coal, whether
you are willing to make those kind of commitments.
Chairman BROWN. And please be very brief in your responses.
Mr. GORMAN. My response is I would like to see what the alter-
native sources of energy are, which are essential to the economy.
We are all trying to get away from coal dependency. The simple
question is timing and alternatives and the economy is not held up
as a result of it.
Mr. MOYNIHAN. Senator, speaking for Bank of America, our poli-
cies are in the public domain on various types of coal and other
types of things. But, importantly, I think what we are all saying
is we are here standing ready to help our clients make this transi-
tion and bring trillions of dollars of financing across this group in
a way that helps those clients that produce energy do what they
need to do, and they have announced their plans to do so. So I
think that is critically important. That is the value of these big
banks stepping up to help all the clients, large, medium, and small,
make the transition.
Mr. SOLOMON. I would echo the comments made by the other
CEOs. We are working with our clients on this transition. We have
made commitments around our own carbon emissions that we have
published publicly, and we continue to be focused on wanting to
have a very constructive conversation about how we can improve
emissions going forward.
34
Mr. SCHARF. And for Wells Fargo, I agree with everything that
has been said and just stress it is all about assisting our clients
on the transition that we know has to occur.
Senator VAN HOLLEN. Thank you, Mr. Chairman. I hope every-
one will support the American Jobs Plan, which is working to-
gether to get it done. Thank you.
Chairman BROWN. Thanks, Senator Van Hollen.
Senator Scott of South Carolina is recognized for 5 minutes.
Senator SCOTT. Thank you, Mr. Chairman, and I appreciate you
recognizing me for the 5 minutes.
Questions for the entire panel. I know that Senator Toomey had
a question about capitalism versus stakeholders capitalism, and I
would add to that woke capitalism that seems to be running amok
throughout the financial institutions of our country. It seems like
you all are very comfortable picking winners and losers, specifically
those who signed the letter in opposition to Georgia. That would be
Bank of America, Citi, Wells Fargo, and Goldman Sachs. Picking
winners and losers in certain areas, especially in election law, I
just want to understand your position on that very important law,
because I as a Southerner and African American who has voted in
the South all my life would hate any form of discrimination, any-
thing that restricts voting rights.
What part of the Georgia law restricted voting rights or was dis-
criminatory? Any of the four that signed the letter.
Mr. MOYNIHAN. Senator Scott, our company signed a letter about
the importance of voting rights based on the input from our ESG
Committee and our teammates about how they felt when the law
came in. In our view, as a company we believe that there ought to
be a concerted effort to get a set of standards that we can all agree
to because all of us, including what you just said, is the access for
people who are eligible to vote is paramount to having a great de-
mocracy. So it came out of our committee, similar to how we have
made a lot of these decisions in which we have had concern.
Senator SCOTT. Let me just—because I understood what you
said, Mr. Moynihan, and I appreciate you comments. But my ques-
tion is: What part of the law was discriminatory? What part of the
law restricted—if you are actually increasing the number of days
of early voting, if you are actually codifying in law dropboxes that
were not a part of the law, if you are actually making it easier to
vote but harder to cheat, what part of that law was discriminatory
or restricted access? I have been studying the law, and that is one
of the reasons why I ask that question, because from my perspec-
tive and, frankly, from the words on the paper—20-pound may be
not worth much, but those words are very powerful. It did not pre-
vent anyone from voting and, frankly, made it easier to vote ear-
lier. And I just am dumbfounded by what the answer to the ques-
tion was: Yes, we support capitalism, but the stakeholder cap-
italism or the woke capitalism seems to be running amok. And I
say that because I cannot find anyone who will answer the ques-
tion specifically giving me any examples or specific provisions of
the law that we do not support. But at the same time, we will dis-
criminate, it seems, against industries that we do not like, and that
is where that stakeholder capitalism comes into play, because
35
banks benefit from a number of explicit and implicit Government
protections and subsidies, all backed by U.S. taxpayers.
So if it is legal and constitutionally protected, the Second Amend-
ment, why would you refuse to bank companies that are in the in-
dustry? I do not fully understand. So it seems like picking winners
and losers in companies and you are diving into choose which laws
you want to uphold and which laws you find offensive, but you can-
not articulate a position on why those things are offensive, it just
seems confusing to me that one would say, ‘‘I support capitalism,
but I am doing these things that are inconsistent with the state-
ment that I support capitalism, and that I cannot articulate a sin-
gle reason why I oppose the law in Georgia or why I oppose fund-
ing or financing the oil industry or manufacturers of guns.’’ I just
find it to be disheartening as a former member of some of the insti-
tutions, as an account holder, and a member of others, why it is
you all have taken such a strong, clear position but cannot or will
not articulate the reason for that position.
[No response.]
Senator SCOTT. Well, Mr. Chairman, I thank you for the time,
and have a good day.
Chairman BROWN. Thank you, Senator Scott.
Senator Warner from Virginia is recognized for 5 minutes.
Senator WARNER. Well, thank you, Mr. Chairman. I do not want
to litigate the Georgia law with my good friend Senator Scott from
South Carolina who we have worked on a lot of projects together,
but I would start with the fact that the Georgia law that makes
it illegal for someone to voluntarily give somebody a glass of water
if you are waiting for hours and hours in line to vote runs counter
to any kind of basic notion of fairness in American democracy. You
know, there are a host of issues why I think reasonable people, not
just from civil rights organizations but from business organizations
across the realm, have said, you know, in the era of 2021, cutting
back on voting rights should not be how our country ought to be
moving forward.
I am going to pick up on some of the questions that Senator Van
Hollen asked, and I have talked with most of you guys and know
you. You know I am not—I do not come in with an immediate bias
against you, but I think we have got to put up—you guys have got
to help put up more than you have. The wealth gap in this country
should scare the hell out of all of us. How you guys have come
through COVID—and you and I would argue—part of that is due
to some of the Dodd–Frank reforms. Well-capitalized, you have
come through well. We lost 440,000 Black businesses last year. We
have seen huge swaths of Latino businesses go down, lots of small
businesses in Appalachia as well.
One of the areas that we have—and I have talked with most of
you about this—is community development financial institutions,
CDFIs. The Federal Government finally—and I have got to give
former Secretary Mnuchin some credit for this and people like Sen-
ator Scott, who was a partner on this. We put up $12 billion to
both help CDFIs who lend to disenfranchised communities and low-
and moderate-income communities. We put up $12 billion—$3 bil-
lion in grants, $9 billion in Tier 1 capital. With almost all my con-
versations with you guys or your folks underneath, you have al-
36
ways had some kind of regulatory reason why you cannot help
CDFIs or cannot do more.
I am going to need you to lean in on this issue going forward,
not just with CDFIs. I see each of what you guys have—I read
about almost each week your institutions in many of the daily po-
litical rags that come out talking about what your institution is
doing to help the disadvantaged. What I do not see, though, is how
do we get a quarterly update on those. I really think there is a mo-
ment in time right now where, whether it is working with CDFIs,
whether it is a housing proposal that we have been working on,
that I hope to get the Chairman on board with as well, that would
actually create a 20-year mortgage product for first-generation
homebuyers that would double the rate of wealth accumulation.
And we have tried to price this with an interest rate subsidy that
would still make your $900 a month mortgage payment on a 30-
year note, you would actually be getting it on a 20-year note. Trust
me on the math on this. We are going to need you to lean in. We
are going to need you to be much more participatory. And, again,
no disrespect to the great ads that run about what each of your in-
stitutions are doing, but we have got to really, I think, up our
game, and if there are regulatory changes that need to be able to
make sure you are able to put some Tier 1 capital into some of
these institutions, if there are other tools, I would love to work
with you. But when we have seen the kind of disruption that takes
place, that has taken place in our economy over the last year, I
think you guys can definitely be part of the solution.
I appreciate some of the programs you have put up, but I am
asking on a generic basis to be willing to engage with me and oth-
ers who care about trying to do something on a systemic basis both
on the wealth gap in this country and on the access to capital
issues. As we showed with PPP, well-intentioned program, but the
number of minority- or women-owned businesses that got those
first rounds because they did not have prior banking relationships
was huge. I know my time is about up, but I will be back to all
of you on an individual basis and want to continue this conversa-
tion.
The last thing I want to raise, though, I think I have—I am try-
ing desperately look for the clock here. I think I have got one—
what has not been raised yet I think from any of our colleagues is
the questions around cyber. The country finally saw with the Colo-
nial Pipeline ransomware attack what a challenge cyber can be.
Think about the fact that the Russians were in 18,000 companies
with the SolarWinds attack. If the Russians had decided to launch
that kind of attack through SolarWinds rather than the one-off
ransomware, it would have brought our economy to an end.
You guys in the financial sector have done a pretty good job, but
we are going to need you again both weighing in on, I believe, the
need for mandatory reporting requirements so that the public and
private sector can sort through this. The finance sector has got
some of that. And we are also going to need to—and I know many
of you have started looking at this—look at the challenges around
cryptocurrencies, because as we all know, that is the ransomware
payment methodology of choice. We work with all of you and Sen-
ator Brown did leadership, and Senator Crapo, on the issue of the
37
anti– money-laundering/beneficial ownership bill we put in place
last year, again, with your help. But we are going to need to part-
ner together on this issue around crypto and the issue around
cyber.
And since I cannot see, Chair, is my time up or can I get in an-
other comment.
Chairman BROWN. Your time has expired.
Senator WARNER. All right. I will be back to you. Thank you so
much, and I look forward to visiting with the leaders.
Chairman BROWN. Thank you, Senator Warner.
Senator Shelby from Alabama is recognized for 5 minutes.
Senator SHELBY. Thank you, Mr. Chairman.
In recent years, activists and others have applied increasing
pressure on our Nation’s largest banks to withhold offering banking
services to certain types of businesses, including energy companies
and gun manufacturers, among others, for political reasons. Many
banks have responded by restricting credit and financing to those
businesses. However, restricting access to capital for law-abiding
companies results in higher costs for consumers and slower eco-
nomic growth.
My question to the panel: Do you believe that political pressure
or political motivation should influence a bank’s decision to provide
an entity access to capital? Or should a bank’s decision to approve
or deny credit or services be based on an impartial and risk-based
analysis? Mr. Dimon, I will call on you.
Mr. DIMON. I think most of the decisions we make are based
upon risk-based analysis and whether we think financing an indus-
try would be bad for our company, not based upon the risk that we
take on. So we do have to make decisions, and all of us make dif-
ferent decisions. I think if the Government passes a law, we follow
the law.
Senator SHELBY. Anybody else? No other comments?
Well, I am getting to another area that we all better be con-
cerned with, and that is the Federal debt. The Federal debt is cur-
rently over $28 trillion. The Congressional Budget Office projects
debt to reach 102 percent of GDP by the end of this year and 200
percent—yes, 200 percent of GDP—by 2051 under current policies
unless there are changes.
Are you concerned about the Nation’s growing Federal debt? And
what impact does an unsustainable level of debt have on our econ-
omy as well as on your banking system or our banking system? Mr.
Dimon, do you want to take that?
Mr. DIMON. I do not want to, but——
Senator SHELBY. I know that.
Mr. DIMON. You know, it is not an immediate concern, the 102
percent. The country has enough wealth, enough income, but we do
need to grow. We need rational policy. It will become an issue at
one point when you have that dramatic growth sometime in 2030
to 2040. And so I think it is much better to try to deal with that
issue today than it is to deal with the issue down the road.
Senator SHELBY. Mr. Gorman, are you still with us?
Mr. GORMAN. Yes, sir.
Senator SHELBY. Have you got a feeling on that?
38
Mr. GORMAN. I do not like debt, so that is my primary feeling.
And I do not like the debt when it gets over 100 percent.
Listen, there are a lot of ways to solve this. You can reduce your
spending, you can raise the taxes, or you can make corporations
more profitable so they generate more taxes. And finding that bal-
ance—and that is, you know, the artful job our legislators have to
help us work for, but, yes, I am concerned about it. I think there
is a limit at which you cannot rely upon the good will and largesse
of the rest of the world to buy that debt. And that starts becoming
a strategic issue for the country eventually. We are not there.
Jamie is, in my opinion, dead right. But I would not like to see this
play out for another decade like this.
Senator SHELBY. Could that have an impact on the concept of the
U.S.’ currency as the number one trading currency in the world?
China is looking at all this.
Mr. GORMAN. I think it will take a long time for that to happen.
You know, in general, when you see the world get in trouble, the
U.S. dollar becomes the flight of security where people go for safety
and soundness. I think it is going to be a very long time—the U.S.
economy is nearly a $20 trillion economy and has a tremendous
system of law, so I think that is a very long time away. But that
does not forgive us taking the lack of discipline simply because, as
I said, taking that for granted.
Senator SHELBY. I know you guys are not on the Fed, but price
stability is important to all of us. That is one of the top mandates
of central banks, is price stability, including our own. As we con-
tinue to pile on the debt and pay interest on the debt, pay nothing
down, do not bring it down, it has got to have serious consequences
in the road ahead. Mr. Gorman, do you disagree?
Mr. GORMAN. Well, no, I agree with you there is a level of debt
that is unsustainable. Right now, though, what we need to do is
get this economy back to its primacy, which it is on the way for.
The low interest rates, some of the fiscal stimulus is obviously
helping that. But it is not an unlimited pool that we can draw on.
It is a pool in a time of crisis.
Senator SHELBY. I thank all of you.
Chairman BROWN. Thank you, Senator Shelby.
Senator Cortez Masto from Nevada is recognized for 5 minutes.
Senator CORTEZ MASTO. Chairman, thank you so much. Thank
you to the panel members. I appreciate some of you I had the op-
portunity to talk with the last couple of weeks. Thank you for tak-
ing the time.
Let me start on an issue that I do not think has been addressed
yet, and that is foreclosure prevention. Let me ask you, you know,
there are about 2 million families who are at least 90 days delin-
quent on paying their mortgage. Millions of people’s jobs dis-
appeared overnight because of the pandemic, and that is more so
in Nevada than anywhere in the country. At one point in time, we
had the highest unemployment rate because of this pandemic.
Four percent of borrowers have not been able to pay their mort-
gage, so for the bankers, what are you doing to work with them to
keep them in their homes? Can you talk a little bit about what you
are doing to address and help them when they are bumping up
39
against foreclosure? And I do not know who wants to start. Wells
Fargo?
Mr. SCHARF. Sure, Senator. So, first of all, for the loans that we
own, we have extended our moratoriums for foreclosures and evic-
tions until the end of the year. We have also come out and sup-
ported publicly the CFPB’s proposal to extend those moratoriums
to apply to the whole industry, which for us would impact the loans
that we service. And we certainly encourage other agencies to align
to those policies.
For those that are exiting forbearance, I would say, you know,
the most important thing is we have very aggressive outreach
through all communication channels. We have many modification
programs that are available for customers in need, and what we
need to do is be in as close contact to them before they get there
as we possibly can. So we are doing it ourselves, and we are work-
ing with outside groups as well. Certainly, if customers can resume
payments, that is terrific. But if they cannot resume them, we have
a significant number of modification options to work with them.
Senator CORTEZ MASTO. Thank you.
Mr. Moynihan.
Mr. MOYNIHAN. Similar themes to Mr. Scharf’s comments in
terms of we contact the borrowers before they reached in, worked
to modify them, to add on to the back of loans, and, you know,
there is a suspension of all foreclosures, obviously, through the end
of the quarter here. But we work with those clients. The good news
is, quite frankly, the number of people who are still in our company
is down dramatically, like by 90 percent. So we are working with
the remaining ones. Many were current, even though they asked
for deferrals, and so we will continue to work with every one of our
clients. You know, as Mr. Dimon said earlier, taking someone
through the foreclosure process is not what we want—it is what we
want to avoid at all costs.
Senator CORTEZ MASTO. Thank you. I appreciate that.
Mr. Dimon.
Mr. DIMON. I would just repeat what they said. First of all, it is
down about 90 percent, and we have several modification pro-
grams. And anyone who is getting close to foreclosure, we work
with—where we own the loan—we do not necessarily control it if
we do not own the loan. We work with them to try to find many
programs to defer payments, to help them through their tough
time.
Senator CORTEZ MASTO. Well, I appreciate that, and really, com-
ing from Nevada, I was Attorney General at the time working with
many of you to address the foreclosure crisis we saw. We have op-
portunities and services in the State of Nevada that I hope you are
also taking advantage of to help homeowners. But the good news,
yes, they are down 90 percent, but there are still several home-
owners in Nevada, because of this pandemic, that are still strug-
gling and not back to work yet because of the nature of the hospi-
tality and travel industry. So I am hoping, please, that you are
working with them and the various community organizations that
are out there as well.
I do not have much time, so let me jump to another issue that
is important in my State. I believe Senator Van Hollen talked a lit-
40
tle bit about this, and I appreciate the investments your banks are
making in minority depository institutions and community develop-
ment financial institutions. However, I am aware that these enti-
ties exist unevenly across the Nation. Nevada has no MDI
headquartered in the State. There is only one certified CDFI in Ne-
vada. In the past 30 years, we have only had eight awards to a Ne-
vada-based CDFI. We are the only State with a single-digit award
amount. By contrast, 22 States with a smaller population than we
have in Nevada have received many more CDFI awards.
So my question to all of you is: How can you ensure and work
to ensure that States and communities without a robust network
of minority depository institutions and community development fi-
nancial institutions benefit from the racial equity investments that
we have made and that you have promised? And that is open to
all of you, and I do not know if somebody wants to start. Ms. Fra-
ser.
Ms. FRASER. Yes, I think one of the obvious areas that we have
talking about is affordable housing and the commitments in terms
of closing the racial wealth gap. Housing is going to be a very im-
portant part of that. Seeing the PAPs programs getting extended
would make a big difference in making sure that that market and
those programs can reach as many people as possible, and that
would remove one of the constraints at the moment.
Senator CORTEZ MASTO. Anyone else?
Mr. SOLOMON. I would comment, Senator, that I think your com-
ments here that we need to work to strengthen this across the
country, you know, are appropriate. They are uneven across the
country. We continue to work to partner broadly with CDFIs in our
new initiative, where we have committed $10 billion to close the ra-
cial wealth gap for Black women in this country. We are making
investments across the United States through all 50 States. But we
would be happy to work with you to find ways that we could have
a larger benefit.
Senator CORTEZ MASTO. Thank you. I know my time is up. I will
submit the rest of the questions for the record.
Thank you, everyone. Thank you, Mr. Chair.
Chairman BROWN. Thanks, Senator Cortez Masto.
Senator Hagerty from Tennessee is recognized for 5 minutes.
Senator HAGERTY. Chairman Brown, Ranking Member Toomey,
thank you for holding this hearing.
During the pandemic our financial sector, including large banks,
community banks, credit unions, farm credit lenders, fintechs, and
all of their employees, showed by the private sector, are often much
more efficient than the Government in solving bipartisan problems.
For example, the PPP we have talked about mobilized our Na-
tion’s private lenders last year that shifted over $300 billion to save
small businesses, and they did it in just 14 days. Compare that
with the 4-plus months that Biden administration has taken on the
Shuttered Venue Operators Grant Fund. They still have not dis-
tributed a dime to save struggling small businesses in my home
State of Tennessee.
America’s financial sector is the envy of the world. It is the most
robust, it is the most efficient. It delivers the greatest liquidity in
financing at the lowest cost of capital anywhere. But our financial
41
sector will not remain the envy of the world if American businesses
and employees have to pass a political litmus test in order to se-
cure the capital necessary for growth. We did not develop the
greatest capital markets and financial system in the world by let-
ting extreme social ideologies dictate business decisions.
What we are seeing today is the debanking of financially sound,
legal American businesses that support millions of American work-
ers. This is happening simply because these companies are in in-
dustries that are politically unfashionable in some places. This
debanking will either force those companies and their jobs to other
countries or, worse, it will put those American companies and their
workers permanently out of business. In the long run, this is going
to be very detrimental to American workers, American businesses,
and our markets.
Private corporations that you all run can make their own deci-
sions, but you should expect heavy scrutiny when leaders use poli-
tics as the driver for business decisions that may harm American
businesses and American workers. I hope that our largest financial
institutions will set the standard for nondiscriminatory business
practices and keep politics out of finance.
For my first question, I would like to turn to Ms. Fraser. I want
to follow up on something that Senator Warner started on. You and
I have actually talked about this in the past, but I want to come
back to the cyberattack on SolarWinds, the ransomware attacks on
our Colonial Pipeline, and also one of the largest U.S. insurance
companies recently, a cyberattack. These are highly serious cyber-
security vulnerabilities that have been exposed in our infrastruc-
ture. We are also seeing a lot of fraud and hacking in the
cryptocurrency area. You and I talked about that as well a few
months ago. And Citi is a very global bank. It has got operations
and customer interactions increasingly moving into the digital
space. I want to be sure that all of you are laser-focused on these
risks.
Ms. Fraser, what are some of the biggest cybersecurity risks that
you are seeing around the globe? And, second, how can we improve
Government coordination with the private sector to address this?
Ms. FRASER. Thank you for the question. I think it is one that
keeps all of us at night as one of the greatest risks to the financial
system right now. This can be perpetrated by Government actors,
by organized crime, and a whole variety of institutions and individ-
uals trying to cause some harm. It gets very critical that we con-
tinue sharing intelligence about what is going on, making sure that
there are plenty of forums in which we can share intelligence about
what is happening and why so that we are able to protect our insti-
tutions, that we continue making major investments—our own firm
invests almost close to $1 billion a year in cyberprotection—and
that the intelligence that the U.S. has is something that we use to
defend against attacks on American companies and the financial
institution worldwide is absolutely critical.
Senator HAGERTY. As Senator Warner mentioned, and I do as
well, we share great concerns about the vulnerable of our financial
services system on cybersecurity, and we also are watching very
closely what is happening in the cryptocurrency markets. And as
Senator Warner said, he wants to work with all of you in address-
42
ing this. I do as well. So you have got bipartisan support here in
the U.S. Senate to address this significant problem. And I think
with our largest banks, we can make significant progress and set
the standard, frankly, for the entire financial system. So I look for-
ward to working with all of you in this regard.
Mr. Chairman, thank you. Mr. Chairman, I yield back.
Chairman BROWN. Thank you. The thing froze. Sorry about that.
Thank you, Senator Hagerty.
Senator Smith from Minnesota is recognized for 5 minutes.
Senator SMITH. Thank you, Mr. Chair, and thanks to all of you
for being with us today. I appreciate it.
I would like to dive in a little bit on this issue of climate risk
disclosure. So in February, when Fed Chair Jay Powell testified be-
fore our Committee, in response to a question that I asked, he said,
‘‘Clearly we ought to be going to more of a template and more
standardized’’ template for climate risk disclosure. And, you know,
for most people, what this would mean is an SEC rule requiring
public companies to disclose their climate-related risk in some sort
of a standard and comparable way so that people can see across—
you know, see what that risk is across different organizations. And
I know that your firms consistently assess risk, including climate
risk. So let me just ask each one of you, if you would, yes or no,
and if no, why not, do you think that the SEC should issue a rule
setting out some sort of standardized climate risk disclosure frame-
work? I will start with Mr. Scharf.
Mr. SCHARF. Senator, first of all, I am proud of the steps that
we are taking on disclosure. I actually do not know enough about
different industries to know whether—that that is the best ap-
proach or not. We have been very focused on developing our own
sets of disclosures and understanding how we are going to measure
different aspects. And it is certainly something we can think more
about and come back and talk to you about.
Senator SMITH. OK. Well, I will come back to that.
Mr. Solomon.
Mr. SOLOMON. Yes, I appreciate the question, Senator, and it is
something that we would be open to. But I think it is very impor-
tant that you are very specific about the form it takes and, in par-
ticular, the consistency across regimes. This consistency issue is, I
think, a very, very big issue. That will be very, very important. We
would be happy to discuss that further with you.
Senator SMITH. I agree. I think that is right. The point here is
that you would have some sort of assessment of what material is
and that that can be clear so that it is not everybody picking their
own idea of what material is.
Ms. Fraser.
Ms. FRASER. Thank you very much. We voluntarily made a large
amount of disclosures on this. I would defer to the SEC as to what
they believe the details of it should be. And as Mr. Solomon said,
there is great benefit from consistency.
I think we also have to recognize there is not a lot of data out
yet, and so whatever system is put in will evolve over time as we
get better-quality data and better understanding of this going for-
ward.
43
Senator SMITH. But having a standardized rule so that it could
be comparable across platforms makes sense to you?
Ms. FRASER. The consistency element is critical, yes.
Senator SMITH. Mr. Dimon.
Mr. DIMON. Well, you have to put this in perspective a little bit,
because we make a tremendous amount of disclosures already in
ESG, so we are not against it. We are in favor of that kind of thing.
And very often we have to make more disclosures. Our 10K is al-
ready 400 pages long, and most people do not read that.
So, yeah, I am in favor of it, but you have got to be very, very
thoughtful about what it is, what you are trying to accomplish, and
how it is not just done for banks but is done for other critical in-
dustries in the right way to accomplish the goals you actually want
to have.
Senator SMITH. Right. But the point that there would be some-
thing that would be standard and consistent that would allow com-
panies, you know, to disclose consistently would make sense to
you?
Ms. FRASER. Yes, but you would not be able to do that imme-
diately.
Senator SMITH. OK. In the interest of time, I want to just skip
to one other thing that I would really like to talk about, because
I think it gets to this question that has been coming up from some
of my colleagues on the other side about this so-called wokeism. So
here we go.
Last year, the Department of Labor issued a rule under the
Trump administration Department of Labor that sharply limited
the circumstances in which pensions, 401(k) plans, could consider
environmental or social or governance factors in their investment
decisions, which meant that, in effect, most 401(k) plans would not
even be able to offer workers the option of keeping their invest-
ments away from companies that discriminate against their work-
ers or support polluting industries, for example. So to me, this
seemed like a politically motivated rule, and it has also imposed a
difficult, unnecessary burden on plans.
Now, I have introduced legislation that would undo this Trump
rule. In fact, the Biden administration has moved forward adminis-
tratively on this. My question to you—and I will just maybe go to
the two that I did not have a chance to hear from before—is: Do
you think that the Trump administration was right to repeal that
rule? Or do you think it is reasonable to have a standard for allow-
ing plans to consider ESG factors if that is what their investors are
asking for? Mr. Moynihan.
Mr. MOYNIHAN. Well, Senator Smith, I will tie this back to the
last question, which is public companies have worked together with
the Big Four accounting firms to come up with a set of metrics and
standards that 80-plus companies have signed onto. The key is to
standardize this, and the key is to bring these metrics together,
and that would allow people to be judged across industries and
across investments on the ESG factors. That is out there. We have
disclosed it. Eighty other companies have signed up to disclose it.
And I think that feeds into the question, with the demand of the
investors to understand these factors, a consistent, straightforward,
simplified set of disclosures that crosses industries is needed, and
44
that would then not require rules about what to think about be-
cause the investors could actually see and make choices.
Senator SMITH. Thank you.
Mr. Chair, I know I am out of time. I just want to observe that
I just disagree with my Republican colleagues on this broader
issue. This is not about being woke. This is about providing indi-
vidual investors with the information that they want in a clear and
understandable way, and I think that that is a good thing for sta-
bility and a good thing for the markets and a good thing for people.
Thank you.
Chairman BROWN. Thank you. Thank you, Senator Smith.
Senator Cramer from North Dakota is recognized for 5 minutes.
Senator CRAMER. Thank you, Mr. Chairman, and thank you to
our panel. A special thanks to the five of you that reached out and
that I was able to meet with in the last few weeks. Mr. Gorman,
I am looking forward to doing that in the future with you. I found
the meetings to be productive, frank, and even encouraging. So
thank you all for that.
You have answered a lot of questions today about your ESG poli-
cies. I think there has been some clarification. I am going to try
to ask some real specific questions that might help inform me a lit-
tle more.
The first question I would have for all of you is: Do you think
U.S. energy investment—or do you think that reliable energy, reli-
able electricity is important to the United States economy? And you
only have to answer if you say no. Is reliable energy important to
our economy?
[No audible response.]
Senator CRAMER. So let me ask this: Do you think global energy
demand is going down? Does anybody think global energy demand
is going down?
[No audible response.]
Senator CRAMER. Let me ask this specific question to you, Ms.
Fraser. Does Citigroup have a coal reduction policy or do you have
a carbon reduction policy?
Ms. FRASER. We have a policy which is reflective of a risk-based
assessment on the coal sector. We see declining demand. We also
take into account reputation and other risk factors when we make
a decision as to where we are going to be financing and not. We
have a focus on helping to support our clients decarbonize, but are
very mindful there is a very important balance here between en-
ergy policy and the economy and making sure that that transition
achieves both goals.
Senator CRAMER. I always like the word ‘‘transition.’’ I believe
that the United States of America is the solution in the transition.
In fact, I would submit to you that there is global demand that is
increasing, and that many of the policies that my friends on the
left want to promote simply transfer their climate guilt to other
countries. And I just would submit that investing in the fossil en-
ergy sector in the United States of America is the single best way
to lower carbon emissions globally, while working with the
innovators in those industries to reduce it.
So words matter. When the policy says, you know, we will not
invest anymore in anybody that uses more than 5 percent coal-gen-
45
erated electricity, I would say, well, what if that coal-generated
electricity actually has zero emissions, you know, 10 years from
now because of technology? So I just want you to know that the
words actually do matter, as you are learning today.
I also know that the voices in your ears are the left. It is the
woke crowd or it is the environmental extremist crowd that is
speaking through proxies or speaking through their institutional
investors. And I just want you to know that I am going to be, you
know, another voice in your ear pointing out some other things.
Let me ask, any one of you, I guess, can answer this. When you
consider, for example, the risk of investing in a large server farm,
let us just say Amazon comes to you and says, ‘‘We are going to
build a large server farm in a city where you have a big bank, and
we would like to borrow $300 million for that server farm,’’ do you
consider whether or not that server farm is going to have 24-hour-
a-day, 7-day-a-week electricity, redundant and reliable electricity?
Mr. Solomon, would that be a consideration in an investment like
that?
Mr. SOLOMON. Senator, I appreciate the question. I think when
we look at any transaction with any company, the people that
evaluate credit and risk think about a broad, broad array of risks.
And so in looking at something like that, certainly they would be
thinking about power source and how that worked in terms of mak-
ing a credit decision. It would be one of many, many factors that
would be considered. The biggest factor, if you are doing something
for Amazon, would simply be the overriding credit of Amazon as,
you know, the largest company, one of the largest companies in the
United States.
Senator CRAMER. Certainly, and I use Amazon because they are
large and because they do have large server farms, and server
farms require a lot of electricity, but they cannot have the lights
go out. And regardless of what the fuel source is, I would submit
to you that you just cannot have the lights go out.
My point is—and maybe, Mr. Dimon, you could wrap up with me
on this. My point is that I think we have this tendency suddenly
in our culture today, for whatever reason, to think that energy is
an industry sector over here and we can just sort of set that aside
over there and just manufacturing, transportation, you know, infra-
structure, the tech industry, all of that we can still deal with over
here. And we simply cannot.
So here is my question to you all. I want to help you be part of
the solution to this transition that we talk about of lower emis-
sions, and I would say that is going to involve a lot of investment
in the United States of America’s energy sector, including fossil en-
ergy.
Chairman BROWN. Thank you, Senator Cramer.
Senator Tester from Montana is recognized for 5 minutes.
Senator TESTER. Thank you, Chairman Brown. I want to thank
all the folks who are here as witnesses today.
I want to talk about housing from a little bit different angle, OK?
I have always talked about availability and affordability. It is a
problem and continues to be a problem. It was a problem before the
pandemic. It is a bigger problem now because we are seeing prices
go up. We are seeing people paying premium prices, sight unseen,
46
cash on the barrelhead and all that stuff to buy a house. Some of
them are going through you guys to buy it, but there is one thing
for certain. Demand is outpacing supply, and the result of that is
we are seeing housing prices in States like Montana go through the
roof. I mean, we are talking 20, 30, 40, even 50 percent increases
over the last 15 months.
So what I would like to know is: Is this a bubble? Are you folks
concerned about this? And if it is a bubble and that bubble pops—
and I was around here in 2009, 2008, whenever it popped last time,
and there was a lot of uncertainty. So the question is: If it is a bub-
ble and if that bubble pops, are you guys in good enough shape to
handle that? And I assume you are going to say yes. Tell me why.
And if you say no, thank God for your honesty. So I think we will
start with Mr. Scharf, and we will just go right down the line.
Mr. SCHARF. Well, I think the answer to the first part of your
question is you have to look market by market. I think our assess-
ment when we look at the markets which have seen material ap-
preciation are because of changes in trends. As far as how we feel,
we have been, I think, relatively conservative in terms of how we
have underwritten and how we continue to underwrite, and be-
tween our loan loss reserves and the amount of capital that we
have, we think we will be just fine.
Senator TESTER. OK. Mr. Solomon.
Mr. SOLOMON. Unlike a number of the banks here, we have a
very, very small, tiny mortgage lending book, so, you know, broadly
speaking, I think you do have to look at what is going on from a
monetary fiscal policy perspective, how it is accelerating asset
prices, how it is affecting prices of homes as we go forward. But
in terms of our institution, it is a very, very small risk in our busi-
ness platform.
Senator TESTER. But if we were to have the bubble pop, it would
have impacts on you whether you have a small part of it or no. Do
you see it as a bubble?
Mr. SOLOMON. I do not see it as a bubble, but I think there is
a lot going on that is inflating asset prices, and I think we have
to continue to watch asset prices, watch inflation, watch monetary
and fiscal policy, and hopefully the Fed will get the right balance.
And if they do get the right balance, then it will turn out that there
was not a bubble. And if we do not get the balance right, there will
be issues. And, of course, we will have—there will be secondary or
tertiary impacts to all this that will affect all these institutions, but
we are very well capitalized and I think very well positioned as an
industry to withstand that and continue to participate construc-
tively at that time.
Senator TESTER. All right. Ms. Fraser.
Ms. FRASER. I think similar to Mr. Solomon, this has to be mon-
itored very closely, and I think it is too soon to call whether it is
or not. Housing is absolutely critical. We can support it through
mortgages as well as affordable housing finance, and many of us
have talked about the importance of support in that arena. We are
speaking for Citigroup. We have a lot of reserves on our balance
sheet, and we believe that we are in strong financial health, and
we are hoping that with the recovery those reserves will not be——
Senator TESTER. Mr. Dimon.
47
Mr. DIMON. Senator, to give you a little comfort, while there is
a little bit of a bubble in housing prices and stuff like that, unlike
2008 and 2009, there, there was tremendous leverage and bad
mortgage underwriting. Here there is not much leverage and much
better mortgage underwriting. So it would not have the same effect
on the financial system as it had last time, and I think all these
banks—I mean, our capital runneth over. We have enough capital
to withstand multiple crises, as we did in 2008, as we did in the
pandemic. We run 120 stress tests a week, some of them far more
severe than the Federal Reserve severe adverse test, and we can
handle all of that rather easily.
Senator TESTER. Thank you.
Mr. Moynihan.
Mr. MOYNIHAN. I think the last point that Mr. Dimon made is
a key point. The stress test which assumes housing prices drop by
60 percent, assume there is a downfall in housing, and you see the
banks all pass the stress test for that.
Second, I think that Mr. Scharf’s points about the underwriting
has been much better done, frankly, in the last 15 years since the
last housing crisis, and so the amount of leverage at the consumer
level is much different. So I think that portends that they would
be able to make it through better also.
Senator TESTER. Thank you.
Finally, Mr. Gorman.
Mr. GORMAN. Not a bubble nationally. Certainly some suburbs
look very frothy. The banks are extremely well capitalized to ab-
sorb should this be a downturn, and we are in, as my colleague
said, a very different position from 10 years ago.
Senator TESTER. Thank you all very, very much.
Thank you, Mr. Chairman.
Chairman BROWN. Thank you, Senator Tester.
Senator Daines, also from Montana, is recognized for 5 minutes.
Senator DAINES. All right. Mr. Chairman, thank you. And a big
thank you to our witnesses for being here. And I have got to say
thank you for helping our economy recover over the past 15
months. A heartfelt thank you.
Shifting gears, I recently read a quote that was actually from the
ACLU, and he was referring to Harvard when he said this, when
he defined ‘‘diversity.’’ He says, ‘‘Diversity at Harvard is where ev-
erybody looks different but thinks alike.’’ That stuck out to me, and
I think it rings true and crosses over several sectors of our society,
including banking.
Mr. Scharf, what noneconomic criteria would Wells Fargo take
into account when making loans? And I think also think of this in
the context of the shareholders’ personal or political beliefs taken
into account.
Mr. SCHARF. Well, Senator, thank you for the question. I think
our approach to underwriting starts with a risk-based approach in
its entirety, and so we look at all of the risks that something could
pose, and we look at the returns relative to the risk that we take.
And so that could be credit risk; it could be market risk; it could
be operational risk; it could be reputation risk.
48
And, you know, we also think about our shareholders and what
their points of view are over time, not for a specific credit per se
but about, you know, their views on just our institution.
Senator DAINES. So I was struck as I looked at what happened,
the situation with CoreCivic, in terms of what criteria was applied
when you made a decision in 2019 to stop lending to CoreCivic, and
really more specifically was that response driven by any reports or
shareholder activist proposals?
Mr. SCHARF. Senator, that decision was made before I arrived at
the company, so I really cannot speak to it.
Senator DAINES. OK. I will move on.
Mr. Moynihan, in the Bank of America’s 2021 proxy statement,
a shareholder proposal stated, and I quote, ‘‘Bank of America’s
charitable contributions are not fully aligned with its public state-
ments. Bank of America has donated to police foundations in New
York, Atlanta, and Los Angeles.’’
In response to pressure from shareholders and the fear of esca-
lating shareholder activism, have either you or Bank of America
halted or reduced giving to police foundations?
Mr. MOYNIHAN. Senator, thank you for the question. We have not
changed the way we gave in the past based on any shareholder res-
olution that I am aware.
Senator DAINES. And specifically to anything law enforcement or
police foundations?
Mr. MOYNIHAN. Exactly.
Senator DAINES. Thank you. A follow-up to that. How do your
ESG initiatives and your guidelines impact your clients’ selection
and lending criteria?
Mr. MOYNIHAN. I think it is similar to what Mr. Scharf was say-
ing. You have a series of risks that you are assessing in any trans-
action, and those risks are off the spread sheet, off the—you have
a balance sheet and income statement, off-the-market opportunity,
off the brand of the underlying companies, and that is all taken
into account by our team, as they look at client selection and each
individual case. Those committees have business representatives,
risk representatives, legal representatives, compliance representa-
tives from all over the company that make the decision.
Senator DAINES. Looking through your 2020 proxy statement,
you discuss commitment to achieve net-zero greenhouse gas emis-
sions in your financing activities. Do you anticipate refusing to pro-
vide banking services to any oil, gas, coal, farms, or ranchers that
would have emissions?
Mr. MOYNIHAN. No, Senator. That commitment—and you have
heard us all talk about it earlier—these commitments—our clients
have committed to their own transitions, and our job is to help
them finance that transition because that is what banks do. And
just in 2020 alone, we did about $60 billion in environmental fi-
nancing to help clients make the transition. So we are working
with the oil companies, with gas companies, and others to help
them finance the transition, including using our purchase power to
help make that happen. So, for example, with the providers of elec-
tricity to us in the Carolinas, we help them get the kind of con-
tracts a company like ours can give to help them build a solar facil-
ity, to help them—and they can select other people. So we can do
49
it through how we underwrite, how we support those clients mak-
ing the transition, and also how we use our purchasing services for
electricity in particular to help a utility make a change.
Senator DAINES. Great. Thank you.
Mr. Dimon, could you explain to what extent—as you look at
your risk models and you factor in any controversy risk and how
that might play into an assessment of perhaps lending to whether
it is a firearms manufacturer or a natural gas project?
Mr. DIMON. So a little bit, but not as much as people think. So
when it comes to energy, it is really carbon intensity we look at,
and we have been working with the auto and oil and gas compa-
nies, all of whom are trying to get their carbon intensity down, I
think actually quite successfully, and the American public will be
happy with it.
When we look at risk away from just financial risk, it is usually
legal and regulatory, and it is usually the cost of underwriting and
doing due diligence that we look at, which might say there is no
reason we are going to do A, B, or C, because the legal and regu-
latory costs down the road would be just too high.
Senator DAINES. All right. Thank you. I am out of time. Thanks
for being here today. Appreciate it.
Chairman BROWN. Thank you, Senator Daines.
Senator Sinema from Arizona is recognized for 5 minutes.
Senator SINEMA. Well, thank you, Mr. Chairman, and thank you
to our witnesses for being here today.
Each of these financial institutions played an outsized role in the
economic response to COVID–19. Ms. Fraser, it is good to see you
again. Let us talk about the Paycheck Protection Program. We ef-
fectively transformer the traditional loan origination process into
what we hoped would be fast emergency cash-flow for small busi-
nesses across the country. We saw that the PPP saved countless
jobs, but we are also seeing concerning instances of fraud and
abuse that need to be held to account. Defrauding American tax-
payers is unacceptable, and strong oversight and investigations
into Paycheck Protection Program fraud must continue.
How do you think Citi and other banks did in implementing the
PPP? And excluding the technical issues with the SBA, what was
the biggest challenge that banks faced in terms of execution?
Ms. FRASER. Yes, I think the goal of all of us, certainly at
Citigroup, was to get as much money into the hands of those who
needed it as quickly as possible. So some of the challenges were
building out digital platforms to be able to disburse and facilitate
the applications and similarly for the forgiveness programs that are
currently underway. And the biggest challenge was speed of getting
that money into the right people’s hands and making sure that we
were doing so in a way that was not allowing fraud into the system
and was protecting the intent of the taxholder’s money in sup-
porting people who needed it the most.
Senator SINEMA. Thank you. And do you believe that repurposing
the loan origination process is the optimal solution to help small
businesses in a future pandemic? Or knowing what we know now,
do you think we could design something better?
Ms. FRASER. I certainly think that it will be a well worthwhile
investment to make sure that we do have a technology platform at
50
the SBA or any of the other relevant institutions helping this to be
able to disburse money as effectively as possible. There were many
lessons learned on these last couple of rounds, and they need to be
applied and investments made in the technology systems for sure,
Senator.
Senator SINEMA. Thank you.
Next I will turn to Mr. Solomon. It is good to speak with you
again. I want to build off of Ms. Fraser’s observations and think
about the future pandemic response. You know, this pandemic real-
ly taught us how fragile the economy can be if the right shock
comes along. For the first times in our lifetimes last spring, busi-
nesses, both large and small, were staring into the abyss. And we
had a Congress that was willing to act, but Government lacked an
effective mechanism to deliver economic relief quickly to everyone.
Now, our office helped thousands of Arizonans who struggled to
navigate Government bureaucracy to access unemployment insur-
ance, PPP loans, stimulus checks, and we are still helping some of
those businesses today.
Now, we chose as a country to move quickly and move together
as a Congress. I am glad we took action. But we owe it to ourselves
to take a hard look at the pandemic response and assess what we
did, what we spent, and whether or not it worked as intended.
Now, it can be tempting to pretend that another pandemic is not
possible and that this is a problem better left to the next genera-
tion. But I think we owe it to the people of this country to have
a better plan in place for the next time this happens, which could
be sooner than we think, and that is why my team and I are start-
ing a bipartisan working group on risk sharing and pandemics.
Right now we are working with a diverse group of stakeholders,
think tanks, and other Senate offices to identify a smarter and
more fiscally responsible solution for businesses that leverages the
power of insurance in the event of a pandemic.
What do you think about this type of public–private partnership?
And do you believe it would promote growth and make our econ-
omy more resilient?
Mr. SOLOMON. So I appreciate the question, Senator, and I think
it is great that you are advocating for us all, thinking about the
lessons we have learned and thinking about preparedness. Cer-
tainly there have been many pandemics before, and we certainly
will see pandemics in the future.
As you think about these issues, I think you need to come up
with an appropriate risk-based system that can price and dis-
tribute that insurance appropriately. We would certainly support
the idea of thinking about this and finding ways that the private
sector can partner with you to potentially allow us to be better pre-
pared from an insurance perspective, and we would be delighted to
work with you and your staff.
Senator SINEMA. Well, thank you. You know, we have a lot of
businesses who could not access the relief they needed during this
crisis. Some were too big; some were too small. Others just simply
could not navigate the bureaucracy, and many of these businesses
failed. Many of these were Main Street businesses. And the bank-
ruptcies and defaults during the pandemic threatened nearly $2
trillion in commercial real estate loans held largely by big banks.
51
This threat forced some banks to set aside capital to cover potential
loan losses, and it tightened credit across the board when busi-
nesses need it most.
So, Mr. Solomon, do you believe that averting some of these
bankruptcies and defaults through a risk-sharing mechanism like
the one our group is contemplating would reduce losses and make
credit more available to businesses in these tough economic times?
Mr. SOLOMON. Well, again, you know, I think it is very, very im-
portant to set up an appropriate risk-based structure. I think these
are complex issues, but I think it is something we should focus on
and think about. We would be delighted to spend some time bring-
ing resource to bear on that discussion.
Senator SINEMA. I appreciate it.
Mr. Chairman, I see my time has expired. I yield back and thank
you.
Chairman BROWN. Thank you, Senator Sinema.
Senator Ossoff from Georgia is recognized for 5 minutes.
Senator OSSOFF. Thank you, Mr. Chairman, and thank you to
our witnesses today.
Ms. Fraser, the American Society of Civil Engineers has rated
the state of U.S. infrastructure at a C-minus and estimated that
the capital expenditure necessary to close the gap to get to a B
level, which they define as a ‘‘State of good repair,’’ is approxi-
mately $2.6 trillion.
Now, not all of that investment has to be public investment. So
my question for you is two-fold. First, do you agree that having
state-of-the-art, world-class infrastructure in the United States is
essential not just to quality of life but also to economic competitive-
ness and sustained growth? And how can Congress take action to
make it easier for private sector entities with significant capital at
their disposal to invest in necessary infrastructure improvements
and construction?
Ms. FRASER. Thank you very much indeed, Senator. It is a really
important question. Yes, I do agree that America having a far
stronger infrastructure than it has today will be important both in
terms of competitiveness of the country as well as an important
source of jobs and growth going forward.
The public–private partnership has been shown to be a very suc-
cessful one in this area where the Government can step in and pro-
vide credits and other areas where there are gaps in a capital
structure or help absorb some of the risks in it to enable future in-
vestors to come in and participate in the investments is going to
be a very important area, and it is one, I think I can speak for my-
self, we would be delighted to work with your office on going for-
ward.
Senator OSSOFF. Thank you, Ms. Fraser. And would you simi-
larly commit to working with this Committee and my office to ex-
plore mechanisms that could make it easier for private capital to
support the development of clean energy production capacity here
in the United States? I know that your bank has made some sig-
nificant commitments in terms of emission reduction.
Ms. FRASER. Yes, we would be delighted to do so. I think the de-
velopment, as we have heard today, of new technologies in seques-
52
tration or in carbon capture and others will be absolutely essential
in the transition ahead. We would be delighted to do so.
Senator OSSOFF. Thank you. I look forward to those discussions.
Mr. Solomon, I would like now to turn to you. Could you please
lend your perspective? What are the impediments and what are the
opportunities for improvement to public policy to unlock more pri-
vate capital for capital investments, improvements, construction,
necessary infrastructure in the United States?
Mr. SOLOMON. So I appreciate the question, Senator, and I think
that it is important for us to try to unleash a lot of the private cap-
ital that exists or is earmarked toward infrastructure. I think there
is over $200 billion of private capital earmarked for investment in
infrastructure in this country. I think that finding ways to collabo-
rate from a public–private partnership perspective has always been
a successful path to take. I think there are things that we can do
to potentially expand activities by making certain tax-exempt fi-
nancing easier, potentially for rural broadband or housing infra-
structure more broadly. I think those are areas that would be
worth exploring.
Senator OSSOFF. Thank you, Mr. Solomon. I appreciate that.
Mr. Dimon, I would like to offer you the opportunity to respond
to the same question, perhaps comment on the statements made by
some of your colleagues.
Mr. DIMON. You know, I agree with everything they said, and I
would just add that infrastructure is critical, but I would beg you,
the Senate, to focus on the output, not the input. Too much time
is spent on how much we are going to spend on stuff. Too little
time is spent on who is responsible, what is it going to cost, what
is it worth. And also you need to fix regulations. I have given this
example many times. You go through the examples around the
country. To rebuild a broken bridge between New Jersey and Stat-
en Island, it took 10 years to get the 49 permits, which they had
to get sequentially. You know, if it is going to take 10 years to re-
build a broken bridge, to get those permits, the cost is higher, the
risk is higher, private capital will not come in. And so you have to
do those things together, and, you know, cost to what outputs, how
many bridges, and then you will get full support of everybody if we
know it is going to be effectively spent.
This country spends lots of money completely ineffectively, and
that would be a very bad idea.
Senator OSSOFF. Thank you, Mr. Dimon. I appreciate that con-
tribution to the discussion.
Mr. Moynihan, when we discuss some of the potential invest-
ments in infrastructure, for example, transit and transportation,
clean energy, the energy grid, can you comment as well, please, on
the opportunities and the challenges faced by private capital inter-
ested in supporting these vital national [inaudible]?
Mr. MOYNIHAN. Well, I think my colleagues have outlined a lot
of the questions and issues, so to speak. There is just a lot of
money ready to be invested. It will take some effort on the permit-
ting and other types of processes to speed those projects along. But
the money is there, and, in fact, it is being invested as we speak.
So I think I would encourage a holistic view of this from the
amount of money that the Government can help to move projects
53
faster, the amount of money that the private sector has, and, im-
portantly the atmosphere on getting the project done which is re-
quired to speed these things along.
Senator OSSOFF. Thank you all.
Thank you, Mr. Chairman. I yield.
Chairman BROWN. Thank you, Senator Ossoff.
Senator Warnock from Georgia is recognized for 5 minutes.
Senator WARNOCK. Thank you so very much, Mr. Chairman.
The country’s biggest banks often set the pace for the rest of our
economy, which is why I think it is important for banks, especially
the biggest banks, to be good corporate citizens and to model good
corporate behavior that benefits our broader community. I think,
frankly, that that is good for capitalism. That means you use your
power to stand up for climate so that we have sustainable solutions
for our democracy, which creates the context for capitalism, for vot-
ing rights, for the least among us, including our brothers and sis-
ters who face discrimination at the hands of our financial system
and sometimes at the hands of our own Government.
I will just give one example. This past weekend, I was honored
to be in Fort Valley, Georgia, along with Agriculture Secretary
Vilsack for the rollout of the Debt Relief for Socially Disadvantaged
Farmers Program I fought to secure in the American Rescue Plan.
Leading up to this event, honestly I was quite disappointed to see
this letter from several banking associations, including the Amer-
ican Bankers Association, an organization that all of your banks
belong to, sent to the USDA. The letter actually complained that
the relief program will cut into the banks’ profits and argued that
USDA should deviate from its congressional mandate to quickly
implement the debt relief for eligible farmers who have faced dec-
ades of discrimination at the hands of the Federal Government.
The letter suggested that somehow paying the prepayment penalty
which the USDA has already indicated it will pay, somehow that
is not enough.
And so I want to give each of you a chance to clear the air and
distance yourselves and your banks from the ABA’s concerning po-
sition I would like one by one if you would tell me do you agree
with the position taken in the letter, which would either hinder the
relief or slow down the relief farmers would receive, or somehow
suggest that the American taxpayers ought to do more than pay
the prepayment penalty, which they are already doing. I would like
a brief yes-or-no answer since I have a few more questions and lim-
ited time. Mr. Scharf, do you agree with the letter?
Mr. SCHARF. Senator, this is not an issue that we are involved
in.
Senator WARNOCK. Pardon?
Mr. SCHARF. This is not an issue that we are involved in.
Senator WARNOCK. Do you agree with the letter? Yes or no.
Mr. SCHARF. Again, this is not our—I have not read the letter,
but it is not our issue, and we are a significant lender in the agri-
cultural sector.
Senator WARNOCK. Minority, do you agree with the letter? Like
Mr. Scharf, your bank is also a member of the ABA.
Mr. SOLOMON. So it is not an issue we are involved in, Senator.
We do not always agree with the ABA. We made a $130 million
54
commitment to Hope Enterprise Corp., which is a significant depos-
itory institution in that area, but it is not an issue we are involved
in specifically.
Senator WARNOCK. Ms. Fraser.
Ms. FRASER. I think similar to my colleagues, Senator, I am
afraid I have not read the letter. This is not an area that we are
involved in, and as Mr. Solomon said, you know, we do not agree
with everything that the ABA says.
Senator WARNOCK. Do you agree with this? Do you agree with
that letter?
Ms. FRASER. I am afraid I have not read the letter, so I do not
know, sir.
Senator WARNOCK. Mr. Dimon, do you agree with the letter? Do
you think that we should deviate from the congressional mandate
and slow-walk the payments that these farmers have been waiting
on or that the American taxpayers ought to do more than pay the
prepayment penalty, which is part of the provisions of the law?
Mr. DIMON. We did not fundamentally agree with the letter, and
that was really our smaller-bank brethren. They do have some le-
gitimate issue, but we did not fundamentally agree with the letter.
Senator WARNOCK. OK. Thank you.
Mr. Moynihan.
Mr. MOYNIHAN. Senator, it is not an issue that our company was
involved in, and I think it is an issue for the smaller banks, and
I think it would be better to hear their point of view on it. But it
is not an issue we engaged in or had anything to do with.
Senator WARNOCK. Mr. Gorman.
Mr. GORMAN. I have not read the letter. It is not our issue. But
I certainly do not agree with discriminating against farmers.
Senator WARNOCK. All right. Thank you so much.
Listen, I want to touch on a different issue in my remaining
time. As we know, the financial crisis, while painful for everyone,
has been particularly devastating for Black and Brown home-
owners. Some of you may have seen recent media reports about
Black and Brown homeowners receiving valuations significantly
undervalued compared to White homeowners. One story in Indian-
apolis is particularly heartbreaking.
Mr. Scharf and Mr. Dimon, as the top two bank mortgage lend-
ers in this country, when you consider the wealth gap and how that
has exacerbated in the real estate market where most people have
most of their wealth in their homes, will you each commit your
banks to take action to help address racial disparities within the
home appraisals market?
Mr. DIMON. Absolutely.
Mr. SCHARF. I agree, Senator.
Senator WARNOCK. Thank you so much. I think this is a critical
issue, and it is the reason I am introducing the Real Estate Valu-
ation Fairness and Improvement Act along with Senator Klobuchar
to help remedy these appraisal disparities which increase the racial
wealth gap.
Thank you so much.
Chairman BROWN. Thank you, Senator Warnock.
55
We are reaching the end of the hearing. Senator Toomey would
like some closing remarks, as I will, and we will have you out as
mostly promised by 1 o’clock, so thank you.
Senator Toomey.
Senator TOOMEY. Thank you, Mr. Chairman, and thank you very
much to all of our witnesses for attending and for your patience
and for being here.
Listen, I cannot help but reflect on the fact that I think this
hearing really demonstrated the very points that I was trying to
make in my opening statement. What we just saw over the course
of the morning was where stakeholder capitalism takes you. This
morning, you all have been criticized for distributing capital to the
owners of the institutions when you buy back stocks. You have
been criticized for charging fees for providing financial services.
You have been criticized for not supporting efforts to unionize your
workforce. You have been criticized for serving lawful businesses
like fossil energy companies. And my point is that if you concede
the premise that shareholders do not rank above other stake-
holders, then it is hard to explain in principle why those criticisms
are wrong.
I think there is a principle to explain why they are wrong, and
that is that your primary responsibility is to maximize value for
your shareholders. And I have got to point out, when you were
asked to endorse a proposal for Government-imposed price controls
on credit, you did not object. In fact, some of you seemed to express
support, at least in principle, and this is an antimarket proposal.
And nobody stepped up and defended this fundamental principle of
capitalism that we use markets to discover prices, not Government
edicts.
So, again, I just want to close by urging you please defend the
capitalist system that has worked so well for so many for so long.
Thank you, Mr. Chairman.
Chairman BROWN. Thank you, Senator Toomey.
I again thank you all for your patience and for being here. I look
forward to doing this more in the future. We have heard a lot today
about how much you value your employees, and yet not one of you
agreed to remain neutral if your workers want to unionize. You
said you would allow their voices to be heard, but that is not what
remaining neutral really means, not using your vast power to in-
timidate your employees.
You say you have focused on lending to small businesses and
growing the economy, but I look at your actions, not your words.
Instead, we see all of you spending billions on stock buybacks. You
say that climate change is a threat to the entire economy, but you
drag your feet when it comes to investing in new technology and
the jobs of the future.
I am glad you raised wages. I appreciate your doing that. I am
glad you made some investments in minority depository institu-
tions and started to increase diversity in your senior leadership, in
several cases leading right up to this hearing. I hope you all con-
tinue to do that throughout the year and not just before a Senate
hearing.
It is also not even close to enough when you are the most power-
ful economic actors in the country. As I said, the six most impor-
56
tant business people in this country are on this screen right now.
The signals your companies send influence workers at companies
all over the country, not just your own employees. Before the pan-
demic, Bank of America downgraded Chipotle’s stock because an
analyst decided the company pays its workers too much. As a re-
sult, the company’s share price declined by 3 percent.
When American Airlines announced pay raises for its pilots and
flight attendants, Wall Street punished the company, dropping its
stock price 5 percent.
A Citibank analyst actually wrote, ‘‘This is frustrating. Labor is
being paid first again. Shareholders get leftovers.’’
‘‘Leftovers.’’ We might have thought that after the pandemic
things might start to change a bit. No one could deny how much
essential workers contribute, how our economy is supposed to re-
ward people whose talents are in high demand. That is what we
are all taught, and that is what corporate leaders always tell us,
right? But this year, after Amazon defeated the Alabama workers’
union-organizing efforts, the company’s stock climbed. Just a few
weeks ago, Wall Street sent Uber and Lyft and DoorDash stocks
down when Labor Secretary Walsh said gig workers should be clas-
sified as employees. This sends a pretty clear message: the more
you pay your employees, the worse you are going to do on Wall
Street. The less power you give workers, the better you will do.
This view that American workers are a cost to cut instead of a
valuable asset to invest in is what is wrong with this system. So-
called analysts on Wall Street, often at your banks, make decisions
for people in Ohio and Pennsylvania and across the country, deci-
sions about whether workers they have never met in towns they
have never been to are a good investment.
I hope you will make progress not only within your own institu-
tions but in thinking about the role your banks play in leading the
system and leading this economy.
Thanks to all six of you for being here today. Thanks for your
patience and for 3 hours of answering questions.
For Senators who wish to submit questions for the record, they
are due 1 week from today, Wednesday, June 2nd.
To the witnesses, we ask you to respond within 45 days.
Thank you again. With that, this hearing is adjourned. Thank
you all.
[Whereupon, at 12:55 p.m., the hearing was adjourned.]
[Prepared statements, responses to written questions, and addi-
tional material supplied for the record follow:]
57
PREPARED STATEMENT OF CHAIRMAN SHERROD BROWN
Today is the first time we have ever had the CEOs of the Nation’s six largest
banks together before the Committee.
Over a century ago, Louis Brandeis wrote about the concentration of corporate
power and how it distorts the market. He called the book, ‘‘Other People’s Money-
and How the Bankers Use It’’. It’s a subject Americans continue to have a stake
in: how you, the Nation’s largest financial institutions, use other people’s money.
You are the six most powerful business leaders in this country. Your decisions af-
fect the lives of millions of people—their paychecks, their job opportunities, their re-
tirement savings.
And your power is so much greater than that of your predecessors 30, 40, 50 years
ago.
Look what has happened to our country during that time.
Profits have gone up, stock prices have soared, your own compensation is strato-
spheric—but workers get a smaller and smaller share of the wealth they create and
they’re working harder than ever.
We have a racial wealth and income gap that has barely budged since we passed
the Civil Rights Act.
In the aftermath of the 2008 Great Recession where millions lost their jobs, Wall
Street still made record profits.
In a pandemic where half-a-million Americans died and we had the highest unem-
ployment since the Great Depression, Wall Street still made record profits.
I sense a pattern.
Like most Americans, I want businesses to make money, and I don’t mind that
bankers are rich. Some people are going to be wealthy, and that’s fine.
Here’s the problem: under the current system, Wall Street profits no matter what
happens to workers, because those profits now come at the expense of workers.
And your banks are the ones that largely built that system.
We often hear about the ‘‘invisible hand.’’ But the economy isn’t physics—it’s not
governed by scientific laws outside our control. It’s made up of people making
choices about our values and the society we want to live in.
The ‘‘invisible hand’’ doesn’t lay off workers. The ‘‘invisible hand’’ didn’t invent
credit default swaps. The ‘‘invisible hand’’ doesn’t decide to invest in private equity
firms that buy up mobile home parks in Iowa and across the country, and jack up
the rent.
Your banks—your lobbyists, and your fellow CEOs at some of the other largest
companies—you all make those choices that dictate how our economy works.
Wall Street built this system, and they didn’t build it for everyone—they built it
for themselves.
When companies lay people off, when they move jobs to low-wage countries, when
they cut paychecks, when they bust unions, when they subcontract work to lower-
paying companies with fewer benefits, Wall Street analysts yell ‘‘buy.buy.buy.’’
And what you do sends a signal to every other company. If businesses want in-
vestment, they emulate you. They know they won’t attract investment unless they
repurpose all their funds into short-term profits for shareholders.
It hasn’t always been like this.
When I was growing up, the CEO-to-median worker pay ratio was 20-to-1. That
was good money.
Today, that ratio is 320-to-1.
From the mid-20th century through the early 80s, the financial sector made up
10 to 15 percent of corporate profits. Today it’s 25 percent—yet it makes up only
four percent of jobs.
A few decades ago, a majority of Wall Street capital funded the real economy—
wages, machinery, research, new construction. Today, much of that capital goes to
stock buybacks, dividends, and complex financial instruments—only about 15 per-
cent goes to the real economy. 1
Instead of investing in businesses that actually make things or provide useful
services, and that create real jobs in towns all over the country, companies spend
billions buying back stocks and handing out CEO bonuses.
Stock buy-backs used to be illegal market manipulation. Today, they’re routine.
Wall Street’s interests and Main Street’s interests no longer match up. The cur-
rent system treats workers as a cost to be minimized—instead of the engine behind
our success.
Look at what’s happened to places like where I grew up, in Mansfield, Ohio.
1 http://time.com/4327419/american-capitalisms-great-crisis/
58
Jobs shipped overseas to countries where companies can pay workers less. Declin-
ing union membership—by design. Crumbling roads, shuttered storefronts, and
workers forced to choose between a hometown they love, and leaving in search of
opportunity.
And that was all before 2008. You all know what happened to Americans then.
And Congress and too many in Washington have been willing accomplices—tax
break after tax break. Gutting consumer protections. Trade deals written by cor-
porate lobbyists.
So I come back to this. There’s a reason towns across the country like Mansfield
look the way they do. It’s because our economy is no longer about workers and com-
munities, and real investment in both of those.
And the six of you before us today are the most powerful economic titans in the
country.
Your banks, and the system they built and uphold, bear some responsibility.
At the end of last month, we held our first-ever worker listening session. We
heard from workers from all kinds of backgrounds, working all kinds of jobs—in-
cluding as a former teller at one of your banks.
They talked about wage theft, about being laid off during a pandemic with no sev-
erance, about how dangerous their workplaces could be, about how companies bust-
ed their unions.
There was a common thread through all of their stories. Their hard work doesn’t
pay off—certainly not the ways yours does.
Pamela Garrison, a worker from West Virginia, said something that stuck with
me—‘‘ ‘working poor’ are two words that shouldn’t go together.’’
I know you can’t snap your fingers and fix all these workers’ problems. But you
also can’t tell me the decisions you make have no effect on the factors that deter-
mine their job opportunities and their wages.
And yes, I know you work hard too. We all do—work is something that unites
all of us. We’re ALL trying to do something productive for our families, our busi-
nesses, our communities, our country.
Here’s the difference: for most people, no matter how hard they work, if one thing
goes wrong in their life—they get in a car accident, the plant where they work shuts
down, their spouse gets sick—they’re on their own.
They don’t get a taxpayer bailout. And they all remember that Wall Street did.
And it hasn’t only been the bailouts. No one can deny that the Nation has been
good to the financial industry—deposit insurance, the Federal payments system, the
whole financial infrastructure you rely on.
But your banks have not held up your end of the deal.
As far as I can tell, you haven’t at all rethought this Wall Street system built
on short-term profits, at the expense of long-term growth for everyone.
In fact, you continue to perpetuate it.
Wall Street gets second chance, after second chance, after second chance. Most
workers don’t even get one.
It’s past time for the financial industry to be as good to the American people as
the Nation has been to you.
The purpose of today’s hearing is to show Americans that their Government is fi-
nally looking out for them. That we understand this economic system has betrayed
millions of workers, that it holds our country back.
Here’s what we want to hear from you today: what are you and the companies
you run going to do—not just say, but actually do—to change.
We want to hear what concrete actions you will take to change the incentives on
Wall Street, to reward work instead of wealth.
To pay for and work to undo the damage Wall Street has done, and continues to
do, to communities of color.
To stop investing in corporations that fuel climate change, threatening people’s
communities and livelihoods.
To channel your vast resources into businesses that employ actual people in cities
and towns, from Mansfield, Ohio, to Mansfield, Georgia.
To invest in our country’s greatest asset—the American people.
I have heard many of you argue that you don’t need Government rules forcing
you to make any changes to your business model.
So show us some proof—prove to us that you are going to use your positions to
change the Wall Street system, make our economy work for everyone—not just
CEOs and the wealthy.
59
PREPARED STATEMENT OF SENATOR PATRICK J. TOOMEY
Thank you, Mr. Chairman.
Today’s hearing is about the U.S. financial system. The financial system proved
to be remarkably resilient during COVID, but I am concerned about increasing pres-
sure on banks to embrace ‘‘wokeism’’ and appease the far Left’s attacks on cap-
italism. I worry that continuing down this path may lead to distorted credit alloca-
tion, activists seeking to make political change through the financial system instead
of the democratic process, and ultimately, diminished prosperity for Americans.
First, let’s observe that the banking system proved to be extremely resilient dur-
ing COVID. Last year, we had the worst pandemic in more than 100 years, the Gov-
ernment shutting down almost the entire economy, and the most severe recession
since the Great Depression. Despite all this, banks remained stable and responded
to their customers’ needs for credit, because they were so well capitalized.
In fact, one of the best decisions we made during COVID was administering the
Paycheck Protection Program (PPP) through the banking system. No other system
had the scale or agility to run this program, and banks leveraged their relationships
to deliver hundreds of billions of PPP dollars to millions of small businesses so they
could keep their workers employed.
The financial system’s contributions to America’s economic growth—before and
during the pandemic—are part of the larger success story of capitalism. No eco-
nomic system has lifted more people out of poverty, created more opportunity, and
produced a higher standard of living than democratic capitalism.
Thanks to capitalism, life is better for the vast majority of Americans today than
it’s ever been. In fact, before COVID, we had the best economy of my lifetime—as
measured by the very metrics that my Democratic friends say are important. We
had the lowest unemployment rate in 50 years for all Americans, record low unem-
ployment rates for blacks and Hispanics, more jobs than people looking for work,
and a record low poverty rate.
Contrary to the mischaracterizations of some of my Democratic colleagues, we saw
across-the-board wage growth, and growing fastest for the lowest income earners,
and a narrowing of the income gap. In fact, the very system of economic freedom
that my colleagues condemn was creating unprecedented and shared prosperity
across America.
That’s why I’ve been surprised and troubled to see some banks taking actions that
undermine the property rights at the heart of our system and politicize lending.
Some bank leaders have embraced so-called ‘‘stakeholder capitalism’’—which dimin-
ishes the primacy of shareholders in our economy and enables corporations to pur-
sue a liberal social agenda rather than prioritize its responsibilities to its owners.
Well-run businesses always benefit their stakeholders, but management’s respon-
sibility is to do so in service to shareholders, who own the company. The people who
own a company—through shares in their retirement accounts, pensions, college sav-
ings accounts, or otherwise—rely on a firm’s officers to look out for their financial
interests.
Making decisions based on social policy objectives—rather than profit maximiza-
tion—deprives these shareholders of their rightful property. Worse yet, once the
shareholders’ rights are reduced to the level of all other stakeholders, how does a
company’s management decide whose interest to prioritize?
Some would invite the Government to step in and make those decisions—for ex-
ample, those who would favor a prohibition on stock buybacks. After all, if the
shareholders’ interest is no longer paramount, the Government may determine that
this capital would be more appropriately allocated to employees or the environment
or other special interest groups.
It is a fallacy to think that if you are seeking profits, you are not serving people.
In fact it’s the exact opposite. Business can only profit when they satisfy customers
and that can only be achieved with a satisfied workforce and good relationships with
the community.
Finally, let me suggest a word of unsolicited advice. If there is an issue in the
political realm that affects your bank, like taxes or regulatory policy, I would hope
you would articulate your views on behalf of your shareholders. But, if there is a
highly charged social or political issue that involves balancing competing values,
such as balancing access to voting with election security: leave that to elected law-
makers. They were elected to make these difficult policy decisions and are directly
accountable to the people who hire and fire them: the voters in their jurisdictions.
60
PREPARED STATEMENT OF CHARLES W. SCHARF
CHIEF EXECUTIVE OFFICER AND PRESIDENT, WELLS FARGO & COMPANY
MAY 26, 2021
Introduction
Chairman Brown, Ranking Member Toomey, Members of the Committee: good
morning, and thank you for the opportunity to be here today.
Just over a year ago, when I last appeared before Congress upon assuming my
role as CEO, we were on the verge of a global pandemic. I cannot help but look back
and think how little we understood then of what 2020 would bring. When the pan-
demic struck, we all came together to stand up unprecedented assistance at a scale
and speed that had never been done before. Though the process was not perfect, we,
the Government, and others worked together to help our fellow citizens. Banks were
a part of the solution to beat back the economic impacts of a global pandemic, and
now we must continue to work together to ensure a fair and equitable recovery.
As we begin taking steps toward a healthier economy, I am proud of all that Wells
Fargo has done to support our customers, our employees, and the communities we
serve-all while continuing to transform our organization. There is much more work
to do, but Wells Fargo wants to be a constructive partner to forge an inclusive recov-
ery for all.
Our Response to the COVID–19 Pandemic
Throughout the pandemic, our focus has been on providing high levels of support
for our customers and the broader communities we serve.
Support for Customers During the Pandemic. We deferred payments and waived
fees for more than 3.7 million consumer and small business accounts to help people
during these challenging times. We provided more than one million mortgage
forbearances and suspended residential property foreclosures and evictions to keep
people in their homes. And we processed approximately $80 billion in Federal stim-
ulus payments. Further, we paused for 60 days the collection of negative balances
existing at the time when Federal stimulus payments are deposited to customers, 1
and we cashed Federal stimulus payment checks for noncustomers in our
branches—with no fees charged. Additionally, during the pandemic, the number of
overdraft-related fees collected dropped by more than 35 percent.
We donated $225 million through the Wells Fargo Foundation to support economic
recovery for communities and vulnerable populations affected by COVID–19. We
helped more than 200,000 renters and homeowners stay in their homes through
grants to nonprofits offering eviction and foreclosure prevention assistance, rental
assistance, and financial counseling. We also undertook extensive efforts to keep at
least 70 percent of our branches safely open, and we supported millions of customers
through digital and mobile banking during the pandemic.
Paycheck Protection Program and Other Federal Stimulus Programs. We were also
one of the leading lenders in the Paycheck Protection Program (PPP). To date, we
have funded more than 275,000 loans, totaling over $13.7 billion to small businesses
throughout the country, with an average loan size of approximately $50,000, making
us an industry leader in providing support to the smallest businesses in need. This
lending has supported more than 1.7 million jobs, and more than 40 percent of our
loans were made to businesses in either low- and moderate-income (LMI) or major-
ity–minority census tracts.
As part of our PPP commitment, we created the Open for Business Fund to do-
nate more than $400 million we earned from PPP program fees in 2020. The Open
for Business Fund shares the same goal as the PPP itself: to help small businesses
survive the pandemic and navigate its impact. The fund will donate roughly $250
million to Community Development Financial Institutions (CDFIs) to help expand
access to capital, $50 million to nonprofits focused on technical training and services
for diverse entrepreneurs, and more than $100 million for long-term resiliency and
other programs to strengthen the small business sector. We have already distributed
more than $158 million to CDFIs around the country, which is projected to help
more than 26,000 small businesses maintain an estimated 75,000 jobs nationwide.
Additionally, through the Federal Reserve’s Main Street Lending program, Wells
Fargo has originated $279 million in loans, helping more borrowers than any other
large financial institution.
1 Where Wells Fargo has acted as garnishee and received third-party garnishment orders with
respect to stimulus payments, our practice has been to follow Federal and State guidance.
61
Our Company and Its Transformation
Our Company. In 1852, our founders, Henry Wells and William Fargo, built an
innovative start-up to help customers build businesses and manage money in a rap-
idly changing world. A lot has changed since then, but through prosperity, depres-
sion, and war, customers have turned to us to help them through any challenge.
And we’re committed to continuing the Wells Fargo legacy of looking forward by
finding solutions and removing barriers to help our customers.
Today, with approximately $1.9 trillion in assets, we proudly serve one in three
U.S. households and more than 10 percent of all middle-market companies in the
country. We have more than 65 million customers and over 260,000 employees, and
we are an industry leader in affordable housing, retail mortgage, and commercial
real estate lending. We have also recently been recognized as being among the best
corporate citizens in the U.S., a top company for philanthropy, and one of the most
generous companies in America.
We are well-capitalized and have been a source of strength for our customers and
the financial system throughout the pandemic and beyond. 2 Despite the challenging
environment brought on by the COVID–19 pandemic, the strength of our balance
sheet was evident throughout last year. Our capital and liquidity levels remained
well above regulatory minimums, and the results of two Federal Reserve stress tests
confirmed our strong capital position. Given the economic uncertainty, we took ap-
propriate measures to maintain strong capital by voluntarily suspending stock
buybacks in March of 2020 for the balance of the year and subsequently reduced
our dividend to comply with the temporary restrictions imposed by the Federal Re-
serve. These actions contributed to a $9 billion increase in our capital since March
of 2020.
More broadly, we have generally maintained large amounts of excess capital and
have taken a number of measures since the financial crisis to reduce our complexity,
enhance our risk management framework, and change our culture, particularly over
the last year-and-half as part of our ongoing transformation. As a result, we are a
safer, sounder institution today, and we are confident that our company presents
minimal risk to the Government and taxpayers. We also believe we have contributed
positively to the economy over the past 10 years.
We further recognize that, like so many companies and individuals, we benefit
from our Nation’s strong central banking system and the support provided by var-
ious Federal programs, facilities, and public financial infrastructure. And we are
proud to support our customers and the American economy as a whole. For instance,
even during the height of the COVID–19 crisis, we were able to extend significant
credit to our clients. In fact, in March 2020 alone, our commercial customers utilized
over $80 billion of their committed loan facilities.
Today, we provide a diversified set of banking, investment, and mortgage products
and services, as well as consumer and commercial finance, through our four report-
able operating segments: Consumer Banking and Lending; Commercial Banking;
Corporate and Investment Banking; 3 and Wealth and Investment Management.
We believe these businesses, working together, form a differentiated platform that
benefits all stakeholders. This vision has not always been realized in recent years,
but we know our potential and have a roadmap to achieve it. We are committed to
building the necessary foundation for a bank of our size and complexity; we recog-
nize our responsibility; and we are committed to completing the work of making
substantial changes in how we operate.
Our Transformation. Since I became CEO in October 2019, much has changed at
Wells Fargo. While working to effectively serve our customers throughout the chal-
lenges of the last year, we have also been committed to advancing our regulatory
work and implementing organizational and cultural change. While we still have sig-
nificant work to do, we are committed to devoting the resources necessary to operate
2 Information regarding Wells Fargo’s capital and leverage ratios as well as the annual
amount of share buybacks and dividend payments for the past 10 years can be found in Appen-
dix A and in our annual reports. (See, e.g., Wells Fargo 2020 Annual Report (Feb. 19, 2021),
available at https://www08.wellsfargomedia.com/assets/pdf/about/investor-relations/annual-
reports/2020-annual-report.pdf).
3 Corporate & Investment Banking delivers a comprehensive suite of advisory, capital mar-
kets, banking, and financial products and services to corporate, institutional, and Government
clients around the globe. The division includes a commercial real estate finance and capital mar-
kets platform, as well as investment banking, leveraged finance, mergers and acquisitions, eq-
uity and fixed income sales, trading, and research solutions for large and middle market compa-
nies.
With respect to Archegos, Wells Fargo had a cash prime brokerage relationship with the firm.
We were well collateralized at all times in late March and no longer have any exposure as of
March 30, 2021. We did not experience losses related to closing out our exposure.
62
with strong business practices and controls, maintain the highest level of integrity,
and have an appropriate culture in place.
We have new leadership. In particular, we made significant changes to our man-
agement team by elevating strong internal talent while bringing in people with the
experience and skills necessary for our success. Since the fourth quarter of 2019,
we have replaced more than 50 percent of our Operating and Management Commit-
tees and added at least 30 senior strategic hires in risk management, operational
excellence, and other key areas across the company-including a new Chief Operating
Officer; Chief Financial Officer; Chief Compliance Officer; General Counsel; Head of
Sales Practices; Head of Operations; Head of Wealth Management; Head of Con-
sumer Lending; Head of Home Lending; Head of Credit Cards; and Head of Diverse
Segments, Representation, and Inclusion; among many others. Our broader group
of senior leaders is also a new team. Over 40 percent of our top leaders are new
to the company or their roles from the start of 2020. Our Board of Directors also
appointed a new chairman and elected a new member to add additional financial
services experience and support our transformation.
We have also implemented a flatter organizational structure. One of my early ob-
servations when I joined Wells Fargo was that we were not managing the Company
at the level of granularity necessary. As a result, we made changes to the manage-
ment structure, most notably having more of our businesses report directly to me.
We now have five principal lines of business—that operate within the aforemen-
tioned operating segments—to ensure clear authority, accountability, and responsi-
bility. All of those line of business leaders now report directly to me and sit on our
Operating Committee. These changes have created the right structure to build our
businesses over the long term and increase our ability to successfully execute our
top priority, which is our risk, regulatory, and control work. I am confident that this
organizational model and our strengthened risk and control foundation has brought
greater focus and accountability to the company. 4
We are also simplifying the company. We identified certain businesses that aren’t
core to our mission and decided to exit them, opting to focus on our customers and
our core, scaled businesses. In the past months, we have announced sales of or our
intention to exit the student loan business, international wealth management, asset
management, corporate trust, and direct equipment finance in Canada.
During my short tenure, our focus on these changes has begun to yield results.
In January of this year, the OCC terminated an open consent order from 2015 re-
lated to our Bank Secrecy Act and anti– money laundering compliance program.
This is a positive step, but I recognize that we still have multiple consent orders
and regulatory matters that continue to require our urgent attention. 5 And we are
continuing to commit significant resources to addressing them.
We are focused on making long-term, sustainable changes. And we know there is
still much more to be done. As I’ve said before, this is a multiyear journey. As we
execute on our commitments, we may have setbacks, but we believe we are doing
what is necessary to move forward and satisfy our obligations.
Ultimately our regulators will decide when we have fulfilled our obligations. My
commitment to them is that we are continuing to approach this work with the great-
est sense of urgency, and we are intent on committing all necessary resources to
diligently do what is necessary, issue by issue.
Our Commitment to Customers
Doing what is right for customers must be at the center of everything we do, and
we acknowledge that we have fallen short of that standard in the past. We have
been taking dramatic steps to embed a customer-centric approach in all of our deci-
sions that impact customers. This extends from product design and pricing, to our
coverage and service models, to how we approach complaints and remediation.
4 Our leaders are also held accountable by the Company’s compensation policies. The Human
Resources Committee of Wells Fargo’s Board made a number of enhancements to our executive
compensation program for 2020, including the adoption of a new clawback and forfeiture policy
that significantly strengthens the Company’s ability to hold certain senior executives and other
employees accountable for misconduct or risk events though forfeiture or recovery of compensa-
tion. Our most recent compensation policies are discussed in detail in our 2021 proxy statement.
(See Notice of Annual Meeting and Proxy Statement (Mar. 16, 2021), available at: https://
www08.wellsfargomedia.com/assets/pdf/about/investor-relations/annual-reports/2021-proxy-
statement.pdf.)
5 Since my testimony in March 2020, Wells Fargo has agreed to pay $20 million to settle
claims by the Maryland Attorney General regarding residential mortgage-backed securities be-
tween 2005 and 2009. The Company also agreed to pay $7.8 million to resolve an inquiry by
the U.S. Department of Labor into certain hiring practices at particular Wells Fargo locations
between 2010 and 2018.
63
While we have more work to do, we are making strides. In 2020, we rolled out
a new set of company expectations with ‘‘Do What’s Right’’ as one of six core pillars.
It sounds simple—but that is the point. These new expectations are clear and
straightforward and guide how we lead ourselves, collaborate with colleagues, and
make decisions; they apply to everyone at the company and are directly linked to
how we evaluate performance.
Additionally, we deployed a new customer feedback program and complaints man-
agement platform to collect and react to customer feedback and improve the cus-
tomer experience. We also built our Sales Practices Management and Oversight pro-
gram, designed to make sales practices monitoring and reporting more robust and
consistent across the company. And lastly, we just recently announced the launch
of an Office of Consumer Practices, a consumer-focused advisory group that will
partner with our businesses on consumer product development, policies, procedures,
training and other areas. All of these efforts are designed to keep the customer front
and center and embed that perspective into our decision making. They are also a
critical part of strengthening our risk and control infrastructure.
We firmly believe that Wells Fargo is uniquely positioned to serve customers
throughout the country. We operate at a local level, supporting consumers as well
as small and larger businesses. We also actively support the communities where we
do business. The quality, depth, and breadth of what we can offer customers are
matched by few, and we continue to invest in a robust customer experience both
digitally and through in-person interactions in our branches.
Branch Network. Our branch network provides local, in-person financial advice
and planning. At the end of the first quarter of 2021, Wells Fargo had 4,944
branches 6 with more than 25 percent of those branches located in LMI census
tracts. We have branches in 36 States and the District of Columbia and serve more
markets than other major banks. Our branches are in 25 of the largest 30 markets
in the U.S. and 27 of the 30 fastest growing markets in the country. And a Wells
Fargo branch or ATM is within two miles of over half of the U.S. census households
and small businesses in our footprint.
Financial Inclusion. In addition to our branches, Wells Fargo provides multiple
choices for customers, including those who are not digitally connected, to conven-
iently access financial services and advice. We have an extensive ATM network and
offer no-fee access for customers at approximately 13,000 ATMs for various banking
services including withdrawing cash, transferring funds, checking account balances,
and making deposits. Wells Fargo ATMs offer banking in English, Spanish, Chinese,
Hmong, French, Korean, Russian, or Vietnamese and meet the Americans with Dis-
abilities Act requirements. In addition, we offer free access to our ATM network for
customers of our Minority Depository Institution (MDI) partners and make our ATM
network available to noncustomers to pay their wireless bill with Visible, a Verizon
subsidiary.
We provide 24/7, multilingual customer service over the telephone through our
automated system as well as through our customer service representatives. This al-
lows customers to get assistance with common needs, including asking questions
about account balances and transaction history or initiating transactions like ac-
count transfers or stop payments. We also serve 32 million digital (mobile and on-
line) active customers.
Wells Fargo further offers and continues to develop products and services to ad-
vance inclusion in the financial system. We are the number one mortgage lender
in lower-income neighborhoods and to Black borrowers compared to other deposi-
tories. And we have made commitments to reduce the Black and Latino home own-
ership gap. For example, in 2015, we announced our support of the goals of the Na-
tional Association of Hispanic Real Estate Professionals’ Hispanic Wealth Project,
which seeks to triple Hispanic household wealth by 2025.
In addition, we offer our Dream.Plan.Home. low-downpayment mortgage and clos-
ing cost assistance program for LMI borrowers with affirmative outreach to LMI
communities and communities of color, and we provide significant grants in connec-
tion with the NeighborWorks LMI downpayment assistance program,
NeighborhoodLIFT. Since 2012, Wells Fargo has invested $521 million in
NeighborhoodLIFT and other LIFT programs to help more than 24,700 individuals
and families buy homes through 80 program launches by providing homebuyer edu-
cation and downpayment assistance. These efforts collectively seek to close the home
ownership gap in key markets.
6 At year-end 2010, Wells Fargo had approximately 6,310 branches. At year-end 2000, Wells
Fargo had approximately 5,500 branches. Please note, however, that the year-end 2000 number
is a rough estimate, as the timeframe predates Wells Fargo’s merger with Wachovia. A map of
Wells Fargo’s branches at year-end 2020 is included as Appendix B.
64
Wells Fargo also actively participates in the OCC’s Roundtable for Economic Ac-
cess and Change (Project REACh), which focuses on removing barriers to financial
inclusion and providing greater access to credit and capital. We chair the REACh
Homeownership Working Group.
We are committed to bringing the unbanked into the financial mainstream. For
example, last week, we announced the Banking Inclusion Initiative, a 10-year com-
mitment to help unbanked individuals gain access to affordable, mainstream,
digitally enabled transactional accounts, a meaningful entry point to fully partici-
pating in the economy and achieving financial stability. It also will assist those who
are underbanked or underserved—individuals who may have a bank account yet
continue to use high cost, nonbank services and have similar needs. Overall, the ini-
tiative will focus in three areas: (i) access to affordable products and digital solu-
tions; (ii) financial education and advice; and (iii) the launching of a National
Unbanked Advisory Task Force that will feature representatives from leading orga-
nizations, including the League of United Latin American Citizens, the National As-
sociation for the Advancement of Colored People, the National Bankers Association,
the National Congress of American Indians, UnidosUS, the National Urban League,
and Hope Enterprise Corporation.
Additionally, we accept a range of alternative identification for account openings,
including several consular cards, and we offer affordable and responsible products,
such as Clear Access Banking, a checkless checking account with no overdraft or
nonsufficient funds fees. The account is certified by BankOn, an organization led by
the Cities for Financial Empowerment fund that works to ensure everyone has ac-
cess to a safe, affordable transactional banking account. We also offer Everyday
Checking, a full-service account for a $10 monthly fee that is waived if the customer
is under 25 years old or maintains certain minimum balance or direct deposit
amounts. The Everyday Checking account is equipped with our Overdraft Rewind
feature, which automatically reverses overdraft fees assessed on prior business day
transactions if the customer has a covering direct deposit credited to their account.
Arbitration. With respect to arbitration, we are in the process of removing con-
fidentiality restrictions in all types of customer arbitration agreements that have
them, thereby increasing the transparency of the arbitration process. Moreover, we
will be updating all consumer arbitration agreements to provide for reimbursement
of filing fees where the customer prevails. This is designed to ensure the costs of
filing for arbitration do not prevent consumers from bringing justified disputes to
the Bank’s attention. These changes follow our decision last year to end the use of
mandatory arbitration for future employee claims of sexual harassment. We are
committed to maintaining a thoughtful approach to resolving disputes fairly and ef-
ficiently.
Our Commitment to Employees
To our employees: I am proud of the work you’ve done over the past year to sup-
port our customers and our communities during these uncertain times. We have
prioritized safety and well being, and my deepest gratitude goes out to our frontline
workers, who made it possible to keep branches safely open. I am also thankful for
the more than 200,000 employees who efficiently adapted to a new and challenging
remote work environment.
For those employees who continue to work in person, we have taken significant
actions to support their safety, including mandating social distancing, enhancing
cleaning protocols, increasing sanitation supplies, and requiring employee self-
screening. We are providing safety kits to all employees working onsite in branches
and offices, and we launched temporary onsite nursing services at 56 of our largest
U.S. sites. We also offer free, voluntary onsite or self-administered COVID–19 test-
ing for employees currently working in-office at a Wells Fargo location in the U.S.
as well as additional paid time off for COVID–19 vaccine appointments.
We also made a cash award to the approximately 165,000 employees who make
less than $100,000 per year and an additional special payment to those working on
the front lines as a way of recognizing their unique contributions.
To support eligible employees who faced challenges with childcare, we granted ad-
ditional days off to arrange for childcare and provided a $100 per day reimburse-
ment for eligible employees seeking childcare through their own personal networks
during the early phase of the pandemic. More than 22,000 employees benefited from
this assistance. We also made a $25 million grant to the We Care Employee Relief
Fund, which is available to employees affected by COVID–19 and who have limited
resources. The fund helped more than 23,000 employees in 2020.
Compensation and Benefits. In addition to our pandemic-related efforts, in 2020,
we raised minimum hourly pay levels in a majority of U.S. markets from $15 to $20
65
based on employee location. And we saw a nearly 13 percent increase in median em-
ployee pay for the year. 7
We provide a 401(k) plan to help employees save for retirement, and we match
employee contributions, dollar for dollar, up to 6 percent of their eligible pay on an
annual basis, after they complete 1 year of service. Additionally, in 2020, we an-
nounced a new base contribution of one percent of certified compensation that will
be made to the 401(k) plan accounts for eligible employees whose annual compensa-
tion is less than $75,000, which is in addition to the matching contribution. These
and additional benefits and opportunities are outlined in our recently published
commitment to our employees. 8
Our Commitment to Diversity, Equity, and Inclusion
Our efforts to strengthen and improve Wells Fargo would be incomplete without
a sustained commitment to diversity, equity, and inclusion, both for our customers
and for our employees. These ideals are essential to our future and personally very
important to me. I recognize that, as a bank and an industry, we can and must do
better in this regard, and I am committed to making sure that we continue to make
progress.
We have made significant strides to diversify our senior leadership, increase the
pipeline of diverse talent inside Wells Fargo, and use our market position to in-
crease the share of diverse suppliers and diverse asset managers. We also maintain
sustained partnerships with third party stakeholders to drive positive outcomes for
diverse communities. 9
I am pleased that, in my short tenure, we have added three diverse executives
to our Operating Committee, including our Head of Diverse Segments, Representa-
tion, and Inclusion, who reports directly to me. Additional new diverse leaders in-
clude our Head of Operations; Head of Strategy, Digital and Innovations; and CEO
of Home Lending.
Among our U.S. employees, approximately 56.1 percent are female, and 44.6 per-
cent are racially diverse. Our Operating Committee is currently 23.5 percent female
and 17.6 percent racially diverse. And our Board of Directors is 25 percent female
and 25 percent racially diverse.
Beyond particular roles, we are accountable for continuing to attract diverse can-
didates to all levels of our organization, including leadership. As part of the year-
end evaluation process, Operating Committee members will be evaluated based on,
among other performance metrics, their progress in improving diverse representa-
tion and inclusion in their area of responsibility. These evaluations will have a di-
rect impact on year-end compensation decisions. Additionally, for the hiring of many
senior roles, we have implemented guidelines that require a diverse slate of can-
didates (at least 50 percent) and a diverse interview panel.
We also continue to focus on early talent recruitment by working with historically
Black colleges and universities (HBCUs), Hispanic serving institutions (HSIs), and
other national partners to identify talent and build engagement. HBCUs and HSIs
are national treasures that have been leading the way for generations in producing
minority leaders in a variety of fields. We have deep and longstanding relationships
with these institutions and related auxiliary groups. For example, since 2007, we
have provided more than $38 million to support programming and scholarships for
the Hispanic Scholarship Fund, the Thurgood Marshall College Fund, and the
United Negro College Fund.
Our Commitment to the Communities We Serve
For the communities we serve, we have continued to invest in the institutions
critical to their success. While we are encouraged to see signs of improvement, we
realize that not all communities are benefiting equally in the recovery. That is why
Wells Fargo has been working to support a more inclusive economic recovery, with
a focus on racial and social equity, economic mobility, and investments in LMI com-
munities.
Investments in CDFIs and MDIs. We are a proud investor in CDFIs and MDIs.
In total, we have provided more than $2.4 billion in funding to support CDFIs and
more than $40 million to support MDIs from January 2011 to May 2021.
7 Median employee pay for 2020 was $74,416, up from $65,931 in 2019—a 12.9 percent in-
crease. Wells Fargo’s ratio of CEO to median employee annual total compensation for 2020 was
274:1.
8 See Wells Fargo: Our Commitment to Employees (May 6, 2021), available at https://sto-
ries.wf.com/wells-fargo-our-commitment-to-employees.
9 See ‘‘Elevating Diversity, Equity, and Inclusion’’, 2020 Social Impact and Sustainability
Highlights, at 13-26 (Apr. 2021), available at https://www08.wellsfargomedia.com/assets/pdf/
about/corporate-responsibility/social-impact-sustainability-highlights.pdf.
66
Within the last year, we made approximately $50 million of equity investments
in Black-owned MDIs across the country. 10 Relatedly, we recently launched the
Black Economic Alliance Entrepreneurs Fund, along with the Black Economic Alli-
ance Foundation, to accelerate the growth of Black entrepreneurs and business own-
ers. The $50 million evergreen fund will provide seed, start-up, and early-stage cap-
ital to businesses founded and led by Black entrepreneurs.
Additionally, through our Open for Business Fund, we have given more than $150
million over the past year to CDFIs around the country, which are providing grants
to hard-hit small businesses with a focus on diverse-owned organizations. Our Di-
verse Community Capital (DCC) program has dedicated $175 million to CDFIs over
5 years to provide capital and technical assistance for diverse small business owners
in the United States. The DCC program has enabled CDFIs to lend nearly $350 mil-
lion to Black small business owners across the country since the program launched
in 2015, according to Opportunity Finance Network. And on March 30, 2021, Wells
Fargo closed on a $5 million patient capital loan to Hope Enterprise Corporation,
a 501(c)(3) and certified CDFI that is dedicated to strengthening communities,
building assets, and improving lives in the Delta and other economically distressed
areas of the Deep South.
Investments in Underserved Communities. In the communities we serve, we focus
on building a sustainable, inclusive future for all by supporting housing afford-
ability, small business growth, financial health, and a low-carbon economy. For in-
stance, last week, we announced the issuance of a $1 billion Inclusive Communities
and Climate Bond, our first Sustainability Bond, designed to drive both social and
environmental impact. The bond will fund projects and programs that support hous-
ing affordability, socioeconomic opportunity, and renewable energy. And diverse un-
derwriting firms will receive the bulk of fees from the bond.
I am also proud to share that Wells Fargo received a rating of ‘‘Outstanding’’ in
its most recent Community Reinvestment Act performance evaluation, which covers
the years 2012 to 2018. This rating reflects Wells Fargo’s strong performance on the
exam’s components and the company’s proven commitment to serving LMI commu-
nities.
These commitments and investments complement a host of additional initiatives
we have undertaken in recent years that aim to support all of our customers and
communities. For example, we committed $1 billion through 2025 to help address
the U.S. housing affordability crisis. Additionally, in the 10 years spanning 2009 to
2018, Wells Fargo was the number one financier of home loans to Black individuals
and originated more mortgages to help Black home buyers purchase homes than the
four other largest bank lenders combined. Similarly, in 2017, we pledged to create
250,000 Black homeowners by 2027 through lending $60 billion for home purchases,
increasing the diversity of the sales team, and supporting homebuyer education and
counseling. In the first 3 years of the commitment, 60,527 Black homeowners have
been supported with $15.2 billion in financing.
Our Approach to Risk and Societal Engagement. Beyond our investments, we
know that in order to be a trusted partner in the communities where we operate
and contribute in meaningful ways to the growth of the U.S., we must be guided
by delivering for our customers every day in a manner that will make us, our em-
ployees, our customers, and our communities proud. Now more than ever, there is
a renewed desire for businesses to operate with all stakeholders in mind.
In 2020, we launched a new Social Impact and Sustainability strategy designed
to make a greater impact in communities by more effectively combining our finan-
cial resources and business expertise. In the communities we serve, the company fo-
cuses its social impact on building a sustainable, inclusive future for all by sup-
porting housing affordability, small business growth, financial health, and a low-car-
bon economy. Through our businesses and the Wells Fargo Foundation, we are
using our resources, business expertise, ingenuity, and collaborations with public
and private sector organizations to help solve complex problems. A major near-term
focus is fostering an inclusive recovery from the COVID–19 pandemic and strength-
ening communities that have been disproportionately impacted.
10 As part of its $50 million equity investment commitment, Wells Fargo has invested in the
following MDIs: Broadway Federal Bank (Los Angeles, California, and Washington District of
Columbia); Carver Federal Savings Bank (New York, New York); Carver State Bank (Savannah,
Georgia); Citizens Savings Bank & Trust (Nashville, Tennessee); Citizens Trust (Atlanta, Geor-
gia); Commonwealth National Bank (Mobile, Alabama); First Independence (Detroit, Michigan);
Harbor Bank (Baltimore, Maryland); Industrial Bank (Washington, District of Columbia); Lib-
erty Bank & Trust (New Orleans, Louisiana); M&F Bank (Durham, North Carolina); Optus
Bank (Columbia, South Carolina); and Unity National Bank (Houston, Texas).
67
Also last year, we began an effort to be more transparent and comprehensive in
nonfinancial reporting and disclosures. The company moved from a single, annual
corporate responsibility report to a suite of disclosures that more completely ad-
dresses our approach to environmental, social, and governance (ESG) risks and op-
portunities, and performance on related measures. Our inaugural ESG Report de-
tails how the company is working to create solutions for stronger communities
through diversity and inclusion, economic empowerment, and environmental sus-
tainability. 11
Likewise, we recognize that our business decisions and those of our customers
have the potential to impact communities and the environment. We believe it is im-
portant to evaluate and consider the environmental, social, and human rights im-
pacts of our lending and investments along with the traditional financial risk. Our
Environmental and Social Risk Management framework and policies are tied to our
due diligence requirements, and they help us identify, evaluate, and manage the en-
vironmental and social risks associated with our lending and investments. 12 Simi-
larly, in February 2021, we released our first Task Force for Climate-Related Finan-
cial Disclosures Report, which provides an update on the company’s progress man-
aging climate-related risks and opportunities. 13
Recently, we made a significant announcement regarding our ongoing efforts to
support the transition to a low-carbon economy. Climate change is one of the most
urgent environmental and social issues of our time, and we are committed to help-
ing transition to a net-zero carbon economy.
The risks of not taking action are too great to ignore, and collective action is need-
ed to avoid significant impacts on our most vulnerable communities.
Accordingly, we set a target to achieve net-zero greenhouse gas emissions—includ-
ing our financed emissions—by 2050. We will also launch an Institute for Sustain-
able Finance to manage the deployment of $500 billion of financing to sustainable
businesses and projects by 2030, as well as support science-based research on low-
carbon solutions and advocate for policies that enable client transitions. Our aim is
to support our customers as they work to transform their businesses for success in
a low-carbon economy and to support our communities as they work to adapt to and
mitigate the impacts of climate change.
These goals build on efforts already ongoing. We recently surpassed $10 billion
in tax-equity investments in the wind, solar, and fuel cell industries, having in-
vested in more than 500 projects, helping to finance 12 percent of all wind and solar
energy capacity in the U.S. over the past 10 years.
As we move forward, we will continue to approach critical issues such as these
with the care and diligence they deserve.
Our Commitment to Cybersecurity, Privacy, and Responsible Technology
We recognize that cybersecurity is an area where we must remain ever vigilant
to meet evolving threats. We invest heavily in cyberthreat management and controls
aimed at preventing and preparing for cyberattacks, and we maintain tools to quick-
ly detect and respond to adverse events, limiting their impact. Relatedly, we
prioritize personal data privacy and support transparency in our information collec-
tion and use practices.
Finally, we believe safe and responsible use of emerging technology has great
promise for our industry. Artificial Intelligence (AI), for example, has the potential
to help detect and prevent harm from bad actors and greatly enhance customer ex-
perience and financial inclusion. Responsible use of AI at banks carries with it fun-
damental value propositions including making better business decisions, driving
leaner and faster operations, enhancing customer experience, and detecting patterns
or irregularities in data.
We have been involved in research and development in the area of distributed
ledger technology (DLT) to facilitate next-generation settlement services in a variety
of areas, including announcing a pilot that will begin soon. It will be an internal
settlement service which will run on our internal DLT platform and allow us to
complete internal book transfers of cross-border payments within our global branch
network.
11 Environmental, Social, and Governance Report (Aug. 2020), available at https://
www08.wellsfargomedia.com/assets/pdf/about/corporate-responsibility/environmental-social-
governance-report.pdf.
12 Environmental and Social Risk Management Framework (June 2018), available at https://
www08.wellsfargomedia.com/assets/pdf/about/corporate-responsibility/esrm-framework.pdf.
13 Task Force for Climate-Related Financial Disclosures Report (Feb. 2021), available at
https://www08.wellsfargomedia.com/assets/pdf/about/corporate-responsibility/climate-disclo-
sure.pdf.
68
Finally, we continue to closely and actively follow developments around
cryptocurrencies, which have emerged as alternative investments products, though
their status as a currency and mechanism of payment remains fluid.
Conclusion
Last year was a challenging one for all, but I am proud of what Wells Fargo has
done to support our customers, our country, and our communities throughout an in-
credibly difficult time. Even in the face of a global pandemic, we made progress in
transforming our company, and we will continue to approach the work ahead with
urgency.
Thank you, again, for the opportunity to testify. I look forward to answering your
questions.
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71
PREPARED STATEMENT OF DAVID M. SOLOMON
CHAIRMAN AND CHIEF EXECUTIVE OFFICER, GOLDMAN SACHS
MAY 26, 2021
Chairman Brown, Ranking Member Toomey, and Members of the Committee, I
appreciate the opportunity to testify before you today.
Overview of Goldman Sachs Goldman Sachs is a leading global financial institu-
tion that delivers a broad range of financial services across investment banking, se-
curities, investment management and consumer banking. Our clients include pen-
sion plans and retirement funds, endowments and foundations, large and small
businesses, financial institutions, Governments, start-ups, charities, nonprofits, and
individuals. Founded in 1869, we are headquartered in New York and maintain of-
fices in all major financial centers around the world. Over the course of more than
150 years we have evolved considerably from a small enterprise to a global institu-
tion.
At Goldman Sachs our purpose is to advance sustainable economic growth and fi-
nancial opportunity. Specifically, as an investment bank, we advise companies on
raising capital including through initial public offerings or lending, managing risks,
and seeing opportunities for them to innovate and grow through acquisitions or
divestitures. We also help local and State governments finance their operations so
they can invest in infrastructure such as schools, hospitals and roads. As a market
maker, we help our corporate or institutional clients (such as pension funds and
other asset managers) manage risk in all key financial markets (including equities,
bonds, currencies and commodities) and help ensure markets are liquid and effi-
cient. We are also an asset manager preserving and investing assets for institutions,
including mutual funds, pension funds, and foundations. We invest capital in pri-
vate companies to help them grow their business and increase employment. And we
act as a private wealth manager, providing advisory solutions, including financial
planning and counseling, and managing assets for individuals.
In 2016, we launched a retail banking franchise that, while relatively small, has
been recognized for its consumer-centric approach. Through our consumer banking
digital platform, Marcus by Goldman Sachs, we offer personal loans, savings and
CDs, investing services, free financial tools and trackers, and through associated
partnerships like Apple Card, we issue credit cards to consumers.
As of the end of April 2021, we had 40,300 employees, with 51 percent based in
the United States. We have offices in over 50 cities in the United States and in over
35 countries around the world. Our primary bank subsidiary, GS Bank USA, is
headquartered in New York City. The Bank operates two domestic branches, which
are located in Salt Lake City, Utah and Draper, Utah. The Bank also has a foreign
branch in London. Given its small size, our branch network has not meaningfully
changed over time.
Goldman Sachs Remains Well-Capitalized
As a result of Dodd–Frank, Basel capital and liquidity and other market reforms,
today the U.S. financial system is substantially safer and more resilient against fail-
ure or disruptions in critical services than it was prior to the financial crisis. The
largest financial institutions, including Goldman Sachs, are more able to withstand
stress events and are also ultimately more resolvable without threatening the finan-
cial system or needing Government support, consistent with Dodd–Frank’s resolu-
tion plan requirements. We have significantly more capital and usable total loss-ab-
sorbing capacity (TLAC), which could be converted to equity in the event that our
equity capital falls below the regulatory required minimums. We have also reduced
the percentage of our liabilities that consist of short-term wholesale funding, while
at the same time significantly increasing the percentage of our assets consisting of
cash and other high quality liquid assets since prior to the enactment of these re-
forms.
Goldman Sachs was well capitalized before and throughout this COVID–19 pan-
demic period. Our capital levels have allowed us to serve our clients and provide
support for the economy (as described below), and the last two rigorous stress tests
conducted by the Federal Reserve in 2020 attest to that fact.
Moreover, there has been a significant change to the firm’s balance sheet and risk
profile since the financial crisis, reflecting decreased risk and complexity. Specifi-
cally, at Goldman Sachs, since the end of 2007:
• Our common equity has more than doubled in absolute terms (from $40 billion
to $88 billion); as of 1Q21, our common equity tier 1 ratio exceeded 14 percent
under the Standardized approach and exceeded 13 percent under the Advanced
approach
72
• Our gross leverage has decreased by 49 percent
• Our TLAC (i.e., loss-absorbing long-term debt and equity instruments) was 40.7
percent of our risk-weighted assets as of 1Q21, exceeding our minimum require-
ment of 22.0 percent
• Our average liquidity pool has more than quadrupled in absolute terms (from
$64 billion to $299 billion) and increased 4x as a percentage of our average total
assets (from 6 percent to 24 percent)
• Our deposit funding has increased approximately 19x (from $15 billion to $286
billion) and increased 10x as a percentage of our funding sources (from 3 per-
cent to 33 percent)
• Our Level 3 assets, which are illiquid, have decreased by more than 50 percent
(they were only 2.1 percent of our balance sheet as of 1Q21)
Goldman Sachs Has Reduced Its Complexity
Since 2009, we have devoted substantial resources across our firm to not only im-
prove the resilience and resolvability of Goldman Sachs, but also to reduce com-
plexity in our structure and make our firm more efficient. Additionally, we believe
that resolution plans have become considerably more sophisticated as they have
evolved over the past decade to effectively safeguard taxpayers from the failure of
the largest U.S. banks, as we meet our internal requirement and demonstrate to
our regulators that we have robust capabilities, an appropriate legal structure, and
sufficient levels of capital and liquidity to facilitate an orderly wind-down.
As of today, we have taken several key actions since the financial crisis that have
reduced our complexity:
• We reduced the total number of our legal entities
• We simplified our ownership structure and funding lines to our material oper-
ating subsidiaries, separated the ownership for our core and noncore legal enti-
ties and aligned staff, technology and other resources with the entities they
serve
• We simplified the management of businesses by merging certain businesses to-
gether into our Asset Management Division and moving our consumer banking
business and wealth management business into one combined division
• We realigned business segments to more closely align with how we manage the
firm with clear lines of management responsibility and leadership over each
segment, which also allows us to be more transparent, including about how we
track our lending and financing activities across businesses
• We sold several noncore businesses and activities including:
• Our Americas reinsurance and European insurance businesses
• Our hedge fund administration business
• Our mortgage servicing business
• Our investments in several commodities-related businesses that hold physical
commodities, including a metals warehouse, a coal extraction facility, and power
generation plants
• We sold our investment in the Industrial and Commercial Bank of China
• Pursuant to Volcker Rule requirements, and before the final rule went into ef-
fect, we exited all of our proprietary trading businesses
Moreover, in accordance with good risk management practices as well as the spirit
of Dodd–Frank’s Section 165 resolution plan requirements, when we have sought to
enter new businesses or make acquisitions, we subject all decisions to our Firmwide
New Activity Committee and other processes to ensure that the new business or ac-
quisition would be properly capitalized, have sufficient funding support and would
not unduly impede our resolution strategy.
Investing in Our People
As the pandemic hit, we transitioned our workforce to be 98 percent remote. To
help our people during the pandemic, we added to and extended their benefits, in-
cluding mental health support and an additional 10 days of COVID–19 family leave
to allow time to care for family members or childcare needs, including
homeschooling. In introducing telemedicine access to U.S. employees and covered
dependents, we waived all costs of urgent-care visits, including COVID–19 consulta-
tions, and we provided virtual mental health counseling and fitness sessions. Most
recently, we offered employees a half day of paid time off for each dose of the vac-
cine.
73
Throughout the pandemic, we have partnered with health care experts to develop
policies and protocols that prioritized the health and safety of our people. Our com-
prehensive protocols have included regular testing (via either onsite testing or
through at-home testing), mask usage, daily health attestations, temperature checks
at arrival, and physical distancing.
Additionally, we have a lot of people who support our organization and operations
through contracted and vendor services, including in our mail room, our cafeteria,
our security guards, and our janitorial staff. We extended our support to onsite ven-
dor staff to ensure they were paid during the pandemic, whether they worked or
not. For those who came into work, we reimbursed transportation costs and pro-
vided in-office meals. Most recently, we paid a bonus to nearly 3,000 vendor staff
who supported us in the office and enabled the continuity of our operations through
the lockdowns that took place around the world.
Investing in Our Retail Customers
Goldman Sachs entered the consumer financial services market in 2016. We
launched our digital consumer platform called Marcus by Goldman Sachs because
we saw an opportunity to serve consumers through consumer-centric products that
are simple and transparent and on the side of the consumer. We set out to build
our consumer business from a clean sheet of paper. In designing Marcus, we spoke
with more than 10,000 people across the country to understand their banking needs
and have since spoken to more than 100,000 consumers. Value, simplicity and trans-
parency are at the core of our consumer products, which is based on this feedback.
We have two primary channels through which we acquire and serve customers:
through our consumer business Marcus by Goldman Sachs and through partner-
ships with large brands. Because we are not operating with an expensive branch
infrastructure, we are able to deliver more value to the customer when compared
to other traditional banks.
Through Marcus, we offer:
• Personal loans with fixed rates, customizable payment options and no fees.
These loans range from $3,500 to $40,000, and because we fund our personal
loans from our own balance sheet, we can provide more flexibility to consumers,
allowing them to select from various monthly payment and loan length options
• Savings accounts/CDs that pay consumers a relatively higher interest rate on
their savings than traditional banks offer, with no minimum balance and no
fees (including no monthly fees, no transaction fees and no overdraft fees)
• Invest, which offers individuals the ability to invest as little as $1,000. This
product combines the accessibility, simplicity and transparency of our Marcus
platform with our firm’s leading advisory capabilities
• Free financial tools and trackers that help customers aggregate their various
accounts, track spending, and get a more holistic picture of their finances.
Although we are working to launch digital checking accounts in the United States,
we do not currently offer consumer checking accounts.
Additionally, through our partnership with Apple via Apple Card, we are pro-
viding innovative financial services to millions of customers that help them to un-
derstand their spending and payment options better and seamlessly earn and re-
deem rewards.
Marcus was created to help millions of Americans take control of their financial
lives with products that offer value, transparency and simplicity. That approach po-
sitions Marcus to meet the financial services needs of a broad range of consumers,
including low-to-moderate income (LMI) consumers. Moreover, Marcus is a digital
platform. Customers do not need to walk into a branch to open an account; they
can do it directly from their mobile phone or call one of our Marcus Specialists. We
believe that digital banking can be leveraged to be more inclusive, particularly with
regard to communities that are underbanked. That being said, we understand that
digital connectivity is a prerequisite to inclusion in the digital banking ecosystem.
That is why we have incorporated digital connectivity as one of our key impact
areas in our One Million Black Women initiative (described below). We are currently
exploring ways to invest in increasing affordable high-speed internet access and to
close the digital divide.
While still new to consumer businesses, we substantially increased our support
for consumers during the pandemic across all of our major consumer products. For
example, our consumer loans, credit card lines, and deposits each increased approxi-
mately 20 percent in 2020 during the pandemic, not decreased, including to those
in LMI communities.
74
We also continued to invest in our consumer bank products and serve our Marcus
clients throughout the pandemic. For example, we launched our Customer Assist-
ance Program to help customers navigate through the pandemic, including by giving
customers the flexibility to defer Marcus loan payments for four months or Apple
card payments for 6 months at no cost, no interest accrued during the deferral pe-
riod and no impact to their credit score. Moreover, Marcus customers were able to
access funds in high-yield certificates of deposit early without a penalty. We focused
on offering seamless digital enrollment, because customers should be able to get
help quickly and easily when they need it. Around 10 percent of our customers en-
rolled in the program, and we are proud we were able to be there for them during
a difficult time.
Investing in Our Clients and the Broader Economy
We have made a significant contribution to the annual growth of the nonfinancial
economy by helping U.S. companies raise capital over the last decade. Additionally,
over this same period, we have significantly increased the amount of financing pro-
vided through direct lending from our balance sheet to the real economy. As an un-
derwriter, over the past 10 years, we have raised debt financing of over $850 billion
for U.S. companies, and we have raised nearly $350 billion of equity capital for U.S.
corporations during that time period. As a direct lender, our corporate loan book has
more than quadrupled over the last decade, growing to nearly $50 billion as of
1Q21, with loans primarily held by U.S. clients.
This financing is in addition to the significant financing commitments that we
have made as part of our investments in our communities and small businesses and
our sustainability initiatives, as described below.
At the beginning of the pandemic, our economy plunged into the steepest eco-
nomic decline since the Great Depression. However, there is no question that we
would have had an even more severe recession had the Congress, the Treasury, and
the Federal Reserve not taken swift, bipartisan action to support our economy
through the CARES Act and related programs and subsequent actions.
We believe that our strong financial position allowed us to continue to provide fi-
nancing to our clients throughout the pandemic, including during the peak of the
market volatility and economic uncertainty last March, to our clients and the broad-
er economy. We were also able to continue to support deep and liquid capital mar-
kets, while maintaining resilient operations without any major outages despite an
unprecedented working environment. During the first six months of 2020, when un-
certainty over the economic impact of COVID 19 was at its highest, we experienced
historically elevated levels of client demand for access to equity and debt capital.
Over the first half of 2020, we raised approximately $180 billion of financing for
our corporate clients, with two thirds of the activity in the United States. We led
the largest capital markets offering for the cruise industry, and we worked with
large U.S. airlines on significant financing transactions and led the first insurance
deals post the start of COVID volatility last year. We also provided approximately
$1 billion of lending commitments across the investment grade energy sector to pro-
vide them with additional liquidity during the pandemic.
As debt markets were largely closed to most borrowers in March and April 2020,
we developed creative solutions to support clients who were most in need of imme-
diate financial assistance, including by lending directly to clients from our own bal-
ance sheet. For example, from March through June 2020, we provided $20 billion
of nonacquisition financing related credit to more than 200 clients. Of this financing,
we provided $13 billion of direct financing that was specifically aimed at providing
additional liquidity to clients in hard hit sectors to help them weather COVID-re-
lated stresses to their businesses, including to airlines, cruise lines, automobile com-
panies, and the hospitality and entertainment sector.
In addition to corporate financing, we also supported pandemic relief efforts by
underwriting nearly $66 billion in financings for sovereigns and multilateral institu-
tions, designed to help alleviate the economic and social impact of the pandemic.
These included a $2 billion sustainable development bond for the World Bank tied
to addressing the United Nations Sustainable Development Goals, and a COVID–
19 response bond for the New Development Bank, also for $2 billion.
Our financing and assistance helped enable businesses across the country and
around the globe to pay their workers, operate their businesses and meet funding
needs. We remain committed to continuing our support for American businesses and
the broader economy to help build a robust, inclusive, and sustainable economic re-
covery.
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Investing in Our Communities and Small Businesses
We started investing in underserved areas in 2001, well before we had a regu-
latory obligation to do so, because we strongly believed it made sense to invest in
areas that others had overlooked and deploy our capital to make a real difference
in these communities.
Our Urban Investment Group (UIG)’s entire purpose is to make investments and
loans that benefit underserved people and places. The team has a comprehensive
approach to closing opportunity gaps, predominantly by making direct investments,
rather than investing in funds. This approach allows us to engage directly with com-
munity leaders and stakeholders impacted by our investments.
Specifically, through UIG, we finance the creation of affordable housing, space for
educational and health facilities, and grocery stores in food deserts. To date, UIG
has committed more than $9.8 billion to benefit underserved people, places, and
small businesses. Since UIG was founded, our investments have spanned 101 cities
in 33 States across the country, bringing affordable housing, quality schools, new
jobs, and growth capital for small businesses to neighborhoods in need. Approxi-
mately 70 percent of UIG’s investments are located in or serve minority commu-
nities.
Goldman Sachs has deployed over $200 million in capital to support Black-led Mi-
nority Depository Institutions (MDIs), starting with our investment in Carver
Bancorp, one of the largest African-American operated banks in the United States,
in 2011. Our partnerships with and investment in MDIs has continued to evolve
since then and, most recently, we announced a $130 million commitment to Hope
Enterprise Corporation, a leading Black-led MDI and Community Development Fi-
nancial Institution (CDFI) in the South, to establish the ‘‘Deep South Economic Mo-
bility Collaborative’’, a public–private partnership with seven cities and nine histori-
cally Black colleges and universities across the South. This Collaborative will pro-
vide credit and support services to entrepreneurs of color, particularly Black women
entrepreneurs, in historically disadvantaged neighborhoods.
Most recently, UIG stood up a loan program in partnership with the City of New
York which will provide funding to support staffing New York City’s safety-net hos-
pitals related to the COVID–19 vaccination process and potential additional
COVID–19 patient care throughout the remainder of 2021. The program aims to
support safety-net hospitals, all of which are located in low-income neighborhoods
and treat the City’s poorest and most vulnerable patients. As we know, COVID–19
has disproportionately impacted Black communities.
Goldman Sachs Partnerships With CDFIs and MDIs
We also provide access to capital to small businesses and high-achieving low-in-
come students by partnering with CDFIs, MDIs and other types of mission-driven
lenders. Given their long track record of serving small businesses in low-income and
minority communities, partnering with and helping build infrastructure for CDFIs
has been core to our small business lending efforts for the last 10 years. Impor-
tantly, since the beginning of this pandemic, our response efforts have been guided
by our belief in partnership and collaboration, and our ability to respond quickly
and creatively and remain nimble in the face of evolving challenges.
Unlike most of the banks appearing before the Committee, our bank is not an ap-
proved Small Business Administration (SBA) lender and therefore did not have the
systems in place to comply with the SBA rules under which Paycheck Protection
Program (PPP) loans were made. Rather than participating directly in the PPP, we
felt that we could provide the greatest value most quickly by committing $1.25 bil-
lion in capital to CDFIs and mission-driven lenders to facilitate emergency lending,
including PPP loans, to underserved and minority-owned small businesses. We rec-
ognize lending capital is not the only need facing the small business ecosystem, so
we paired that lending capital with $25 million in philanthropic support to CDFIs
and community-based organizations that were on the frontlines helping businesses
navigate the unprecedented crisis.
As a result of this intentional, local-partnership approach, our small business
lending capital deployed during the pandemic reached very small businesses. To
date, the current median employee count among recipients is around two and our
average loan size is $43,000. The program reached businesses that serve under-
served communities. Nearly half (approximately 45 percent) of the capital was de-
ployed to businesses located in minority communities.
In addition to our $1.25 billion CDFI commitment, we recently committed an ad-
ditional $1 billion in partnership with the SBA and our CDFI partner Lendistry to
fund approximately 40,000 PPP loans, over half of which will benefit minority-
owned businesses. We moved expeditiously to ensure these applicants were able to
have their loans processed and approved before the PPP funds were exhausted. The
76
commitment to Lendistry, one of the most active SBA Community Advantage lend-
ers in the country, will be the largest ever to a Black-led CDFI and will provide
much-needed capital to underserved small businesses, especially Black-run small
businesses and communities, who have been disproportionately impacted by the
massive economic, health, and social disruption over the last 16 months.
To amplify the reach and impact of our capital, we engaged with stakeholders in
the public sector to identify opportunities to partner to support the efforts that were
already undertaken to support small businesses hit the hardest in the early days
of the pandemic. As a result, we were able to support emergency funds with New
York City and Chicago, which has served as a model for other relief funds across
the country. Additionally, to ensure the furthest reach of this capital to underserved
small businesses, we partnered with organizations such as the National Urban
League, the U.S. Hispanic Chamber of Commerce, and the New Voices Foundation
to deploy capital, critically important information, and technical assistance, to small
businesses owned by entrepreneurs of color.
We applaud Congress’s move to expand PPP late last year by injecting additional
funding into the program so that the hardest hit businesses could get a second PPP
loan, and importantly, the decision to provide for a $15 billion set aside for CDFIs
and community-based lenders, which is something we advocated for from the very
beginning. As a result of this expansion of the program, we expanded our commit-
ment by providing an additional $500 million to our CDFI partners to fund PPP
loans in 2021, bringing our total commitment to $1.25 billion.
10,000 Small Businesses Program
Through our 10,000 Small Businesses program, launched in 2010, we deliver a
comprehensive business education to small businesses by partnering with more than
100 community colleges and business support service providers. To date, we have
graduated 10,800 small business owners, with 73 percent of graduates reporting
revenue increases and 54 percent adding jobs within 30 months of graduation. I am
particularly proud that Goldman Sachs is one of the largest private contributors to
community colleges in the United States.
Additionally, our commitment to and investments in CDFIs and MDIs is at the
core of our strategy to facilitate access to capital and technical assistance to under-
served small businesses and a key pillar of our 10,000 Small Businesses program.
At the launch of this program, we committed $300 million in lending capital and
grant support for CDFIs, MDIs and other mission-driven lenders. Through this in-
vestment and partnerships, we have been able to build the capacity of CDFIs across
the country, including enabling them to expand to new markets, launch new lending
programs and develop the tech infrastructure that many of them were able to lever-
age during the pandemic to deliver capital and technical assistance to small busi-
nesses at scale at a critical time.
In 2020, we announced an additional $250 million commitment to the program
to serve 10,000 more entrepreneurs.
One Million Black Women
Building on our history of investing significant capital in Black communities
through our 10,000 Small Businesses program and our Urban Investment Group,
we recently launched a new investment initiative, One Million Black Women. In
partnership with Black women-led organizations and other partners, we will commit
$10 billion in direct investment capital and $100 million in philanthropic support
to address the dual disproportionate gender and racial biases that Black women
have faced for generations, which have only been exacerbated by the pandemic.
One Million Black Women has, in part, been shaped through research, including
a new report, Black Womenomics, published by Goldman Sachs Investment Re-
search. The research shows that Black women are one of the most marginalized
groups in the country, and if we can reduce the earnings gap for Black women we
would see U.S. GDP increase by $300 billion a year. We believe if we can narrow
opportunity gaps for Black women, we will narrow opportunity gaps for all groups
and drive economic progress for the country as a whole.
Our investments will focus on increasing opportunity at key moments in Black
women’s lives, whether by expanding access to quality health care, modernizing
daycare and primary school facilities in Black communities, or providing access to
capital to grow a business, among other things. For example, the New York City
safety-net hospital loan, described above, is part of this initiative and we expect
thousands of Black female health care workers and patients will benefit from the
GS loan.
To date, we have announced that we will provide investment capital and philan-
thropic grants to 12 organizations nationwide, as listed in the Appendix.
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This effort cannot succeed without advice and counsel from the broadest range of
Black voices possible, so we have created a new advisory council of prominent Black
leaders from a wide range of fields including Dr. Ruth Simmons (President, Prairie
View A&M University), former Secretary of State Condoleezza Rice, Dr. Valerie
Montgomery Rice (President and Dean, Morehouse School of Medicine) and Rosalind
G. Brewer (CEO of Walgreens) and Darren Walker (President, Ford Foundation).
There has never been an investment of this size focused on Black women, and we
are proud to bring people together in this historic effort.
Launch With GS
Three years ago, we developed Launch With GS, a $500 million investment strat-
egy that aims to increase access to capital and facilitate connections for women,
Black, Latinx, and other diverse entrepreneurs and investors. Since its inception,
Launch With GS has deployed more than $500 million globally to companies and
funds with diverse management teams. In early 2021, we announced an additional
$500 million commitment to Launch With GS, for a total of $1 billion toward invest-
ing in these entrepreneurs and funds.
Launch With GS is grounded in our belief that diverse leadership teams out-
perform if they are given access to capital and the resources to drive their busi-
nesses forward. In addition to deploying capital, we are fostering a global ecosystem
of founders, investors and clients. In early 2020, Launch With GS announced Gold-
man Sachs’s first Black and Latinx Entrepreneur Cohort, comprising a group of
high-growth start-ups from across the United States. Beyond access to capital, these
businesses participate in a customized 6-week virtual experience—including one-on-
one and sector-specific workshops with our research, banking and investment teams,
and interaction with start-up experts across key areas, including legal services, cap-
italization, marketing, and branding.
Philanthropic Initiatives
A dedication to service and a commitment to using our expertise and convening
power to help address broader issues has long been a core element of our culture.
Moreover, since the onset of the pandemic, we have been focused on how we can
help communities around the world, including those where we live and work.
As a key element of the firm’s overall impact investing platform, we established
our Goldman Sachs Gives program to coordinate, facilitate and encourage global
philanthropy by our most senior leaders—partners. GS Gives is committed to fos-
tering innovative ideas, solving economic and social issues, and enabling progress
in underserved communities globally. Since 2010, GS Gives has granted more than
$1.8 billion to over 8,000 nonprofits in 100 countries around the world. In 2020, GS
Gives deployed nearly $200 million in grants to support pioneering nonprofit organi-
zations and firm initiatives such as the COVID–19 Relief Fund and the Fund for
Racial Equity.
The Goldman Sachs COVID–19 Relief Fund was designed to address the most
pressing challenges brought on by the pandemic in the world’s hardest-hit commu-
nities. Grants deployed provided assistance for health care providers on the front
lines, aid for the most vulnerable populations, including underserved children and
families, economic relief for reduced and lost work, and support for accelerated med-
ical research. The fund has deployed a total of $42 million to date, supporting 305
nonprofits working directly on COVID–19 relief and response efforts in more than
30 countries around the world.
Additionally, in response to the COVID–19 pandemic, we facilitated the donation
of more than 2.5 million surgical masks and 700,000 N95 masks to hospitals world-
wide. In New York, we connected Mount Sinai Hospital with our ground transpor-
tation partner and donated cleaning supplies to help the dedicated car service safely
transport health care workers to and from three local hospitals.
Most recently, we announced an additional $10 million commitment to support re-
lief and recovery efforts in India, which is home to three Goldman Sachs offices and
thousands of our people. Our funding will be deployed to support frontline health
facilities that are leading the fight against COVID–19, including ongoing vaccina-
tion efforts. It will also be used to support initiatives promoting mental health in
several cities across India and to support communities with economic recovery.
In addition to our COVID–19 relief and recovery efforts, last June we created a
$10 million fund, the Goldman Sachs Fund for Racial Equity. Through GS Gives,
the fund supports the vital work of leading organizations addressing racial injustice,
structural inequity, and economic disparity. To date, the fund has donated to
(among others) the NAACP Legal Defense Fund, the Black Economic Alliance Foun-
dation, the United Negro College Fund, Equal Justice Initiative, Black Girls Code,
and the Innocence Project.
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Investing in Diversity and Inclusion
Improving our diversity and inclusion efforts in every aspect of the work we do
at the firm is a top priority. Since becoming CEO, I have been vocal about the im-
portance of advancing our firm’s diversity, including with respect to gender, race,
sexual orientation, gender identity, veterans, and disability or whatever contributes
to who we are. Effectively serving a broad and diverse set of clients means having
an appreciation and understanding of their different experiences, interests, and val-
ues, and we are committed to building a team capable of that critical work. I believe
a core part of my tenure as CEO will be defined by our progress on this front. I
believe that we should have a company that looks like the regions and communities
we serve.
We are focused on driving accountability and transparency as it relates to these
efforts and ensuring we have impact not only on the people of Goldman Sachs but
also on the communities where we operate. For the first time, we published in April
our inaugural People Strategy Report, which provides a comprehensive overview of
our approach to attracting, developing, retaining, and rewarding diverse talent. The
Report also discusses how we hold managers and senior leadership accountable for
our diversity and inclusion commitments, including by our global, regional, and divi-
sional committees.
Board Diversity
We have been, and will continue to be, committed to diversity on our Board, and
in recent years, have maintained a particular focus in our director searches on di-
verse candidates. Our Governance Committee aims to develop a Board that, as a
whole, reflects diverse viewpoints, backgrounds, skills, experiences, and expertise.
As of July 1, 2021, our five most recently appointed independent directors will be
women: Kimberley Harris, Jessica Uhl, Dr. Drew Faust, Vice Admiral Jan Tighe
(Ret. U.S. Navy) and Ellen Kullman. Of our 13 directors who will be in place on
July 1, our Board will include: six directors who are women, two directors who are
Black, including our Lead Director and our newest director Kim Harris, one director
who is of Indian descent, one director with career service in the military and three
directors who are non-U.S. or dual citizens. Overall, our Board will be 62 percent
diverse by race, gender, or sexual orientation.
Diversity of Senior Leaders
Having a diverse Board is not enough to achieve where we want to be on our di-
versity efforts. Our most recent partner class had the highest percentage of women
(27 percent, up 4 percent from 2016) and Black partners (7 percent, up 3 percent
from 2016) in our history. We also recently added two women and one ethnically
diverse leader to the Management Committee, bringing the total on the committee
to seven women and four non-White leaders out of 28 committee members.
Most recently, I announced a number of new leadership positions within our
firm—many of whom are women. These include the Chief Legal Officer and General
Counsel, the Global Co-Head of our Consumer and Wealth Management Division,
the Head of Investor Relations, the Chief Operating Officer for our Asset Manage-
ment Division, and our Deputy Chief of Staff for the firm. I have also recently pro-
moted a number of Black professionals into leadership seats in the last year, includ-
ing our Chief Strategy Officer, our Global Head of Corporate and Workplace Solu-
tions, our Co-Head of Investment Banking in Asia (ex-Japan), our Global Chief Op-
erating Officer of Global Investment Research and our Private Wealth Management
New York Region Head.
However, more work needs to be done to enhance the diversity of our senior lead-
ers across the firm, and we are working to improve these efforts.
Increasing Diverse Representation
Increasing the diversity of our people is a business imperative and is essential to
our ability to serve our clients, generate long-term value for our shareholders and
contribute to our broader communities. In 2019, we set forth ambitious aspirational
goals and a comprehensive action plan to increase diverse representation at all lev-
els and create an even stronger culture of inclusion for all of our people. We are
aiming to achieve representation in entry-level hiring of 50 percent women globally,
11 percent Black professionals and 14 percent Hispanic/Latino professionals in the
Americas, and 9 percent Black professionals in the U.K.
With consistent and persistent focus, we have attracted more diverse talent to
Goldman Sachs than ever before. In our 2020 campus analyst class in the Americas,
55 percent were women, Black talent made up 11 percent of the class, Hispanic/
Latinx talent made up 17 percent, and Asian talent made up 31 percent. The posi-
79
tive results we have achieved demonstrate the power of setting aspirational goals
and holding ourselves accountable.
In addition to setting clear aspirational goals, we continue to find innovative ways
to democratize access to the people, opportunities and culture of the firm through
our various diversity recruiting programs. Building upon our long-standing commit-
ment to developing and recruiting students from HBCUs, we launched a $25 million
commitment to HBCUs over the next 5 years. The commitment is tied to the Market
Madness: HBCU Possibilities Program, a 4-month training in finance fundamentals.
Students receive in-depth training, mentorship from Goldman Sachs professionals,
a $10,000 stipend, and the ability to participate in a final case study competition
with grand prizes ranging from $250,000 to $1 million in grants for their institu-
tions. Our goal is to double the number of campus analysts that the firm recruits
from HBCUs by 2025, and over time we believe that this expansion in our long-term
investment in HBCUs will help us better serve our clients and contribute to a more
inclusive and dynamic economy and society.
But we know it is not enough to recruit talent; we also need to make sure they
can realize their potential, so we’ve set additional representation goals to hold our-
selves accountable and do so transparently in the public domain. By 2025, we aim
for 7 percent of our vice presidents in both the Americas and the U.K. to be Black,
9 percent of our vice presidents in the Americas to be Hispanic/Latinx, and 40 per-
cent of our vice presidents across the globe to be women. By increasing the diversity
of our vice president population, we pave the way to increase the representation of
our most senior roles at the firm.
We have also embraced our responsibility as a leader in our industry to promote
change. In July 2020, we began a new policy to only underwrite initial public offer-
ings for companies domiciled in Western Europe and the United States that have
at least one diverse board member. The feedback we’ve received from clients and
investors has been overwhelmingly positive, and in July 2021 we will raise that fig-
ure to two.
Promoting the Use of Diverse Contractors and Vendors
Our firm has a long history of working with small and diverse businesses as part
of our vendor diversity program, which began in 2000 and seeks to drive opportuni-
ties with small, minority and women business owners. We continue to discover and
partner with exceptional businesses through the program in our efforts to achieve
a supply chain that reflects the diversity of our people and clients. For example,
when constructing our global headquarters in New York, which opened in 2009, we
spent more than $300 million with minority- and women-owned businesses, which
was the most successful project in the history of New York State’s Minority- and
Women-Owned Business Enterprise Program at the time.
Moreover, we actively encourage our sourcing teams to include small and diverse
businesses in competitive bids and encourage our larger, nondiverse vendors to do
the same. Our Vendor Code of Conduct, which all of our vendors must acknowledge,
also states the expectation we have of our vendors to provide diverse companies
with the opportunity to compete on a fair and equal basis for business. In 2020, in
an effort to minimize barriers to entry, we built a new website to increase trans-
parency on doing business with Goldman Sachs and simplified our online applica-
tion form to encourage more prospective diverse vendors to submit their details as
to expertise and experience, which is then shared with our strategic sourcing teams.
In recent years, we have further expanded our program globally and firmwide. In
addition, we continue to partner with our 10,000 Small Businesses program, 10,000
Women program, Launch With GS and One Million Black Women initiatives, among
others, to identify diverse vendors for upcoming sourcing opportunities.
This year, for the first time, we publicly reported our spend with small and di-
verse businesses. In 2020, we bought goods and services worth over $265 million
from small and diverse vendors globally. Seventy percent was with minority-women-
owned businesses and 30 percent with small businesses. Twenty-eight percent was
subcontracted through our nondiverse prime vendors to multiple smaller diverse
vendors.
Over the course of 2021, we are further enhancing our reporting capabilities and
we remain committed to holding ourselves and our vendors accountable in our ef-
forts to increase activity with small and diverse businesses from our 2020 baseline
by 50 percent by 2025.
Use of Diverse Asset Managers
Our asset management business works with nearly 40 external asset managers
that are majority women-owned or ethnically diverse-owned firms. This number has
almost doubled over the last 2 years due to a focused effort to increase our pipeline
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and onboard more diverse managers. These firms manage equity, fixed income,
hedge fund and private equity assets for Goldman Sachs institutional and private
clients.
In addition, we are continuing to refine and enhance our diverse manager
sourcing across all asset classes to further increase the number of diverse-owned
managers on the platform. We are increasing the training of our manager selection
team on diversity, equity, and inclusion and will be hiring additional professionals
with experience in sourcing diverse managers. We also plan to partner with diverse
industry trade organizations to connect to smaller diverse-owned managers and
have partnered with organizations focused on creating an asset management inves-
tor pipeline.
Use of Diverse Broker-Dealers
Goldman Sachs is one of the largest issuers of corporate bonds in the investment
grade capital markets, and we have had an established diverse broker-dealer pro-
gram for many years. Specifically, in the last 10 years, we have employed a range
of diverse firms on every new syndicated USD benchmark and preferred financing
we have issued for ourselves, representing over $156 billion of aggregate issuance.
We have endeavored to be inclusive across all diverse firm types with strong rep-
resentation from Black, Hispanic, disabled veteran and women owned and operated
firms.
The majority of these transactions have included four diverse firms, with some in-
cluding as many as 12. Over this period, we have asked 23 different diverse firms
to join our underwriting syndicate, and we are proud to support these firms and
their underwriting and distribution businesses. We manage our relationships with
diverse firms on a continuous basis and regularly review our partner firms based
on numerous criteria, including the commitment each makes to their community,
the proportion of their employees that are diverse and representative of their demo-
graphic, and their distribution capabilities.
Moreover, in 2020, our Federal Instruments Fund—designed to direct the bulk of
its trading to diverse broker-dealers—raised $3.1 billion, more than twice the prior
year. This stands as the leader among all diversity and inclusion-related money
market fund flows during 2020. Despite that significant inflow, the fund maintained
61.8 percent of purchases with diverse-, women-, or veteran-owned broker-dealers
who benefited from the increased trading volumes.
Investing in Sustainability and a Transition to a Green Economy
At Goldman Sachs, we have a long-standing commitment to sustainability. We
view climate transition and inclusive growth as drivers of risk and opportunity for
us and our clients.
I am proud of our established track record of focusing on environmental matters.
We were the first major U.S. bank to come forward in 2005 with a comprehensive
Environmental Policy Framework, where we acknowledged the scientific consensus
that climate change is real and that it is one of the most significant environmental
challenges of the 21st century. In 2015, we updated that Framework to underscore
our commitment to leveraging our people, capital and ideas to find solutions to ad-
dress climate change, including by developing a target to finance and invest $150
billion in clean energy by 2025.
In 2019, we developed a sustainable finance framework to put climate transition
and inclusive growth at the forefront of our work with clients. We have set clear
targets and remain committed to reporting and providing transparency on our
progress. For example, as part of our commitment, we announced that we would tar-
get $750 billion in financing, investing, and advisory activity on our sustainability
priorities by 2030. In the first year, we far surpassed what we thought possible,
reaching $156 billion in commercial activity, which includes $93 billion dedicated to
climate transition.
We have been carbon neutral across our own operations and business travel since
2015, 5 years earlier than our goal, and we recently extended that carbon neutral
commitment to include our supply chain, targeting net-zero greenhouse gas emis-
sions by 2030. This commitment aligns our financing activities with a net-zero-by-
2050 transition pathway, in line with the goals of the Paris Agreement.
And, because we cannot possibly confront the challenges of climate change and
structural inequity on our own, we have gone beyond our commercial work to part-
ner with our peers and other organizations to effect real change. For instance, we
are working with the Bloomberg-sponsored Climate Finance Leadership Initiative to
help attract more private capital to sustainable infrastructure projects in emerging
markets.
81
Increasingly, we advise corporates seeking to integrate ESG or related principles
into their strategy and help them identify sustainability-related risks and opportu-
nities as levers of growth. This includes financing opportunities that fund invest-
ment in our clients’ transition to a lower-carbon-intensity business model, partici-
pating in the scaling of sustainable finance in equity capital markets, and facili-
tating M&A opportunities to accelerate climate transition and inclusive growth.
For example, in August 2020, we brought to market Alphabet’s first-ever sustain-
ability bond issuance and the largest-ever such bond issued by a corporate. Proceeds
will be targeted toward sustainability projects, including clean energy and trans-
port, circular economy and design, energy efficiency, and affordable housing. Addi-
tionally, we launched in February 2021 our inaugural sustainability bond issuance.
This $800 million commitment is aligned with our sustainable finance framework
for future issuances and further demonstrates our belief that building a low-carbon,
inclusive economy is a business imperative.
These initiatives are very much market driven, good for business and a way for
us to help our clients transition to a low carbon future, and we are staying the
course.
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85
PREPARED STATEMENT OF JANE FRASER
CHIEF EXECUTIVE OFFICER, CITIGROUP
MAY 26, 2021
Chairman Brown, Ranking Member Toomey, and Members of the Committee: I
would like to thank you for this opportunity to represent Citi here today. I am Jane
Fraser and I have been Chief Executive Officer of Citi since March.
Citi believes deeply in its mission of responsibly providing financial services that
enable growth and economic progress. We believe banking is the foundation of eco-
nomic empowerment and mobility and we are committed to expanding access to fi-
nancial services for all communities. The past year, and all the challenges it has
brought, has been an opportunity for us to walk the walk. As the world’s most glob-
al bank, we continue to support many of the most iconic American businesses as
they navigate the uncertainty of markets abroad. And working in concert with Fed-
eral assistance programs, we continue to serve as a source of strength for our cus-
tomers and communities here at home. We are laser-focused on driving a sustain-
able and equitable recovery to the pandemic.
Who We Are as a Bank
The origins of this global crisis are very different to the last one: this is not a
financial crisis, but a public health crisis with severe economic consequences. Like-
wise, Citi has shown during the pandemic that we are a very different bank than
the one that entered the financial crisis more than a decade ago.
Right-Sizing the Bank To Increase Our Impact
As my predecessor, Mike Corbat, shared with you in 2019, since the financial cri-
sis Citi has worked to become a smaller, safer, stronger, and far less complex insti-
tution. We have gone back to basics as a bank and today we have two primary lines
of business: our Global Consumer Bank and our Institutional Clients Group. An on-
going effort to simplify our structure has resulted in us shedding over 70 businesses
and divesting more than $800 billion of noncore assets.
By divesting these noncore assets, we increased the efficiency in our use of capital
and reduced our deferred tax assets by more than half, generating $7 billion of regu-
latory capital in the process. Even as we continue to meet the needs of our cus-
tomers and communities during the pandemic, we remain well capitalized. We
ended 2020 with a Common Equity Tier 1 Capital ratio of 11.7 percent and a sup-
plementary leverage ratio of 7 percent. This allowed us to resume the repurchase
of common stock this year, which we had voluntarily paused at the onset of the pan-
demic. (See Appendix for more information.)
Like our peers, Citi has benefited from Government programs and facilities, in-
cluding FDIC insurance and access to the Federal Reserve’s Discount Window. But
in turn, we provide a tremendous benefit to the Government and the broader econ-
omy through the services we offer. We also support the Federal Government in
much of its financial activity overseas.
Over the past four decades, Citi is proud to have financed more of America’s pub-
lic infrastructure than any other bank. Last year alone, we spurred the investment
of more than $27 billion across the U.S. in projects including bridges, hospitals, air-
ports, water, and public power, on behalf of a wide range of municipal and nonprofit
clients. Many of these large projects would not be possible without the heft of a bal-
ance sheet like Citi’s to finance them. In fact, over the past 10 years, Citi has been
the source of $508 billion in financing for local governments, nonprofit health care
institutions, public works, affordable housing and other anchors necessary for strong
communities. Combined with the $77 billion we lend on average each year to compa-
nies in industries outside of the financial sector such as manufacturing, agriculture,
retail and energy, Citi aspires to be an essential catalyst for growth and progress
throughout American life.
Our Core Franchises
The U.S. economy needs banks of all sizes, scaled to support a full range of busi-
nesses and households. Today, Citi is right-sized to serve clients wherever they do
business. Our Global Consumer Bank serves roughly 70 million customers in the
U.S., where we operate just under 700 retail branches concentrated in the six met-
ropolitan areas of New York, Washington, DC, Miami, Chicago, San Francisco, and
Los Angeles. Our current branch count, while fewer than the approximately 1,000
branches we had 10 years ago, is greater than the 450 we operated at the turn of
the millennium. Roughly 29 percent of our branches are in low- and moderate-in-
come census tracts, which is commensurate with our peers. And through invest-
ments in our digital capabilities, new and expanded partnerships and our role as
86
the world’s largest credit card issuer, we have been able to extend our reach beyond
our core, physical footprint to serve communities across the country and deepen cus-
tomer relationships.
Our Institutional Clients Group serves clients across more than 160 markets and
jurisdictions, and has a physical presence in nearly 100 of them. We provide a full
range of wholesale banking products and services to our clients via six main busi-
ness lines including banking, capital markets and advisory; commercial banking;
global markets; securities services; treasury and trade solutions; and wealth man-
agement and private banking. Working together, our Institutional Clients Group
provides solutions to meet the needs of corporations, financial institutions, public
sector entities, investment managers and high-net worth individuals and families. 1
We are the leading financer of affordable housing in the country—and have been
for 11 consecutive years. Our commercial bank serves many mid-sized American
companies, including numerous firms looking to expand and grow across the country
and the globe. We also help many State and local governments finance critical infra-
structure, such as schools and health facilities. We endeavor to provide stellar exe-
cution to lead transformation for our clients as they navigate evolving global factors
including environmental, social and corporate governance (ESG) issues, wellness,
mobility and fintech. Our network-driven strategy and global presence allow us to
provide products and services to clients who value a partner that can help them
grow in any country they do business. This includes multinationals who are expand-
ing globally, particularly in emerging markets, and emerging markets companies
who are growing beyond their home market or region. We also assist 90 percent of
global Fortune 500 companies in their daily operations and help them to hire, grow,
and succeed.
Serving as a Source of Strength During COVID–19
Because of the steps we have taken to invest in our resilience and improve our
safety and soundness, we are on a strong footing from a liquidity and capital per-
spective to support our customers, colleagues, and communities through this pan-
demic. The prudent decisions we made in the wake of the last crisis have proved
their full value in this one.
At the onset of the pandemic, Citi quickly took action through a comprehensive,
approach to provide immediate, on-the-ground relief. We were one of the first banks
to announce temporary assistance measures. To date, we have provided assistance
to 2.7 million consumers and small businesses in the U.S. who have suffered the
impacts of the pandemic, and we significantly ramped up our capital support for cor-
porate clients in the hardest-hit sectors such as retail and the airline industry.
Our credit card customers last year were eligible for waivers on late fees and
could defer minimum payments for 2 months, with the option to re-enroll if nec-
essary. There was no negative credit bureau reporting during the waiver period for
accounts that were previously not delinquent. For retail bank customers adversely
affected by the pandemic, we refunded certain banking fees, including penalties for
early CD withdrawal and monthly account maintenance fees, upon request. In addi-
tion, we allowed free cash withdrawals at other banks’ ATMs.
For our small business customers, we offered waivers on monthly service fees and
remote deposit capture fees, as well as penalty waivers for early Certificate of De-
posit withdrawals. Citi exited the direct mortgage servicing business in 2019, how-
ever, our mortgage subservicer, Cenlar FSB, continues to offer forbearance, loss
mitigation, foreclosure, and eviction practices in compliance with the CARES Act,
GSE, and other governmental pronouncements.
We are also proud to be the conduit for the extraordinary consumer and business
aid that Congress and the Federal Reserve have provided. We helped deliver this
aid across many Government-sponsored programs, including the Small Business Ad-
ministration’s Paycheck Protection Program. To date, we have funded more than
$5.1 billion in loans to small businesses in the hardest-hit sectors and in the hard-
est-hit areas of the country. Businesses such as Dinah’s Chicken in Glendale, Cali-
fornia, and the Maryland Youth Ballet survived partly on the help Congress enabled
and banks like ours delivered. The average size of loans we disbursed was $100,711,
and nearly 80 percent of those loans have gone to small businesses with 10 or fewer
employees.
Earlier this year, we launched a series of PPP webinars, including one in Spanish,
to help small businesses in communities across the country complete the PPP appli-
cation and loan forgiveness process. We have also shared the webinars with 180
community-based organizations and promoted them on our social media channels.
1 Citi does not have a trading or prime brokerage relationship with Archegos, nor did we have
any exposure to Archegos in our private bank.
87
To provide further support, we are donating all net profits from our participation
in the PPP to Community Development Financial Institutions (CDFIs) and small
businesses. To date, we have contributed, or are in the process of contributing, $50
million in net profits, with at least another $40 million expected over the coming
year. 2
Mindful of the ever-changing COVID–19 landscape and its impact on our cus-
tomers, Citi deployed protocols to enable consumers to receive full access to stimulus
dollars, including applying temporary provisional credits so that customers can ac-
cess deposited stimulus funds. Overdraft fees in 2020 were less than 0.1 percent of
our total revenue and fees were down 18 percent compared to 2019.
We also expanded access to check cashing services for noncustomers, eliminated
surcharges for prepaid debit cards issued for stimulus payments and adjusted poli-
cies and procedures covering the garnishment of customer stimulus payments. For
internal matters (i.e., where a customer owes funds to Citi), Citi continues to pro-
hibit levying on any CARES Act or stimulus payments identified by the bank. For
third-party garnishment orders, Citi complies with applicable State and Federal
laws and acts in conjunction with regulatory guidelines.
Our Priorities Going Forward
As CEO, I have set several priorities for our firm, including continuing to support
our customers and communities through the pandemic and recovery, establishing a
standard of excellence in the way we manage risk and ensuring we are best posi-
tioned to deliver for our customers in the digital era.
1. Building on Our Record of Financial Inclusion To Support an Inclusive Recov-
ery
We are already seeing the shoots of a K-shaped recovery in which some will do
better and others will struggle. Unfortunately, those who will struggle have been
economically disadvantaged historically, and they will need special attention from
our industry. At Citi, we have a strong record of breaking down barriers impeding
access to financial services and helping direct the flow of capital into communities
that have traditionally lacked it. Our partnerships with CDFIs and Minority Deposi-
tory Institutions (MDIs) are emblematic of this work.
In the face of a broader consolidation of the banking industry, there is an impor-
tant role for institutions of all sizes. Indeed, we are focused on ways we can support
smaller banks, such as CDFIs and MDIs, because they often can serve communities
in more effective and enduring ways than we can on our own or through our branch
footprint. CDFIs level the playing field for underserved communities and popu-
lations, especially communities of color. That’s why, in the last 5 years, Citi and the
Citi Foundation have provided $173 million in capital and $79 million in philan-
thropic funding to more than 80 CDFIs across the U.S. in support of their small
business and community development efforts. As noted earlier, we also are donating
net profits from the PPP to CDFIs to provide further support to small businesses
and households hit hard by the pandemic.
MDIs also are critical to the financial services ecosystem in diverse communities
and are important partners of Citi. We are a founding partner bank for the Depart-
ment of Treasury’s Financial Agent Mentor-Protege program, in which we are cur-
rently mentoring nine MDIs. Last year, Citi announced a partnership with the Na-
tional Bankers Association, through which Citi created a purchasing facility to as-
sume up to $50 million in PPP loans from MDIs. To date, five MDIs have taken
part in the program, allowing them to free up capital that can be used for other
lending activities. In addition, as part of Citi’s Action for Racial Equity initiative
to close the racial wealth gap, we have committed $100 million in support of MDI
growth and revenue generation, allocating nearly $50 million in growth capital to
MDIs to strengthen their ability to serve racially diverse and underserved house-
holds and entrepreneurs.
At Citi, we are also harnessing our capabilities in other ways to expand financial
inclusion and make a direct impact on communities. Although we have a smaller
branch footprint compared to some of our peer banks, across the Nation Citibank
customers have access to more than 65,000 fee-free ATM locations, including ATMs
at Costco, CVS Pharmacy, Duane Reade, Target, Rite Aid, and most Walgreens. In
addition, our Citi ATM Community Network program helps eliminate one of the big-
gest barriers to banking by removing surcharge fees at Citibank ATMs for more
than 440,000 customers of 28 minority-owned banks and credit unions.
2 Citi participated in the Main Street Lending Program (MSLP), opening the program to exist-
ing customers on July 20, 2020. Only two customers, totaling $86.3 million, met all conditions
for MSLP approval and were successfully funded prior to the program’s cessation. Citi’s fees
were $650,000.
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One of Citi’s fastest growing products is our Access Account, an FDIC-insured
checkless account with low or avoidable monthly charges and no overdraft fees,
launched in 2014. We recently partnered with the National Urban League to pro-
mote this account in additional underserved communities. Additionally, 10 years
ago, we began working with the City of San Francisco to establish the Nation’s first
universal, publicly funded college savings account program for every family in that
city’s public school system. We are now expanding the program to San Jose and Los
Angeles. 3
We are especially proud of our role as the country’s leading affordable housing
lender. In 2020 alone, we worked with State and local governments across the coun-
try to provide more than $7 billion in financing for affordable rental housing
projects. That includes the financing to renovate six developments in Cambridge,
Massachusetts, for lower-income seniors and disabled residents and a brand new
480-unit housing complex reserved for low-income families and seniors in Las
Vegas.
2. Achieving Excellence in Our Risk and Control Environment
The pandemic is irrevocably changing many things about banking, including ac-
celerating customers’ adoption of digital channels. At Citi, we are embracing this op-
portunity to transform our business and achieve a state of excellence in how we op-
erate and in our ability to serve our customers. A major part of this agenda is im-
proving our risk and controls infrastructure. In 2020, compared to 2019, we invested
an additional $1 billion towards modernizing our technology, simplifying our proc-
esses and improving and automating controls. We also hired our first chief adminis-
tration officer to oversee these efforts.
We understand a world-class risk and controls infrastructure is critical to our
ability to handle the volumes and scale of the new digital era and reaffirm the trust
and faith our customers put in us. These efforts are also addressing the issues iden-
tified in consent orders by the OCC and Federal Reserve in October 2020 and are
intended to reduce the risks that have led to other enforcement actions. We take
pride in our role as a global leader in financial services and are fully committed to
addressing the issues identified by our regulators. (Please see the appendix for addi-
tional information on public actions taken since Citi last testified in 2019.)
3. Delivering for Our Customers in the Digital Era
From financing the first transatlantic cable to developing the first mobile banking
app from a major U.S. bank, Citi prides itself on both financing emerging tech-
nologies to enable progress and leveraging them responsibly to better serve our cus-
tomers. In our approach to today’s newer technologies, we remain guided by a focus
on risk and controls. We were one of the world’s first companies to develop our own
set of ethical principles for artificial intelligence, which aim to ensure effective gov-
ernance, risk management and responsible innovation in our use of AI. We recently
launched an AI Center of Excellence to share and drive adherence to best practices
across the firm.
Similarly, before we engage with cryptocurrencies, we see it as our responsibility
to ensure we have clear governance and controls in place. Citi is focusing resources
and efforts to understand changes in the digital asset space and the use of distrib-
uted ledger technology, including demand and interest by our clients, regulatory de-
velopments and technology advancements. These developments and important risk
and control considerations are guiding our measured approach.
With the proliferation of new technologies, the use of mobile and cloud and man-
aged services to conduct financial transactions, and the increasing sophistication of
threat actors, prominent financial institutions such as Citi have been and will con-
tinue to be subject to cyberincidents. Recognizing the significance of these risks, Citi
employs a threat-focused, data-driven strategy to protect against, detect, respond to
and recover from cyberattacks. We actively participate in industry, Government and
cross-sector knowledge-sharing groups to enhance our resilience. We also devote sig-
nificant resources to implement, maintain, monitor, and regularly upgrade our sys-
tems and networks. In addition, to protect Citi’s and our customers’ assets and in-
formation, we have implemented multiple layers of controls, including intrusion de-
tection and prevention, endpoint detection and response, as well as various other
prevention, detection, and response processes. 4
We invest in advanced technology to safeguard data and customer information.
For instance, the Citi Virtual Card Account provides a secure, business-to-business
3 For additional details on our work with CDFIs, MDIs, and support for the unbanked and
underbanked, please see Helping Advance Racial Equity in the Financial Services Industry and
pp. 72–80 in Citi’s 2020 ESG Report.
4 For more information about Citi’s cybersecurity efforts, see pp. 55–56 and 116 of Citi’s 2020
Annual Report.
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digital solution for large workflows through the generation of one-time account num-
bers. The virtual card technology enables real-time transactions that are automated
and secure, safeguarding against fraud and potential misuse. The account elimi-
nates the need for paper-based payments but still leaves an electronic trace, which
allows for easy reconciliation and reporting. In addition, our Citi Payment Outlier
Detection solution uses analytics, artificial intelligence, and machine learning to
find transactions that do not align with typical patterns of activity. These outliers
are then investigated to determine whether they indicate fraud. Each year, we pro-
vide our employees with training on how to properly handle and maintain the secu-
rity and privacy of Citi’s and our customers’ information.
Bringing Our Mission to Life
The events of this past year are a stark reminder that companies like ours have
a role to play in helping tackle the world’s toughest problems. Citi’s mission of ena-
bling growth and economic progress is not just a nicety we put up on our website;
it is something we take very seriously and bring to life through our day-to-day work
across all parts of our business and our philanthropy.
Over the past decade, Citi and the Citi Foundation have provided more than $870
million to hundreds of community partners across the U.S. to support vibrant and
equitable local economies in the communities where we do business. In addition to
our financial support, we harness the passion and expertise of our employees to en-
hance our impact and engagement, with an average of 450,000 in total volunteering
hours in the U.S. each year.
To illuminate the challenges affecting communities and to inform solutions, we
have underwritten critical research including the groundbreaking U.S. Financial
Diaries project, which tracked the financial lives of hundreds of low-income families
over a year, and the annual Menino Survey of Mayors, the only nationally rep-
resentative survey of U.S. mayors. We have also collaborated with leading national
civil rights and advocacy organizations on policy developments that support finan-
cial inclusion and wealth creation in low-income communities of color.
1. Sustainability
Citi manages and mitigates credit and reputational risk through a number of in-
ternal initiatives, including Citi’s Environmental and Social Risk Management
(ESRM) Policy. The ESRM Policy provides the framework for how Citi identifies,
mitigates and manages the potential environmental and social risks associated with
customers’ activities that could lead to credit or reputational risks to the company. 5
Climate change presents risks to Citi and its clients that will only increase over
time. We are committed to helping our clients mitigate these risks and transition
to cleaner energy. For instance, we have worked with oil and gas clients to support
next-generation carbon capture and sequestration technology, and we have
partnered with others on innovative loans that are linked to their sustainability per-
formance.
The market continues to drive demand for sustainable finance, an area in which
Citi has long been a leader. We helped create the Equator Principles in 2003 and
the Green Bond Principles in 2014, both establishing important industry standards.
In 2018, Citi became the first U.S. bank to report on our efforts to implement the
Taskforce on Climate-related Financial Disclosures framework, providing trans-
parency about the impact climate change has from a risk management perspective.
And knowing how important it is to manage our own footprint, last year we fulfilled
a goal of sourcing 100 percent renewable electricity for our facilities globally.
We recently committed to financing $500 billion in environmental projects and ac-
tivities by 2030. This is a tenfold increase over our first environmental financing
commitment made back in 2007. And on my first day as CEO in March, we com-
mitted Citi to net zero emissions by 2050. We know that to truly address the risks
of climate change, we need to help our clients—which include many of the world’s
biggest multinationals, as well as investors and even countries—responsibly transi-
tion to net zero. 6
2. Equity
The global pandemic has laid bare the systemic inequities that have impeded com-
munities from reaching their full potential, and we cannot ignore the role our own
industry has played in contributing to these disparities. In the aftermath of George
Floyd’s death in Minneapolis, as calls for racial justice intensified across the U.S.,
we launched Action for Racial Equity, more than $1 billion in strategic initiatives
to help close the racial wealth gap and increase economic mobility. As part of this
5 See Citi’s 2021 Proxy Statement for more information.
6 For more information about Citi’s sustainability agenda, see pp. 24–58 in Citi’s 2020 ESG
Report.
90
initiative, we are tackling the home ownership crisis in communities of color and
are in the final stages of committing $200 million of equity to the preservation of
affordable and workforce housing projects that will be comanaged by five Black in-
vestment managers.
We have set a target of directing $1 billion annually by 2023 to diverse suppliers
to help more minority and women-owned entrepreneurs get the financing they need
to start and grow their businesses. As part of that effort, 27 percent of third-party
broker fees paid in 2020 went to minority- and women-owned firms. Our new, glob-
ally unified wealth business will increase the number of minority-owned third-party
asset managers investing in minority-owned businesses offered to Citi clients, with
a target of onboarding 5–15 diverse fund managers and seeking $200 million of cap-
ital investment into these funds by the end of 2023. These are investments that
promise to pay tremendous dividends: recent research by Citi found that if key ra-
cial gaps for Black Americans had been closed 20 years ago, U.S. GDP could have
increased by an estimated $16 trillion. 7
3. Diversity
We are also making sure we maintain a culture that embraces the diversity of
our people and the communities we serve. Today, our board of directors is 50 per-
cent women and 19 percent minority. I am proud to be the first woman to run a
global financial institution, and equally proud that we have one of the most senior
Black executives in our industry, Mark Mason, as our CFO. Of my U.S.-based direct
reports, five are women, one is Black, one is Hispanic and three are members of
the AAPI community.
We are notable in our industry for recognizing the importance of transparency
and accountability to our diversity efforts. In 2018, Citi was the first major U.S. fi-
nancial institution to publicly release the results of a pay equity review comparing
compensation of women to men and U.S. minorities to U.S. nonminorities. To close
these gaps, we have set goals to increase our representation at senior levels of our
firm. We are focused on increasing female representation to at least 40 percent glob-
ally, up from 37 percent when we established our goals in 2018, and to boost the
representation of Black employees in those same roles in the U.S. to at least 8 per-
cent, up from the 2018 baseline of 6 percent.
To help us recruit more racially diverse talent, we have established pipelines from
historically Black colleges and universities and have expanded the diverse slates of
candidates we interview for open roles. To help solve the two-pronged issues of rep-
resentation and pay equity, we must have more women and minorities in senior,
high-paying roles. Career development is one of our top priorities, and we promote
from within to continue developing our existing talent. In 2020, 33 percent of open
positions at Citi were filled with internal candidates. 8
4. Human Rights
We are committed to identifying, preventing, and disrupting human rights wher-
ever we do business, regardless of a Government’s human rights record. As part of
this effort, we engage human rights experts, clients and peers in line with the U.N.
Guiding Principles on Business and Human Rights, a global framework for pre-
venting and addressing the risk of adverse impacts on human rights linked to busi-
ness activity.
We regularly initiate investigations concerning illicit activity related to sexual ex-
ploitation and human trafficking. Red flags may be the result of information re-
ceived from law enforcement, NGOs or various global public–private partnerships
that track activity suggesting human trafficking and child sexual exploitation. In
addition, Citi was one of the first financial institutions to engage with the U.N. on
their Survivor Inclusion Initiative, in which we provide financial services to sur-
vivors to help them transition back into society. 9
I thank you for the opportunity to respond to your questions and to discuss our
support for our customers, clients, and the communities hit by the crisis.
7 ‘‘Citi GPS Report: Closing the Racial Wealth Gaps—The Economic Cost of Black Inequality
in the U.S.’’, September 2020.
8 For more information on Citi’s diversity and racial equity efforts, see pp. 60–91 in Citi’s 2020
ESG Report.
9 For more information on Citi’s work regarding human rights, see pp. 118–124 in Citi’s 2020
ESG Report.
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PREPARED STATEMENT OF JAMIE DIMON
CHAIRMAN AND CHIEF EXECUTIVE OFFICER, JPMORGAN CHASE & CO.
MAY 26, 2021
Chairman Brown, Ranking Member Toomey, and distinguished Members of the
Committee, I appreciate the invitation to appear before you to talk about JPMorgan
Chase, the strength and resilience of the U.S. financial system, and the people, busi-
nesses, and communities we serve.
JPMorgan Chase is a global financial services firm with assets of $3.4 trillion and
operations worldwide. We are a leader in investment banking, financial services for
consumers and small businesses, commercial banking, financial transaction proc-
essing, and asset management. We serve millions of customers in the United States
and many of the world’s most prominent corporate, institutional, and Government
clients. More information about our financial performance and shareholder informa-
tion can be found in our 2021 Annual Proxy Statement, and in previous annual fil-
ings.
Banks play an essential role in a community, with the potential of bringing people
together, enabling companies and individuals to reach their dreams, and being a
source of strength in difficult times. Our 160,000 U.S. employees serve over 63 mil-
lion households including more than 4 million small businesses. Over the last 20
years, we have grown our branch footprint through both organic growth and merg-
ers with other banks. Today from nearly 4,900 branches located in 38 States and
the District of Columbia, and through mobile and digital banking platforms, we
serve customers with deposit products, wealth management, mortgages, auto loans,
and credit cards. Since 2017, we have expanded our branch footprint from only 23
States, and will be in all 48 contiguous States by this summer. We open 30 percent
of our new branches in low- to moderate-income neighborhoods. Today, nearly one-
third of all our branches are in communities of color, and one-third of our small
business banking customers are in majority–minority census tracts. We have about
150 branches in the Southwest Border region, and nearly 100 branches in rural
communities, with more to come as we expand into our new markets.
Our Support for the Real Economy Through the Pandemic
We are living through extraordinary times, for which history will judge the lead-
ers of Government and industry by the actions we take to address the health crisis,
support the people and businesses suffering from the devastating economic impacts
of the pandemic, and address longstanding structural inequities and racial economic
inequality.
At JPMorgan Chase, our focus has been on what we, as a company, could do to
serve. We entered this crisis from a position of strength, and leveraged our size and
scale to contribute to stability in our country and ongoing support for the ‘‘real econ-
omy’’—our customers, clients, employees, and communities impacted by the global
crisis:
• In 2020, we extended credit and raised capital totaling $2.3 trillion for con-
sumers and businesses of all sizes, helping them meet payroll, avoid layoffs, and
support operations.
• We have delayed payments and extended forbearance options for about 2 mil-
lion mortgage, auto, and credit card accounts, and refunded $120 million in fees
on consumer deposit accounts, including overdraft fees, for over 1 million cus-
tomers—all with no questions asked.
• Under the SBA’s Paycheck Protection Program, we funded well over 400,000
loans to small businesses supporting over 3 million jobs, for more than $40 bil-
lion in total funding. About 80 percent went to businesses with fewer than 10
employees, and 90 percent to those with fewer than 20. Around one-third of
Chase-facilitated loans went to businesses in communities of color.
• Outside of the PPP program, we provided $18 billion in new and renewed credit
for U.S. small businesses in 2020. We delayed payments for 21,000 loans and
refunded $24 million in deposit fees for more than 130,000 small businesses hit
hard by the crisis.
• We took steps to make sure those in need, including those without access to tra-
ditional banking services, received each round of stimulus payments quickly.
We deposited funds into our customers’ accounts immediately after receiving
them from the IRS, and temporarily credited any overdrawn accounts so cus-
tomers could use the full value of their relief. We also cashed noncustomer stim-
ulus checks at our branches and waived the check cashing fee. We did not gar-
nish checks unless compelled to by law.
96
• We provided more than $70 million in loan relief for owners of multifamily
properties housing more than 27,000 tenants, offering these landlord borrowers
periods of interest-only payments and mortgage deferrals so they could more
easily offer rental payment relief to their tenants.
• We committed $250 million in business and philanthropic initiatives with a
focus on helping underserved small businesses and nonprofits access low-cost
capital.
• And we supported our own employees—especially our own frontline workers
who continued to show up to their jobs in branches, call centers, lock boxes, and
for other roles that could not be performed at home. We gave special payments,
provided additional paid time off to manage personal challenges at home and
additional paid time off for illness or precautionary situations. We continued to
pay branch employees for their regularly scheduled hours, even if hours were
reduced or branches temporarily closed, and offered additional childcare sup-
port, including additional days of back-up childcare, discounts for childcare and
subsidized full-service childcare in our 14 U.S. childcare centers.
There is no doubt that the bold and swift action taken by Congress, the Federal
Reserve, and the Administrations over the last 15 months was instrumental in re-
versing financial panic, avoiding a deep and lasting economic crisis, and providing
vital emergency aid directly to individuals and small businesses. While real damage
was done, particularly for those at the lowest ends of the economic spectrum, the
size and scope of the programs mitigated further economic deterioration and put
this country on a path for a healthy economic recovery. We were proud to have par-
ticipated in various Federal Reserve emergency programs, such as the Paycheck
Protection Program, Primary Dealer Credit Facility, Commercial Paper Funding Fa-
cility, Money Market Mutual Fund Liquidity Facility and the Secondary Market
Corporate Credit Facility, among others. We are very appreciative of the partner-
ship with the Small Business Administration on PPP and proud of our thousands
of bankers who worked around the clock to get funds to businesses as quickly as
possible.
Our Commitment To Advancing Racial Equality
Events of the last year highlighted and exacerbated longstanding inequality, par-
ticularly among Black and Latinx families, increasing barriers to wealth creation
and holding us back as a country. We believe it’s our collective responsibility to ad-
dress this, and why JPMorgan Chase recently committed an additional $30 billion
over 5 years to advance racial equity, building on our past investments. Our com-
mitment includes:
• Promoting and expanding affordable housing and home ownership for commu-
nities of color by committing to originate $8 billion in mortgages and up to $4
billion in refinancing loans for Black and Latinx households, and financing $14
billion for an additional 100,000 affordable rental units.
• Growing Black and Latinx owned businesses by delivering $2 billion in loans
to small businesses in majority Black and Latinx communities, and by spending
an additional $750 million with new and existing Black and Latinx owned sup-
pliers to the firm.
• Improving financial health and access to banking in underserved communities—
including helping 1 million people open low-cost accounts—by opening new
Community Center branches, hiring local Community Managers, and investing
at least $50 million in Minority Depository Institutions to help them better
serve their communities.
• Building a more equitable and representative workforce through recruiting, de-
velopment, and retention efforts, holding senior managers accountable for diver-
sity and inclusion priorities, and providing our employees with access to the
skills training they need to advance their careers.
These are new business commitments that will help to drive real change. We have
made solid progress since our announcement late last year and are on track for our
5-year commitment. We have already refinanced over $2 billion in mortgages for
Black and Latinx households and have funded equity investments and loans for con-
struction or rehabilitation of an incremental 5,500 multifamily affordable housing
units. We have funded over $60 million in investments in nine Minority Depository
Institutions, already exceeding our initial 5-year goal.
At the same time, we are building the foundation that will help us grow new rela-
tionships in communities of color to meet our aggressive commitments. We ex-
panded our Homebuyer Grant program to up to $5,500 to help more customers with
97
closing costs and a downpayment when buying a home in more than 6,700 minority
communities nationwide. We opened our first Community Center branch in New
York’s Harlem community, and have replicated that model in minority communities
around the country, including Chicago, Minneapolis, New Orleans, Dallas, and the
Crenshaw neighborhood in Los Angeles, with many more coming in the next year.
We have hired Community Managers, Home Lending Advisors and small business
bankers in these communities, with many more to come.
We have also made other notable announcements in recent months that will ma-
terially and expeditiously contribute to addressing the racial wealth gap:
• Bringing visibility to credit invisibles: We recently announced that we are build-
ing a new utility in partnership with the OCC’s Project REACh that will begin
to address the 50 million Americans who are ‘‘credit invisible’’ and cannot ac-
cess affordable loans. Working with Early Warning Systems and the three cred-
it bureaus, a number of banks will soon pilot the utility that allows lenders to
use deposit data to improve their ability to assess the creditworthiness for cus-
tomers with no credit history or score. We expect a short-term impact on hun-
dreds of thousands of Americans with no credit file, and that is just the begin-
ning of new opportunities for more Americans to access the credit that is essen-
tial to building wealth.
• Investing in midsized entrepreneurs of color: JPMorgan Chase is coinvesting up
to $200 million alongside Ariel Investments to create an entirely new class of
middle market Black and Latinx entrepreneurs that are positioned to scale
their businesses.
• Diverse venture capital funds: We launched a new initiative aimed at providing
capital to funds managed by diverse, emerging asset managers, including mi-
nority-led and women-led venture capital funds and other private funds. Called
‘‘Project Spark’’, we invested an initial $25 million in five funds managed by di-
verse senior executives across JPMorgan Asset Management.
• Supplier diversity: The firm is working to increase business with certified di-
verse businesses. By working to increase diversity within our supply chain, we
are both creating a supply chain that reflects the diversity of our customers and
driving growth in communities where we do business. Our commitment to
spend an additional $750 million on Black and Latinx businesses will fuel this
priority.
• Affordable housing: We recently launched a program to provide our new and ex-
isting multifamily clients an interest rate discount on their loan if they commit
to not increasing rents in a portion of their property. The more affordable the
property, the greater the discount. To date, this program has financed nearly
20,000 multifamily units, and our goal is to finance $10 billion or 100,000 units
over the next 5 years. Additionally, early next month, we look forward to shar-
ing additional steps and a new commitment we are making to promote afford-
able housing and home ownership. We have also begun expanding FHA lending
at a hopeful and measured pace in key markets, and want to continue to ex-
pand, but further FHA reforms—including servicing reforms, employment and
valuation relief, waivers for face-to-face meetings, and addressing appraisal
bias—are still needed.
While our investment commitment is significant, we know there’s more work to
do. We are actively tracking our investments over time to evaluate their impact and
partnering with outside experts to assess our performance and hold our business ac-
countable so we can better understand trends and contributing factors that could
hold us back.
Our Employees
At JPMorgan Chase, we consider our global workforce a competitive advantage,
and our 260,000 employees our greatest strength.
• Increasing wages. We have been increasing starting-salary wages for thousands
of employees. In early 2021, for the third time in the last 5 years, we increased
our internal minimum wage to between $16 and $20 an hour, up from $12 to
$16 in 2017, while providing an annual benefits package worth about $13,000.
Career mobility from entry level roles is also critical, which we promote by of-
fering 300 skills and education programs. Nearly 70 percent of employees who
started at JPMC before 2017 with salary of less than $40k are still at the com-
pany and have experienced an average increase of 40 percent since that time.
• Women at JPMorgan Chase. Globally, women are paid 99 percent of what men
are paid at our firm, considering factors such as role, tenure, seniority, and ge-
98
ography. We conduct periodic reviews of compensation and, for business seg-
ments where women are paid less than expected, we proactively address it
where appropriate. And unlike in other sectors, we did not see increased attri-
tion by women—in fact, this improved in 2020. Women make up nearly half of
the firm’s Operating Committee.
• Improving ethnic diversity. We also know that attracting the best talent can
only be achieved through a dedicated focus on inclusive recruiting and internal
advancement opportunities. We have made progress in this area with programs
such as Advancing Black Pathways, a program focused specifically on increased
hiring, retention, and development of Black talent. In year two of the program,
we are currently at 63 percent of our 5-year goal to hire 4,000 Black students.
Over the past 5 years, we have increased the number of Black professionals in
our most senior ranks, with the number of Black Managing Directors and Exec-
utive Directors up by more than 50 percent. We have more work to do in in-
creasing diversity in our most senior ranks and will be aggressive in pursuing
our goals.
• Transparency in reporting diversity. We believe being transparent about our
workforce data will help drive progress. Since 2010, we have publicly shared
Equal Employment Opportunity Commission information about our workforce
on our website. Starting in 2019, we began publishing global workforce data for
our employees and Board of Directors, with demographics that include the
LGBTQ+ community, veterans, and people with disabilities. Starting this year,
we will publish our consolidated EEOC reports on our public website for the
first time.
• Accountability in executive compensation. We have an equitable and well-gov-
erned approach to compensation, including pay practices that attract and retain
top talent and encourage a shared success culture in support of our business
principles. Our executive compensation program is designed to hold our senior
leaders accountable for long term business performance and, starting last year,
for diversity and inclusion efforts and outcomes. Executives are also held ac-
countable, when appropriate, for meaningful actions and issues that negatively
impact business performance in current or future years. We comply with SEC
rules and disclose our CEO Pay ratio annually in our Proxy Statement.
• Second Chance Initiative. We have also expanded opportunities for individuals
with a criminal background. In 2020, we hired about 2,100 people who have
paid their debt to society—representing roughly 10 percent of all new hires in
the United States. We recently expanded our efforts by enhancing our recruit-
ing strategy, which started in Chicago in collaboration with local community or-
ganizations, into Columbus, Ohio, to build a hiring pipeline in the city.
JPMorgan also joined a group of 29 major employers and national organizations
to launch the Second Chance Business Coalition that will expand opportunities
for more people to reenter the workforce.
Risk Management—How We Do Business
We have unwavering principles that are not just about a fortress balance sheet,
but also about risk management and culture. We must manage over two dozen cap-
ital and liquidity requirements while serving our clients. To do this, we have $202
billion in tangible common equity and $1.43 trillion in liquid assets, both of which
have increased dramatically in recent years. While we are still awaiting the 2021
results, we agree with the Federal Reserve’s conclusion following last year’s stress
tests that ‘‘the banking system has been a source of strength during the past year
and stress test results confirm that large banks could continue to lend to households
and businesses even during a sharply adverse future turn in the economy.’’ Our cap-
ital and liquidity requirements have increased dramatically in recent years, and no-
tably in 2020 when a combination of monetary and fiscal stimulus swelled bank bal-
ance sheets by $10 trillion, largely in low- to no-risk assets. We continued to meet
the borrowing needs of our clients—households, businesses, and municipalities—pro-
viding more than $1 trillion in credit in 2020, despite low loan demand.
We devote specialized attention to compliance with the laws and regulations gov-
erning anti– money laundering and terrorist financing, economic sanctions and
anticorruption efforts. We have robust Know Your Customer and Anti– Money Laun-
dering controls, processes, and technology, with thousands of employees dedicated
to this important function. We applaud the work of Congress to reform AML over-
sight, and believe the AML Act, including a new centralized beneficial ownership
directory and the improved use of artificial intelligence, will improve law enforce-
ment’s ability to identify and stop criminal activity.
99
Cybersecurity is also an incredibly important priority for us, and for America—
a priority I cannot overemphasize. At JPMorgan Chase, we invest over $700 million
annually and dedicate thousands of employees to maintain our defenses and en-
hance our resilience to this ever-increasing threat. But attacks are increasing in
number and sophistication across all sectors, including Government, utilities, tech-
nology companies, electrical grids, and others. This is a serious national security
concern that requires partnership and collaboration to address. To this end, des-
ignated critical infrastructure from Financial Services and the Electricity sectors
have invested significant resources to create a collaborative organization for the
analysis of cyber risk to the financial system. We need the Government to meet us
halfway and provide dedicated national security resources to collaborate with crit-
ical infrastructure companies and defend the national interest from cyberattacks.
Also, as evidenced by the SolarWinds incident, we need appropriate reforms to en-
sure the data that is held by financial regulators is properly secured and that poli-
cies are in place to guide timely and meaningful notification and response to im-
pacted firms when a breach does occur.
Climate change is also one of the defining issues of our time. JPMorgan Chase
first announced its Paris-aligned financing commitment in October 2020, which in-
cludes establishing carbon reduction targets for 2030 for some of the most carbon-
intense sectors. We have created the Center for Carbon Transition to help our cli-
ents invest in lower-carbon solutions, and help them set a path for achieving net-
zero emissions by 2050. We also recently targeted $2.5 trillion over 10 years to ad-
vance long-term solutions that address climate change and contribute to sustainable
development. And we have publicly advocated for market-based, carbon policy solu-
tions, including a price on carbon, and investments in innovative technology to help
companies transition to a cleaner future. The bottom line is this: Abandoning fossil
fuels is not an option right now. Instead, we must work together, across public and
private sectors, in a bipartisan fashion, to manage risk and invest in new solutions
and technologies.
We have robust processes in place and are constantly evaluating with whom we
do business, taking into consideration many factors when we make our decisions.
In line with regulatory expectations, we use risk-based frameworks to determine our
tolerance for a client’s level of legal, credit, or regulatory risk. We serve businesses
that can demonstrate adherence to the law, whatever the industry.
JPMorgan Chase has invested significantly in artificial intelligence and machine
learning capabilities. We already use AI successfully in fraud and risk, marketing,
prospecting, idea generation, operations, trading and other areas, but are still at the
beginning of this journey.
Over the years, when we have faced legal and regulatory issues, we consistently
acknowledged our mistakes, often self-identified them, and improved our controls
where necessary. Where inappropriate behaviors have been identified, either by us
or by our regulators, we have taken action to address them. In the last 2 years,
there have been two regulatory resolutions of legacy issues. One of these matters
related to past misconduct by certain former employees that occurred prior to 2016
relating to market manipulation. Their conduct was unacceptable, and we took ac-
tion, including termination and canceling millions in compensation. We also recently
settled a matter with the OCC related to past deficiencies that were identified in
our internal controls and audit over certain fiduciary activities. By the time the set-
tlement was announced, we had already enhanced our controls to address the defi-
ciencies. Over the years, we have meaningfully improved our control environment
and simplified our business, which the Department of Justice and the OCC noted
in their recent announcements in connection with these resolutions.
Policy Recommendations
America is poised for a strong economic rebound. But we must ensure that the
economic recovery benefits all, and that we address longstanding inequities that
threaten the promise of America. Access to affordable health care, an education sys-
tem failing too many of our children, crumbling infrastructure, climate change, and
racial economic inequality are just some of the problems challenging our great Na-
tion. All of us—Government, business, and civic society—must work with a common
purpose to address these challenges. We must unleash the extraordinary vibrancy
of the American economy.
Economic growth will give us the wherewithal to deal with the issues stemming
from inequality in ways that are sustainable. The actions we take today will deter-
mine the future of our country for generations.
Earlier this year, JPMorgan Chase released a set of data-driven policy rec-
ommendations informed by research from the JPMorgan Chase Institute and the
work of the JPMorgan Chase Policy Center to provide immediate support to those
100
most impacted, as well as longer-term policies to increase the financial health and
stability of households and small businesses. Solutions that address longstanding
racial and economic inequities will require efforts by all of us, including in these
areas:
• Households and the Social Safety Net: There are large racial gaps in take-home
income and liquid assets that persist across age, income, gender, and geog-
raphy. This disproportionately impacts Black and Latinx families who, when
faced with a negative income shock such as job loss, must cut their spending
and consumption more than other groups. To address racial disparities in in-
come and wealth and reduce household financial volatility, we support Federal
policies that boost earnings, improve job-quality, and increase access to good
jobs, as well as reduce expenses that disproportionately burden Black and
Latinx families. This includes increasing the Federal minimum wage; reforming
the Earned Income Tax Credit (EITC) by raising the maximum credit and in-
come limit, extending the credit to childless adults, and eliminating the age cap;
supporting side car savings accounts; ensuring workplace benefits and protec-
tions such as paid sick and family leave are available to as many working
Americans as possible, as well as piloting portable benefits tied to and that
move with the worker regardless of employer; and reducing barriers to employ-
ment for individuals with criminal backgrounds—one in three working-age
adults—to expand economic opportunity to millions of Americans, which is part
of JPMorgan Chase’s Second Chance initiative.
• Small Businesses: Minority- and women-owned small businesses have faced his-
torical barriers to accessing credit, and the COVID–19 pandemic only exacer-
bated it. Although Federal law requires fair lending, many hurdles remain for
both minority and women entrepreneurs. We must better align Federal pro-
grams to meet the needs of the most vulnerable small businesses, enhance ac-
cess to capital for minority and women entrepreneurs, and support an inclusive
economic recovery in communities. This includes increasing resources for the
Small Business Administration (SBA) Microloan program; making permanent
the SBA Community Advantage program; increasing the Department of Treas-
ury’s Community Development Financial Institution Fund to $1 billion with a
set-aside for Black-led CDFIs; and improving Government procurement pro-
grams and policies to provide greater opportunity for underserved small busi-
ness owners to secure Government contracts.
• Affordable Housing: Many Black and Latinx households face a housing afford-
ability crisis. Home ownership rates are lowest for Black families—30 points
lower than for white families. As COVID–19 created more financial instability,
Black and Latinx households are more likely to be cost-burdened than White
households and are at the highest risk for eviction. We must work together to
reform Federal programs to expand affordable housing and home ownership for
underserved communities and provide the support needed to weather economic
uncertainty. This includes considering additional rental assistance funding to
stabilize families facing continued economic hardship; ensuring all homeowners
have access to mortgage forbearance; supporting comprehensive housing re-
forms such as modernizing the Federal Housing Administration (FHA) to in-
crease access to sustainable home ownership; and increasing Federal funding
for affordable housing programs such as Low-Income Housing Tax Credit, Hous-
ing Trust Fund, Emergency Solutions Grants, Community Development Block
Grants, and HOME.
I want to close by thanking our employees for the tireless work, ingenuity, and
singular focus on doing right by our customers. Over the last year, they performed
their jobs with integrity and excellence, often remotely, while also navigating per-
sonal challenges. By working together and focusing on our mission, we proudly
served our customers, communities, and our country through an extraordinary year.
I look forward to working with all of you to solve big challenges and foster healthy
and inclusive economic growth. There will be areas where we disagree, but we all
share a common purpose of creating a more perfect union. We have proven repeat-
edly that when we work together—Government, business, and civic society—we can
solve seemingly intractable problems and ensure we are a country of unlimited op-
portunity for all.
Thank you for your time, and the work you do for our country. I welcome any
questions that you may have.
101
PREPARED STATEMENT OF BRIAN MOYNIHAN
CHAIRMAN AND CHIEF EXECUTIVE OFFICER, BANK OF AMERICA
MAY 26, 2021
Chairman Brown, Ranking Member Toomey, and Members of the Committee:
On behalf of all of us at Bank of America, I am grateful for your consideration
of this written statement, and I look forward to discussing these matters with you
during my appearance before the Committee.
Beginning in 2020, the U.S.—and countries around the world—have faced chal-
lenges without modern precedent caused by a global health and humanitarian crisis.
In response, Bank of America has taken many steps that will be discussed in this
statement to help our clients, the communities we serve—and ultimately the U.S.
economy—through the pandemic-driven economic crisis and recovery. We made ad-
ditional investments to address the needs of our teammates and their families, to
support our communities and to help deliver progress on important issues facing so-
ciety, with a particular focus on racial equality and economic opportunity.
When the crisis hit, we were well-positioned to be a source of strength and sta-
bility. That reflects our decade-plus focus on driving Responsible Growth.
2010–2020: A Decade of Transformation
I assumed the role of CEO on January 1, 2010. Over the past decade, my team-
mates and I have transformed Bank of America into a strong, straightforward, sta-
ble, transparent, and client-centric company.
Our approach to how we run the company is shared and commonly understood
by our team at Bank of America. We call this Responsible Growth, and it has four
straightforward tenets:
1. We must grow in the market;
2. We must grow with a customer focus;
3. We must grow within our risk framework; and
4. And we must grow in a sustainable manner.
I’ll discuss each of these tenets in greater detail later in this statement.
Coming out of the financial crisis, we adopted a straightforward strategy, serving
three groups of customers—people, companies of all sizes, and institutional inves-
tors—through eight lines of business. All of those lines of business operate within
the United States. Outside the United States, we operate those lines of business
serving companies and institutional investors.
We also took significant steps to reduce the scope and complexity of our company,
as envisioned in the Dodd–Frank Wall Street Reform and Consumer Protection Act
(Dodd–Frank). We divested more than $80 billion of noncore activities and busi-
nesses, including private equity holdings, an insurance company, an asset manage-
ment company, equity positions in non-U.S. financial institutions, and businesses
outside the United States that served consumers and retail investors. We consoli-
dated our capital to support the U.S. consumer, small and mid-sized companies, cor-
porate clients and institutional investors we serve.
We also improved our risk management framework, again consistent with the
principles embodied by Dodd–Frank and in alignment with a business model that
emphasizes deepening relationships with core clients.
Another central element of our company’s transformation since the financial crisis
is how we have strengthened our capital and liquidity. Since the end of 2009, we
have increased our tangible common equity 1 from $112 billion to $180 billion. Over
the same period, our average global liquidity sources have increased from $214 bil-
lion to over $1 trillion. Our capital and liquidity levels give us the financial strength
and flexibility to support our clients, regardless of the economic environment.
In addition, we have managed our loan portfolio to a more balanced credit profile,
making it consistent with our risk framework.
As a result of these improvements, the Federal Reserve has modeled Bank of
America’s loan loss rate in its annual Comprehensive Capital Analysis and Review
(CCAR) stress tests to be the lowest among peers in seven of the last 8 years. Bank
of America also had the lowest loan loss rate (6.1 percent) in the additional Decem-
1 Represents a non-GAAP financial measure. Tangible common equity is calculated as com-
mon shareholders’ equity of $249.7 billion and $207.2 billion for the first quarter of 2021 and
the fourth quarter of 2009, which has been reduced by goodwill of $69.0 billion and $86.3 billion
for the first quarter of 2021 and the fourth quarter of 2009 and intangible assets (excluding
mortgage servicing rights) of $2.1 billion and 12.0 billion, net of related deferred tax liabilities
of $0.9 billion and $3.5 billion for the first quarter of 2021 and the fourth quarter of 2009.
102
ber 2020 CCAR stress test, which was prompted by macroeconomic uncertainties
caused by the global pandemic.
Subject to Federal bank regulations, we have remained committed to returning
excess capital to shareholders, absent what is needed to support economic growth,
deliver for customers and communities, reward our teammates through shared suc-
cess, invest in our future and sustain strength and stability. From the beginning
of 2011 through the end of the first quarter of 2021, we returned almost $115 billion
through share repurchases and dividends, and ended that period with $35 billion
in excess capital above our required minimum as well as record liquidity. And while
we have continued to repurchase shares over the past decade, the number of shares
currently outstanding is still nearly double the amount outstanding before the 2008
financial crisis, due to capital raised in the wake of the financial crisis. Table 1 in
the Appendix shows end-of-year capital and leverage ratios as well as capital dis-
tributions over the past 10 years.
Thanks to the efforts of our team to transform the company over the past decade,
and their ongoing focus on Responsible Growth, our company has been well-posi-
tioned to be a source of strength for all of our stakeholders during the health, eco-
nomic, and social crises of the past year.
Delivering for Clients, Teammates, and Communities
Supporting Our Clients When and Where They Needed Us
For over a decade, we have invested heavily in our capabilities to be able to serve
all of our clients where, when and how they choose. That includes investment in
technology; from 2009 to 2011 we doubled our new technology initiative spending
budget to roughly $3 billion and it has remained at that level or higher every year
since then. This strong and consistent level of investment enabled us to rapidly re-
spond to evolving client needs in 2020—and to be there for them when they needed
us most.
Client Support Programs
Our support for clients included far-ranging measures to assist those impacted by
the health and ensuing economic crisis, through our own relief programs and
through Government relief programs.
Client Assistance Program
Through our Client Assistance Program, we helped nearly 2 million consumers
and small businesses defer payments on credit cards, vehicle loans, and home loans
as they managed their finances through the pandemic. Even with a deferral, the
vast majority of those clients remained current on their payments. A small percent-
age have needed extended assistance, and we continue to work with them individ-
ually to help them get back on track. For example, for clients with mortgages origi-
nated by us, we are adding deferred payments to the end of the loan term so they
aren’t making a lump-sum payment up front.
At peak, we deferred roughly $55 billion in client loans through our Client Assist-
ance Program. Today, due in part to Government stimulus efforts, clients are better
positioned to manage through the pandemic and deferrals are less than $7 billion.
Paycheck Protection Program
Beginning in late March 2020, thousands of Bank of America teammates worked
to design, develop, and deliver a digital platform to support clients through the Pay-
check Protection Program (PPP). We began accepting PPP applications the day after
the program details were announced in early April—the first major bank to do so.
And in 2020, we provided PPP loans to more small businesses than any other finan-
cial institution.
To support that work, we dedicated more than 3,000 employees by the first week
of the program to assist small business customers with PPP applications. We did
not prioritize among client applicants when processing or submitting completed ap-
plications to the Small Business Administration (SBA) based on the amount of the
customer’s loan request or any broader client relationship.
To date, we have provided PPP loans to nearly 500,000 small businesses—reflect-
ing more than $35 billion in funding. Of all PPP loans provided to Bank of America
clients, 83 percent have gone to businesses with 10 or fewer employees; nearly 40
percent have gone to businesses in majority–minority communities; and 24 percent
have gone to low- to moderate-income (LMI) communities. We sent millions of
emails to help clients understand the program, and encourage them to apply if eligi-
ble, including targeted outreach to drive awareness in LMI and majority–minority
communities.
We also took immediate measures to implement SBA guidance related to some of
the smallest businesses—sole proprietors, independent contractors and single-mem-
ber LLCs—allowing them to use gross income, instead of net profit, in the PPP ap-
103
plication process and potentially benefit from a higher loan amount. We have pro-
vided PPP loans to more than 10,000 of these small businesses, with an average
loan amount of under $20,000.
Bank of America’s process for the PPP allowed any business client with an exist-
ing credit relationship, or a business client that had no credit relationship with
Bank of America or another bank, to apply online for a PPP loan, because we could
provide financial assistance more quickly to those with whom we already had a rela-
tionship. To assist businesses in underserved communities that weren’t Bank of
America clients, we partnered with dozens of community development financial in-
stitutions (CDFIs) to assist them in providing PPP loans to more than 10,000 small
businesses in the communities they serve.
In August 2020, we launched our digital portal to help clients apply for forgive-
ness on their PPP loan. We have since updated our portal to support the SBA’s sim-
plified application processes. To date we have helped more than 220,000 clients re-
ceive loan forgiveness and we continue to work closely with clients to help them in
the PPP forgiveness process.
We expect to receive fees from our participation in the PPP consistent with the
rules and formulas set forth in applicable laws, and will have a final assessment
of total fees received once all loans have been processed. In 2020, we announced
that any net proceeds related to PPP fees will be dedicated to support small busi-
nesses and the communities and nonprofits we serve.
Stimulus Payments
Since the start of the pandemic, we have supported clients and nonclients through
three Federal stimulus programs as well as two State programs and one local pro-
gram. Through these efforts, we have processed over 43 million stimulus trans-
actions totaling $73 billion.
We took steps to ensure all clients were able to access their funds immediately.
Additionally, we provided overdraft credits to help those with a negative balance on
their account access the full payment amount. If a client had a negative balance on
their account when they received a stimulus payment, we provided a temporary
credit to their account—for at least 30 days—equal to the amount of the negative
balance. Through this expanded support, we have helped more than 1 million clients
access the full amount of their stimulus payment.
To help nonclients access the full amount of their payment, we waived nonclient
check cashing fees for stimulus checks.
We continue to process stimulus payments pursuant to all applicable Federal and
State regulations on garnishments, including Executive orders on garnishments
issued in several States during the pandemic.
Unemployment Insurance
Bank of America has supported 12 State government unemployment agencies (Ar-
izona, California, Iowa, Kansas, Kentucky, Maryland, Massachusetts, Michigan, Ne-
vada, New Jersey, North Carolina, and South Carolina) with the distribution of un-
employment benefits during the pandemic.
Those States have contracted with Bank of America to help distribute unemploy-
ment funds using prepaid debit cards. Since March 1, 2020, we have experienced
a more than six-fold increase in cards issued, compared with the rate of issuance
prior to the pandemic, and loaded over $195 billion in unemployment payments to
more than 24.7 million recipients, with California representing the largest share of
active prepaid cards and aggregate funds.
The delivery of unemployment benefit payments is a collaborative effort between
State agencies and the bank they select to administer the delivery of payments,
with each having different responsibilities. Unemployment claimants submit an ap-
plication for unemployment benefits to the State agency, online, via email, or by
phone. The State agency determines both eligibility and benefit amount, then trans-
mits a file with benefits recipient and payment information to the bank. The bank
creates and mails a card, and loads funds into an account associated with that card.
Once the benefits account is opened, the bank is responsible for routine card serv-
icing issues relating to account access, lost or stolen cards, personal identification
numbers, as well as account transaction claims and disputes. The State agency is
also responsible for addressing ongoing questions regarding benefit recipient eligi-
bility status.
The vast majority of State unemployment funds have been delivered to recipients
as intended during the period of heightened activity brought about by the pandemic.
However, Bank of America and the relevant State agencies have also seen unprece-
dented levels of criminal fraudulent activity in the form of eligibility and identity
fraud. We have faced these challenges in all 12 States, although the scale of fraudu-
lent activity related to California’s program has been uniquely large.
104
A spike in criminal activity occurred in the third quarter of 2020, resulting in
heavy volumes in our call centers and claims departments. In response, we took a
number of actions with authorities in order to reduce fraud, including freezing sus-
picious cards, while also implementing measures to improve the experience for valid
recipients. These steps, in connection with additional measures being taken by
States, have led to a meaningful reduction in fraudulent activity and improved proc-
esses for legitimate recipients. We continue to monitor and adjust our response as
needed to support these important State programs.
Supporting Clients’ Day-to-Day Financial Needs
Our services are essential to our clients and to the economy. Throughout the past
year, our team has redoubled its efforts to support the everyday financial needs of
our clients—in person and through digital channels—in all of the communities we
serve.
Ongoing Support Through Our Financial Centers
From the beginning of the health crisis, we’ve taken additional health and safety
measures within our financial centers to protect our teammates, clients, and com-
munities. That includes implementing enhanced deep cleanings and temperature
checks, and installing more than 44,000 wellness barriers. Like many businesses,
we’ve had to continuously adjust our local operations in response to the spread of
coronavirus, State regulations, and local ordinances.
Through it all, our financial center teammates have been there for our clients—
and our entire company is grateful for their efforts. I will talk more about how we
have supported our teammates in financial centers later in this testimony.
Staying Connected Through Digital Platforms
For more than a decade, we’ve invested heavily to develop a secure, user-friendly
digital platform that supports the full range of client needs. These industry-leading
digital capabilities have allowed us to remain connected to our clients and deliver
essential products and services without interruption during the health crisis.
In 2020, more than 9 billion out of 10 billion total client interactions with Bank
of America came through digital channels. As clients navigated lockdowns and quar-
antines, we saw 84 percent of deposits come through our automated channels (mo-
bile, online, and ATMs), up from 78 percent the prior year. This includes a record
160 million checks—many of them Government stimulus checks—deposited using
our mobile banking app in 2020.
As the health crisis hit, we saw a spike in digital adoption among older clients,
who needed a safe and reliable way to continue banking. As one client shared with
us in the spring of 2020:
I’m a 75-year old senior in New York, currently sheltering in place at home.
I received a few checks that I needed to deposit so I could pay my bills.
I had heard about a way to deposit using my iPhone, so I decided the time
had come to learn how to do it.
At a time when clients’ schedules were pressured, our digital capabilities made
it easier to connect with our teammates for support and guidance. In 2020, clients
used digital tools to arrange a record 2.6 million in-person and virtual appoint-
ments. Our Bank by Appointment capabilities were responsible for more than 20
percent of account sales and service interactions in our financial centers, up from
13 percent in 2019.
The strength of our digital platforms enabled us to be responsive to rapidly chang-
ing needs of our clients during the crisis. For example, Erica, our AI-based financial
assistant located in our mobile app, learned 60,000 new pandemic-related intents—
for example, ‘‘Erica, tell me about coronavirus relief options’’—in a matter of days
to support our clients and connect them with the information and resources they
needed. And our CashPro platform allowed our commercial clients—including those
pivoting to remote work—to continue managing payments and cash flow uninter-
rupted.
Supporting Underserved Communities
We are committed to ensuring everyone has access to the products and services
they need to achieve their financial goals, regardless of where they live and what
they earn.
Throughout 2020, we continued to use our network of financial centers—including
financial centers in LMI communities and our designated community financial cen-
ters, which I describe in greater detail later in this testimony—as well as our digital
capabilities, to support financial needs within underserved communities. To com-
plement these channels and to ensure these communities have access to capital, we
continue to invest heavily in alternative channels of funding, including CDFIs.
105
Bank of America is the Nation’s largest lender to CDFIs, which provide afford-
able, responsible lending, and support to low-income and other disadvantaged cli-
ents and communities. By funding CDFIs, including our support for PPP lending de-
scribed above, we help make it possible for credit to flow to needs we might other-
wise be unable to serve through direct lending.
Currently, we provide $1.8 billion to finance affordable housing, community facili-
ties, and small businesses through 256 CDFIs in all 50 U.S. States and the District
of Columbia. More than $510 million of that total has been focused on small busi-
nesses.
In addition to funding CDFIs directly, Bank of America connects CDFIs with
other sources of flexible capital. For example, Bank of America has facilitated CDFIs
accessing more than $750 million in loan capital under the Federal Reserve’s PPP
Liquidity Facility.
Sustained Outreach and Engagement
Throughout the health crisis, our teams have continued to reach out to clients
across all businesses in order to support their financial needs and help them navi-
gate the current environment.
• We sent tens of millions of emails and placed outbound phone calls to Consumer
& Small Business clients;
• We held thousands of calls, meetings, and broadcasts to actively advise and con-
nect with our Wealth Management clients; and
• We issued guidance and market insight from our BofA Global Research and In-
vestment Insights teams through multiple channels, including virtual investor
conferences.
While each outreach to clients varied in content, the overarching message was al-
ways the same: Bank of America is here to support you.
Taking Care of Our Teammates and Their Families
Our teammates’ health and safety is always our top priority. Since the beginning
of the health crisis, we have taken many broad ranging steps to protect our more
than 200,000 teammates and to support their families.
First, we transitioned about 85 percent of our employees, including any teammate
who identified as high-risk, to work from home. Many high-risk employees have
been redeployed to roles they can perform remotely.
We also expanded many of our benefits and resources, including additional sup-
port for mental health, free virtual medical consultations and no-cost coronavirus
testing. And we delivered face coverings to all employees and contractors to help
them stay safe, in line with guidance of medical experts, health officials, and the
U.S. Centers for Disease Control and Prevention.
As the pandemic hit, we knew our teammates were going to be under pressure
at home. For most of them, their home became their workplace. For our 40,000
teammates with children, home was often also a school or daycare. For many team-
mates with aging parents, home became an assisted living space as well. Our team-
mates needed help. We offered them $100 per day to hire that help and, to date,
we’ve funded more than 4 million days of care. And we continue to expand our
childcare benefit programs to support our teammates with children. Beginning in
July, we will provide childcare reimbursement up to $275 per month, per child, for
U.S. employees earning up to $100,000 in cash compensation.
We took additional actions to support the health of teammates working daily in
our offices, and to recognize their efforts to serve our clients and help the economy
move forward. In our financial centers, we implemented onsite coronavirus testing,
temperature checks, daily health screenings, physical distancing markings, and
wellness barriers to keep teammates and clients safe. And we provided these team-
mates with special compensation programs, including supplemental pay and en-
hanced overtime pay, as well as transportation and meal subsidies.
We expanded our dedicated team of Life Event Services specialists—which was
established in 2014 to assist teammates through disasters and other times of cri-
sis—to provide personalized support to teammates impacted by the coronavirus. And
we continue to offer 24/7 confidential counseling through our Employee Assistance
Program for teammates and their immediate family members.
More than 1 year into this health crisis, we recognize that COVID–19 vaccines
are key to returning to a more normal way of life—for our company and for the
world. We continue to share extensive information and resources, including local tip
sheets, to help our teammates learn more about vaccines and find out where they
can get one. And we are providing all employees up to two half-days of paid time
off to complete vaccination appointments in 2021.
106
Helping Our Communities Move Forward
Last year, as we confronted overlapping crises, we invested heavily to support the
communities in which we work and live and, at the same time, help deliver progress
on important issues impacting us all.
Promoting Local Health and Safety
In response to the health and humanitarian crisis, our teams immediately set to
work providing important resources to our local communities—including those hard-
est hit by the impacts of the coronavirus. We pledged $100 million toward medical
supplies, food security, and other vital support, and an additional $250 million to
CDFIs to provide more companies and not-for-profits access to important capital.
Our support also included the donation of personal protective equipment (PPE) to
communities across the country. To date, we have delivered roughly 29 million face
coverings, more than 5 million gloves and more than 28,000 cases of sanitizer to
communities in need.
In May of 2020, we also launched a $1 billion corporate social bond, the first
issued by a U.S. commercial bank to focus exclusively on fighting the pandemic.
Racial Equality and Economic Opportunity
Last year, we saw intensified passion to address the obstacles to true racial equal-
ity in the United States and around the world. In June of 2020, we accelerated our
longstanding work to promote racial equality and economic opportunity for all
underrepresented groups with a $1 billion, 4-year commitment. We recently ex-
panded that to $1.25 billion over 5 years.
We are delivering our commitment in our local communities through targeted in-
vestments in four key areas: jobs, small businesses, housing, and health care. Since
June 2020, we have already deployed more than $350 million of the money into our
communities, including:
• MDIs and CDFIs—We have completed equity capital investments in 17 minor-
ity depository institutions (MDIs) and CDFIs as part of a $50 million commit-
ment made in 2020. As part of this commitment, we have acquired up to 4.9
percent of common equity in MDIs and CDFI banks facilitating benefits in the
communities that these institutions serve through lending, housing, neighbor-
hood revitalization, and other banking services. These equity investments are
in addition to approximately $100 million in deposits from Bank of America in
MDIs as well as our $1.8 billion CDFI portfolio, discussed earlier in this testi-
mony.
• Private equity funds—We recently increased our target for equity investment
in minority-focused funds to $350 million, and have already committed more
than $250 million to 90 private equity funds across the United States. These
funds provide capital to Black, Hispanic-Latino, Asian, Native American, other
underrepresented minority and women entrepreneurs to help them establish
and grow their businesses. These investments help advance racial equality and
economic opportunity on several levels. The investments we make in the funds
themselves provide capital to underrepresented minority and women investors
who own and manage the funds. These investors, in turn, are helping fund mi-
nority-owned businesses, and we anticipate the private equity funds invest-
ments we have already made will lead to more than 2,000 minority-owned oper-
ating companies getting the investments they need to hire employees, including,
of course, underrepresented minorities and women.
• Higher education institutions—Through our partnerships with 21 historically
Black colleges and universities (HBCU) and Hispanic-serving institutions (HSI),
we have worked to enhance up-skilling and reskilling for Black and Hispanic-
Latino students and create pathways to long-term career success.
• For example, in February, we partnered with the Black Economic Alliance
Foundation, Morehouse College, and Spelman College to launch the Center for
Black Entrepreneurship (CBE), the first-ever academic center of its kind. Our
$10 million anchor funding will support the development of an academic cur-
riculum, faculty recruitment, cocurricular programming, modernization of exist-
ing facilities, and the development of new physical space. The CBE will be lo-
cated on the campuses of Spelman College and Morehouse College in southwest
Atlanta.
In 2020, we also issued an industry-first $2 billion equality progress sustainability
bond designed to advance racial equality, economic opportunity, and environmental
sustainability.
Affordable Housing
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During 2020, we continued to address the affordable housing shortage for individ-
uals, families, students, veterans, the formerly homeless, those with special needs,
and other at-risk groups.
We recently tripled our affordable home ownership commitment to $15 billion by
2025. By providing grants for downpayments and closing costs through this pro-
gram, we aim to help more than 60,000 individuals and families in low- and mod-
erate-income communities purchase homes and, importantly, build wealth through
the power of home ownership. And we have expanded our funding and long standing
partnerships with nonprofits like Neighborhood Assistance Corporation of America
(NACA) for the same reasons.
Additionally, in 2020, we provided a record $5.87 billion in loans, tax credit equity
investments, and other real estate development solutions, and deployed $3.62 billion
in debt commitments and $2.25 billion in investments to help build strong, sustain-
able communities by financing affordable housing and economic development across
the country. Between 2005 and 2020, we financed more than 215,000 affordable
housing units.
In April 2021, we committed $60 million–$30 million in loans and $30 million in
equity financing—to support Enterprise Community Partners’ Equitable Path For-
ward, a 5-year initiative to help facilitate racial equality in housing. The investment
will increase access to capital and career opportunities for diverse leaders devel-
oping multifamily, affordable and supportive housing across the country. Through
this initiative, we will help provide much-needed Low Income Housing Tax Credit
capital and debt financing to directly source, structure and close deals with diverse
developers, especially emerging developers seeking both flexible capital and tech-
nical assistance.
Responsible Growth
Our company’s purpose is to make financial lives better. Responsible Growth is
how we deliver on that purpose. By driving Responsible Growth, we create value
for our shareholders as well as our clients, our teammates, our communities and,
at the same time, help deliver progress on important issues facing society.
Our decade-long focus on Responsible Growth prepared us well for the current
health crisis. It positioned us to continue serving our clients through the worst eco-
nomic shock in recent history, while at the same time increasing investments to
support the needs of our teammates and our communities.
To reiterate what I described at the beginning of my statement, there are four
tenets to Responsible Growth. First, like every business, we must grow to be suc-
cessful. Second, we must grow with a customer focus. Third, we must grow within
our risk framework. Fourth, we must grow in a sustainable manner.
1. Grow in the Market
To be successful, we have to grow in the market—and that growth has to be con-
sistent with our principles and risk framework, and beneficial for our stakeholders.
In 2020, we saw a surge in client activity due to the health crisis. As a result
of our planning and investments over the past decade, and the tireless efforts of our
global team, we were there to support our clients’ evolving needs—including those
consumers and small businesses hardest hit by the impacts of the coronavirus.
We supported our clients with our various customer assistance programs. We sup-
ported small businesses with PPP loans. We supported wealth management clients
with advice, expertise, and execution in volatile markets. We supported commercial
clients with our strong balance sheet: providing more than $70 billion in loans in
a few-week period, and raising $772 billion in capital for clients over the course of
2020. We supported institutional investors by providing market expertise and in-
sights, trading capabilities, and access to help them navigate through the uncer-
tainty.
And we leveraged our digital capabilities to help all of our clients—from retail cli-
ents to CFOs to institutional investors—manage their finances wherever and when-
ever they needed.
All of this, and more, allowed us to continue to serve clients through the pan-
demic, even as volumes surged. We played our part, with our industry colleagues,
in helping ensure economies around the world, and here in the U.S., recover more
quickly. In the end, that is the role of the bank.
Our diverse set of businesses allowed us to respond to and support the financial
needs of all clients, and our results for 2020 reflected the trust clients placed in us
to do so.
In 2020, average deposits at our bank increased 18 percent year-over-year to ap-
proximately $1.6 trillion.
In Consumer Banking, we added $115 billion in average deposits during the year.
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During 2020, we added roughly 22,000 Merrill and 1,800 Private Bank relation-
ships, and ended the year with client balances at all-time highs of $3.3 trillion.
Apart from the role we played as one of the largest PPP lenders, we remained
the largest small business lender in the country overall, ending 2020 with more
than $32 billion in small business loan balances.
We supported our commercial clients in their rush to borrow as they sought li-
quidity in February, March and April of 2020—reaching a high of $585 billion in
commercial loans during the year. As conditions stabilized, we helped provide mar-
ket access for these clients to raise needed and permanent capital.
Through a dynamic market environment, we remained a source of strength and
stability for our clients. And we grew as a result.
Benefits Provided by the U.S. Federal Government
Bank of America benefits from its status as a nationally chartered financial insti-
tution as well as from Government support for, and assistance in, the safeguarding
of our physical and digital security. Prudently enacted fiscal and monetary policy
fosters a strong national economy and the well-being of our population. We are for-
tunate to play a part in a robust U.S. banking system, and our ongoing success as
a business relies on a strong, stable and predictable U.S. regulatory environment
coupled with appropriate and rigorous oversight and supervision.
The U.S. regulatory framework in place prior to the health crisis put Bank of
America and the industry on a strong footing, and we applaud the swift and com-
prehensive actions that Congress, Treasury Department, Federal Reserve and other
U.S. Federal Government agencies took to mitigate the economic impact of the
coronavirus. Those actions—quantitative easing, stimulus programs, financing facili-
ties, and preemptive regulatory relief—combined to ensure the continued health of
our citizens, our markets and our economy. Overall, the Government’s robust re-
sponse bolstered confidence and ensured the health crisis did not evolve into a fi-
nancial one.
Adjustments to U.S. financial regulations in response to the pandemic were sen-
sible given the heightened uncertainty, and would have been even more meaningful
to provide stability to the sector if the financial impacts of the crisis been more se-
vere:
• Temporarily excluding U.S. Treasuries and central bank reserves from the con-
solidated Supplementary Leverage Ratio (SLR) made sense, given the uncertain
amount of bank balance sheet expansion that quantitative easing could have
caused. While that exclusion has now sunset—with no firm having breached its
minimums—it will be important for regulators to revisit that requirement, since
the relationship between low-risk assets and risk assets has changed meaning-
fully since the leverage backstops were calibrated. While the temporary exclu-
sions increased Bank of America’s SLR, as of the first quarter of 2021, our com-
pany’s more binding constraint was the common equity tier 1 capital ratio. Ex-
cluding the temporary relief, our SLR at the end of the first quarter 2021 was
in excess of the minimum 5 percent requirement.
• Allowing an optional extended phase-in of the regulatory capital impact of the
Current Expected Credit Loss (CECL) accounting standard helped ensure cap-
ital was available for customers and markets.
• Permitting banks to offer forbearance to borrowers without causing those loans
to be characterized as troubled debt restructurings helped preserve capital for
those who needed it.
Additionally, the U.S. Federal Government’s relief measures were beneficial to
markets generally, and to consumers including our clients.
• While quantitative and monetary easing pressured our net interest income due
to lower interest rates, we saw high deposit inflows as liquidity flooded into the
system.
• The funding facilities for various types of assets helped stabilize the markets
for those assets (although Bank of America did not need to access these facili-
ties).
• As a major facilitator of PPP lending, discussed earlier in this testimony, we
saw first-hand how PPP loans helped businesses across the country weather the
storm and continue paying their workers.
• Stimulus checks and supplemental unemployment payments helped keep our
clients current on their loan payments, even if temporarily displaced from the
workforce.
Finally, Bank of America’s clients also benefit from protections, such as deposit
insurance, that safeguard depositor assets and increase consumer confidence in the
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banking system. Bank of America pays into the Federal Deposit Insurance Corpora-
tion (FDIC) Deposit Insurance Fund, which is used to protect the depositors of in-
sured banks and to resolve failed banks. We paid approximately $585 million in pre-
miums to the FDIC in 2020, and nearly $13 billion over the past decade.
2. Grow With a Customer Focus
To drive Responsible Growth, we must grow with a customer focus. And by focus-
ing on the needs of our customers and clients in 2020—through the extraordinary
pandemic-related efforts described above and across the full range of our high-touch
and high-tech capabilities—we made a meaningful difference in their lives. How do
we know? In 2020, our client satisfaction scores were the highest in company his-
tory.
Our company has developed over many decades to one which now serves cities
and towns across America. Our nationwide coverage, combined with our industry
leading digital platforms, gives us the scale and breadth to address the individual
financial needs of our roughly 66 million clients—with whom we interact tens of
millions of times each day.
Our Branch Network
Our network of financial centers is an important high-touch way we connect with
our clients, work with them to achieve their financial goals, and support the eco-
nomic well being of our communities.
Today, Bank of America’s nationwide network consists of approximately 4,300 fi-
nancial centers and 17,000 ATMs across 38 States and the District of Columbia.
Over the past two decades, the size and footprint of our network has evolved to help
us more effectively serve clients where they are. In 1999, we had had approximately
4,500 banking centers. Over the following years, the number of financial centers in-
creased during a period of acquisitions to a high of 6,149 at the end of 2007.
Since 2008, we have opened approximately 650 financial centers to help provide
local access to more clients and communities. During this period, we expanded our
physical footprint into 5 new States (Colorado, Minnesota, Ohio, Utah, and Ken-
tucky). And we’ve continued to invest in renovations across our financial center net-
work to help us more effectively support the financial needs of our clients. We com-
pleted more than 1,500 renovations in the past 3 years alone.
We continuously monitor client behavior, including digital engagement and traffic
patterns and make adjustments to our financial center footprint to most effectively
serve them. This includes selectively consolidating financial centers, primarily in
areas in which we have overlapping coverage.
In 2010, we reviewed our branch network and identified a number of locations
that we felt could be better served by more local financial institutions. We sold more
than 350 branches to nearly 30 other financial service institutions. That gave these
local providers the opportunity to strengthen their local networks while preserving
access to those branches for the people they serve.
Supporting LMI Communities. As our network has evolved, we have made signifi-
cant investments in LMI communities to ensure that they have better access to the
full range of high-quality financial services and products that we offer. Since 2008,
the portion of our financial centers in LMI communities has remained steady at ap-
proximately one-third. At the same time, the portion of centers in majority–minority
communities has increased from 33 percent to 36 percent.
All our financial centers are staffed with professionals who can readily assist cli-
ents with any financial need. Each center provides free Wi-Fi for our clients’ conven-
ience, giving them the opportunity to connect to our leading digital and mobile re-
sources and tools. At the same time, 72 percent of our financial centers are multi-
lingual, reflecting the communities we serve.
Seven hundred of our financial centers are designated community financial cen-
ters focused on meeting clients’ and communities’ unique needs by connecting them
to products and services, jobs and capital that will increase financial resilience and
help our local communities thrive. Many community financial centers also include
enhancements such as local art and cultural exhibits prominently featured in the
lobby; kiosks with interactive, self-guided financial education content; and con-
ference rooms where clients can attend Better Money Habits financial education
seminars in English and Spanish. Many clients have appreciated the additional re-
sources and support our community financial centers provide, and client satisfaction
rates in these centers is at an all-time high.
Our efforts to lend, invest and provide services in LMI communities are subject
to the Community Reinvestment Act (CRA) and are currently rated outstanding.
Digital Banking
Complementing our high-touch offerings, our high-tech digital capabilities help us
serve clients when and where they need us. Today, we have more than 40 million
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digital customers. In the first quarter of 2021 alone, these clients made 2.6 billion
digital logins. In the first quarter, approximately 70 percent of Consumer & Small
Business households actively used digital platforms and roughly half of all Con-
sumer Banking sales came through digital channels. Of those clients, 61 percent are
now fully paperless.
Digital is transforming how our clients send and receive money. Our 13.5 million
Zelle active users, including Small Businesses, sent and received 170 million trans-
fers worth $49 billion in the first quarter alone, that’s up 66 percent and 83 percent,
respectively, over 2019 levels.
On the commercial side, our CashPro platform continues to enable businesses and
corporations to efficiently manage their finances from the office, home, or some-
where in between. CashPro sign-ins were up 37 percent in the first quarter of 2021
compared to 1 year earlier.
Our wealth management advisors also used our digital capabilities to support the
needs of our Merrill Lynch and Private Bank clients in a virtual setting. Digital en-
gagement for both businesses hit records highs in the first quarter of 2021.
We deliver a wealth of services through our digital platforms for all customers
and clients, across all lines of business. These benefits are equally accessible and
applicable across all demographics. And we are constantly exploring ways to expand
and interconnect these tools to deliver a more seamless, personalized experience for
each client that spans and supports their entire relationship with us.
Emerging Technologies
Artificial Intelligence. One of the ways we improve the overall client experience
and better serve their financial needs across our platforms is by the thoughtful and
responsible application of artificial intelligence (AI).
In evaluating the potential uses of AI, we first we look at the customer needs and
how our potential AI-driven solution might benefit them and fit into our overall
business process. We treat AI like every other technology: If it can improve the cli-
ent experience, we will consider including it. If it does not, we won’t.
While there are many new applications of AI available today, the building blocks
of this technology—data science, predictive modeling, testing, and training—have
been around for over half-a-century. As with all technologies we use, we have rig-
orous policies and procedures in place for how we develop capabilities using AI.
Importantly, we take measures to ensure we have a diverse team in place to
build, test and refine our AI capabilities. This helps remove the potential bias in
algorithms. Ultimately, we understand that members of our team must be held ac-
countable for the output of our AI. Human oversight is a critical factor in AI suc-
cess.
We do not utilize the type of AI commonly associated with explainability chal-
lenges to decision outcomes for lending or hiring.
One of our most prominent applications of AI is Erica, our AI-based virtual finan-
cial assistant located in our mobile app. More than 20 million of our digital clients
use Erica to do everything from checking their balances to paying their bills, and
99 percent of our clients who engage with Erica are able to find the information
they need without calling a contact center. Additionally, Erica’s personalized,
proactive insights and guidance can help clients manage cash flow and optimize sav-
ings. For example, even if a client has not directly engaged the Erica financial as-
sistant, Erica will reach out to help if a client’s balance is at risk of going below
$0 in the next week, or if a merchant charges them twice.
Erica continues to gain new capabilities and learn new ways to support our cli-
ents. This, in turn, has driven increased client engagement. In the first 3 months
of 2021, clients interacted with Erica 100 million times, whereas it took 18 months
for Erica to reach the first 100 million interactions.
Distributed Ledger Technology and Blockchain. We continue to evaluate applica-
tions of new technologies that have the potential to deliver value to our customer
and clients, including distributed ledger technology (DLT) and blockchain. While
Bank of America holds more than 60 blockchain patents, we still have not found
a use case at scale.
In 2019, we joined the Marco Polo trade finance network that leverages Corda
DLT to provide transformative solutions to global trade participants. Through the
network, we will be able to offer clients access to innovative risk mitigation solu-
tions such as receivables discounting, payment commitment and payables finance
programs, providing them greater transparency and making traditionally paper-
based processes more efficient.
Cryptocurrency. We continue to evaluate the opportunities, risks, and client de-
mand for products and services related to cryptocurrency. Currently, we do not lend
against cryptocurrencies and do not bank companies whose primary business is
cryptocurrency or the facilitation of cryptocurrency trading and investment.
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Data Privacy
Bank of America does not sell personally identifiable customer data to third par-
ties, nor do we allow third parties to conduct research for their own purposes using
personally identifiable customer data that the bank has collected in the normal
course of business. If any of our vendors receive customer data in the course of per-
forming a function for us, Bank of America requires that the vendor meet our pri-
vacy and data protection standards and that the data be protected by the bank’s
strict information security controls. No further use of that data can be made without
Bank of America’s express approval.
Consumer-Focused Products and Services
Early in the financial crisis, it became clear to us that customers in all income
groups wanted clarity, consistency, transparency, and simplicity in their financial
products and services. As part of our transformation over the past decade, we’ve em-
bedded these principles into our existing portfolio of products and services.
For example, we have cut the number of credit cards we offer from 25 to 6 today,
and condensed 22 checking accounts into 1 operating account.
We also continue to add to our series of fair and affordable banking solutions to
help clients budget, save, spend, and borrow with confidence as well as attract the
unbanked into the mainstream of available financial services.
In 2020, we added Balance Assist, a short-term, low-cost, and digital-only lending
solution. An alternative to payday lenders, Balance Assist allows clients to borrow
up to $500 (in $100 increments) for a $5 flat fee, regardless of the amount advanced
to their account. Clients repay the loan in three equal monthly installments over
a 90-day period.
In 2014, we introduced Advantage SafeBalance Banking, a full-featured bank ac-
count with no overdraft or nonsufficient fund fees. The low monthly fees for the ac-
count are waived for students under 24 and members of our Preferred Rewards pro-
gram. Today, about 2.5 million clients use SafeBalance accounts to manage their ev-
eryday finances.
For clients who want to establish, strengthen, or rebuild their credit, we offer
Bank of America Secured Card. Clients can apply for an account with a security de-
posit of $300. With responsible credit behavior, clients can improve their credit score
and, over time, may qualify for credit without the security deposit. More than
830,000 households currently use a Bank of America Secured credit card.
Our digital platforms help us deliver these products and services to our clients,
and extend our reach further into our communities. Today, 64 percent of under-
served clients use our mobile app to actively manage their accounts as well as to
access information and resources to help them achieve their financial goals.
In September 2020, we launched LifePlan, which gives clients the power to select
what’s most important to them, selecting from items like ‘‘improve credit,’’ ‘‘pay off
student loans,’’ and ‘‘budget and start saving.’’ Clients then receive personalized in-
sights to help them achieve their goals, through both high-tech and high-touch
interactions. By the end of the first quarter of 2021, our clients had created more
than 3 million plans, one of the fastest product rollouts in our history.
In 2013, we launched Better Money Habits, a free financial education program
that helps people build financial know-how, with tools and resources in English and
Spanish. For Bank of America customers, the platform is embedded in our online
and mobile offerings—including LifePlan—and is enhanced by our Spending and
Budgeting Tool, which puts timely information at clients’ fingertips to help them im-
prove their financial outcomes. Last year, consumers accessed financial education
information on the Better Money Habits website 7 million times, reflecting a 12 per-
cent year-over-year increase in traffic to our English site and a 133 percent increase
in traffic to our Spanish site.
The impact of Better Money Habits has been significant. Among clients who use
both Better Money Habits and our Spending and Budgeting Tool, about one in four
grew savings by 20 percent or more, while about one in three grew their checking
balance by 20 percent or more.
Mandatory Arbitration. Bank of America avoids relying on mandatory arbitration
clauses in nearly all cases. Since 2009, Bank of America has not used mandatory
arbitration in banking disputes with individual customers regarding consumer cred-
it cards; auto, recreational vehicle and marine loans; and deposit accounts. Bank of
America eliminated mandatory arbitration in its mortgage and home equity agree-
ments several years before that, other than in a limited number of jurisdictions,
where we have customized loan agreements with high net worth borrowers that con-
tain mandatory arbitration provisions.
Bank of America, along with other securities industry firms, also uses arbitration
clauses in our client agreements when establishing a brokerage or investment advi-
sory account relationship. FINRA provides the forum and sets the rules for these
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arbitrations, subject to oversight and approval of the Securities and Exchange Com-
mission.
Additionally, Bank of America does not include mandatory arbitration clauses in
our offer letters to employees and thus, employees we hire are not required to arbi-
trate discrimination and harassment claims (though employees registered with
FINRA are required to arbitrate nondiscrimination employment claims as result of
industry requirements and we have a mutual arbitration clause with a managed
service provider for contract employees).
Supporting Small Businesses
Small businesses are the backbone of the U.S. economy and key to the economic
well being of our communities. Bank of America serves 13 million business owner
clients nationwide who rely on us for their financial needs, both business and per-
sonal. More than 3 million of those business owners have their business banking
relationship with us, and our team of more than 2,000 dedicated small business
bankers work within our communities to help address their everyday needs.
According to the FDIC, Bank of America maintained its position as the Nation’s
top small business lender at the end of 2020, with $50.3 billion in total outstanding
small business loans (defined as business loans in original amounts of $1 million
and under).
The success of the small businesses we serve helps support the well being of their
communities through economic growth, development and job creation. Currently, 60
percent of our small business lending is to LMI clients or communities. Approxi-
mately 40 percent of our small business clients are women and 13 percent of our
small business clients are Hispanic, in-line with the nationwide averages for small
business ownership. We serve over 1 million Hispanic business owners, making us
a market share leader according to Deloitte.
Capital Markets Activity
Our capital markets businesses include Global Banking and Global Markets.
Global Banking, which includes Global Corporate Banking, Global Commercial
Banking, Business Banking and Global Investment Banking, serves middle-market
and large corporate clients. We help clients raise capital and hedge risks. When
markets are volatile and clients are trying to manage their business, they turn to
us for help. When markets are stable and there is less client activity or volatility,
our revenues may be lower.
In 2020, we were the number three investment banking firm in the world with
total investment banking fees of $7.2 billion, up 27 percent from the prior year pri-
marily driven by higher equity issuance and underwriting fees as we provided cli-
ents access to markets.
Our Global Markets business offers sales and trading services and research serv-
ices to institutional clients across fixed-income, credit, currency, commodity, and eq-
uity businesses. Global Markets’ product coverage includes securities and derivative
products in both the primary and secondary markets.
Since the financial crisis, we have positioned this business to deliver steady and
sustainable returns across the range of market conditions, while taking less risk.
Over the years, our performance bears that out. Over the past 5 years and with all
of the volatility in markets and trading activities during that period, Global Markets
has delivered annual sales and trading revenue within a range of $12.9 billion and
$15.2 billion. The average over that period was $13.6 billion. This relative stability
reflects our leadership positions across multiple products and our ability to maintain
the appropriate business mix during market shifts.
Our Global Markets business generated a 22 percent return on capital in the first
quarter of 2021. This helped offset other segments that were more negatively im-
pacted by the health crisis, reflecting the value of our diverse and complementary
lines of business.
Our goal for our Global Markets business is to be large enough to serve customers
and clients in every major market around the world but not so large, risky, or vola-
tile as to ever—even in the worst of times—hamper our ability to serve all our cus-
tomers across every line of business.
Through our focus on Responsible Growth, we manage our Global Markets busi-
ness through a well-established risk framework and oversight. This naturally limits
activities that are highly leveraged and concentrated. As one example of the impact
of these strategies, Bank of America did not have any exposure to recent events in-
volving Archegos Capital Management.
3. Grow Within Our Risk Framework
Growing within our established risk framework is integral to how we drive Re-
sponsible Growth. Our principled approach to risk management allowed us to con-
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tinue supporting our customers and clients against the backdrop of one of the worst
economic declines in U.S. history, driven by the global pandemic.
Our risk management begins with the board of directors. The directors set the
risk appetite for the company. That cascades through the company and defines the
risk we take in credit risk, operational risk, trading, or otherwise. The Enterprise
Risk Committee of the board reviews dashboards quarterly to review compliance
with the risk appetite.
The risk function is an independent control function that is outside the lines of
business hierarchies. The 7,000-plus teammates in the Risk & Compliance group re-
port to the Chief Risk Officer, who has a reporting relationship to the Chief Execu-
tive Officer and to the Enterprise Risk Committee of the board. Other control func-
tions, also outside the lines of business and reporting to the CEO, include the 1,100
person audit team that reports to the Chief Auditor (who reports to the Audit Com-
mittee of the board), the Chief Financial Officer, the head of Global Human Re-
sources, the Global General Counsel, and the Chief Technology and Operations Offi-
cer.
We drive a culture of compliance and risk management deep into our company.
To ensure that all employees across all levels are managing risk effectively, we con-
duct educational sessions and mandatory training on key risk types facing our com-
pany, including strategic risk, credit risk, market risk, liquidity risk, operational
risk, compliance risk, and reputational risk. We also sustain an open environment
in which employees are encouraged to identify, escalate, and debate potential issues.
As a global systemically important bank, Bank of America’s business operations,
resiliency and financial strength have the potential to both bolster and affect the
stability of the financial system and the economy as whole, as the current health
crisis demonstrated. Managing systemic risk is a priority for Bank of America, as
it is for our regulators. It important to both external stakeholders and the com-
pany’s core business strategy. To avoid passing these risks onto the Government
and taxpayers, Bank of America maintains billions of dollars in additional capital;
plans extensively for the possibility of economic, financial or market stress; and ex-
pends substantial resources to meet heightened supervisory expectations for risk
governance. As our balance sheet and external testing reflects, we are much strong-
er than we were 10 years ago, having transformed the company in the wake of the
financial crisis: We reduced scope and complexity, improved risk management, and
are fully committed to growing responsibly.
Cybersecurity
Cyberthreats are evolving and pervasive, and we continue to invest heavily in our
cybersecurity capabilities to protect our clients and our company. That begins with
the strength of our team, and over the past decade, we have doubled the size of our
Global Information Security (GIS) team to nearly 3,000 teammates.
Our cybersecurity framework is designed to prepare, prevent, detect, mitigate, re-
spond to, and recover from cyberthreats. We maintain strong, ongoing relationships
with Government partners, including the Department of Homeland Security, the De-
partment of the Treasury, law enforcement, and the intelligence community. Coordi-
nation within our industry and across other industries is also critical to mitigating
and managing today’s cyber challenges. We continue to invest in partnerships to
build a trusted community for cyberthreat information sharing, and are leading ef-
forts across the financial services industry to define resilience and recovery in to-
day’s marketplace.
We helped drive the creation of the first financial sector organization focused spe-
cifically on systemic risk and analysis, the Analysis and Resilience Center for Sys-
temic Risk (ARC, formerly the Financial Systemic Analysis & Resilience Center).
We hold or have held leadership/board positions in financial sector organizations
working to improve the security and resilience of the sector. These include the ARC,
FS–ISAC, FSSCC, and Sheltered Harbor.
We also participate in industrywide exercises, along with Government partners,
to test the resilience of our crisis management plans and response to threats and
incidents. We are leveraging our leadership role to help ensure that the financial
sector is truly resilient. We are also working with partners in the electricity and
communications sectors on these topics, given our mutual dependencies with them.
Compliance Commitment
Since 2019, Bank of America has continued to take steps to improve compliance
and prevent violations of laws and regulations. We have made important progress,
and our work continues. Based on readily accessible public information, we entered
into three settlements with Government regulators valued at greater than $1 mil-
lion since the last hearing: (1) in June 2019 Merrill Lynch Commodities Inc. agreed
to pay $36.5 million to the U.S. Department of Justice and the Commodity Futures
Trading Commission to resolve allegations that former precious metals traders mis-
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led the market for precious metals futures contracts; (2) in September 2019, Bank
of America agreed to pay $4.2 million in back wages and interest to resolve allega-
tions of hiring discrimination violations between 2008 and 2013 at six branches, as
identified by the U.S. Department of Labor’s Office of Federal Contract Compliance
Programs; and (3) in December 2020, Merrill Lynch paid $2 million to the New
Hampshire Bureau of Securities Regulation, and $24.3 million to an affected inves-
tor to resolve claims of unauthorized and excessive trading by a former financial ad-
visor. To the extent a settlement included restitution to investors or consumers, the
relevant terms are set forth in the respective settlement agreement. Two Foreign
Exchange Consent Orders, one issued by the Office of the Comptroller of the Cur-
rency (OCC) and one by the Federal Reserve Board (FRB), were terminated in April
and December of 2019, respectively.
4. Grow in a Sustainable Manner
To drive Responsible Growth, we must ensure that our growth is sustainable.
There are three complementary and interdependent tenets to how we approach sus-
tainable growth: driving operational excellence, being a great place for teammates
to work and sharing our success with our communities.
Driving Operational Excellence
Operational excellence is key to ensuring our growth is sustainable and instru-
mental to our success. It describes the ways in which we drive continuous improve-
ment, reduce operational risk and seek to find faster, simpler, and more efficient
ways of working and serving our clients. We then reinvest savings back into our
team, our capabilities, our client experience, our communities and our shareholders.
In 2015, we had $57 billion in expenses. In 2020, we had $55 billion, including
roughly $1.5 billion in net coronavirus-related costs. Compared with 2015, we have
more customers and clients and more transactions—so more work. Yet compared
with 2015, costs are down and client satisfaction is up. And over the same period,
we invested about $18 billion in technology initiatives, provided companywide sup-
plemental bonuses, increased our minimum hourly rate of pay for U.S. employees,
opened 300 financial centers and refurbished 2,000 more. That’s the power of oper-
ational excellence.
This work is fueled by the ingenuity and creativity of our teammates, who con-
tinuously look for ways we can do things better. In total, we’ve approved nearly
8,600 of their ideas, which commit to delivering billions in expense savings. In 2020
alone, our team generated more than 1,700 ideas that helped us define commit-
ments to save nearly $1 billion.
Being a Great Place To Work
Attracting and retaining the best talent is key to driving Responsible Growth and
one of our top priorities. It helps us manage our operations, provide the best service
for our clients, and support our communities.
We strive to make Bank of America a great place to work for all teammates. And
we fulfill this commitment by being a diverse and inclusive workplace, attracting
and developing talent, recognizing and rewarding performance and supporting team-
mates’ physical, emotional, and financial wellness. For additional information on
these topics, including detailed metrics on workforce diversity, please see our 2020
Human Capital Management Report, which is included with this testimony.
In 2020, one of the most important ways we made our company a great place to
work was by supporting the health and safety of our teammates during the health
crisis, described earlier in this testimony.
Diversity and Inclusion. Another way we make our company a great place to work
is by fostering a diverse and inclusive workplace. We want our workforce to reflect
the communities we serve across all dimensions. As highlighted in our 2020 Human
Capital Management Report, we have continued to make progress in our goal to en-
sure diverse representation at all levels of our company. That begins with our board,
which is 50 percent diverse and one of only a handful of S&P 100 boards with six
or more women. Looking across our company, 50 percent of our management team
is diverse, more than half of our global workforce is women, and 45 percent of our
U.S.-based teammates are people of color. And over the past decade, the number of
people of color we hire in the U.S. from universities has increased by 50 percent.
In 2018, we made a 5-year commitment to hire and train 10,000 employees from
LMI communities through our Pathways program, a program designed to provide
the opportunity for long-term careers. To date, we’ve already hired more than
11,000 teammates through the program—well ahead of our commitment to do so by
2023.
We also surpassed our 5-year pledge in 2014 to hire 10,000 veterans, National
Guard and reservists, and continue to maintain that hiring momentum today by at-
tracting, developing, and retaining military talent.
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At the same time, we are focused on creating a culture of inclusion in which every
employee can be their best. We currently have 11 Employee Networks with over 340
local chapters across the globe. More than 90,000 of our teammates participate in
at least one network, and our participation rate grew from 38.2 percent in 2019 to
42.7 percent in 2020. Additionally, our Courageous Conversations series helps us
break down barriers, while driving greater accountability and action. Last year, we
reached more than 165,000 employees through conversations with civil rights, social
justice, and inclusion leaders focused on racial, social, and economic injustices.
A Diverse and Inclusive Supply Chain. In addition to our focus on workplace di-
versity, we recognize the value of having and promoting diversity in our supply
chain, and actively seek to do business with certified diverse businesses either di-
rectly or indirectly through our Supplier Diversity Program. Examples of diverse
vendors include companies owned by minorities, individuals with disabilities, vet-
erans, women, and lesbian, gay, bi-sexual, or transgender individuals. We also en-
courage supplier diversity by mentoring and developing certified diverse-owned busi-
nesses so that they can become qualified to provide products and services that meet
our requirements.
As part of our vendor Code of Conduct, we expect vendors to actively promote a
diverse and inclusive environment through specific programs and initiatives to re-
cruit, develop, and retain diverse talent of all types. We also expect vendors to
measure and report on the success of their workplace diversity programs and initia-
tives. Additionally, we expect our vendors to have policies and procedures to drive,
and report on, inclusion of certified diverse owned businesses in their own supply
chains.
We have taken additional steps to promote diversity and inclusion in the policies
and practices of those with whom we do business, and throughout the broader econ-
omy. For example, our Chief Investment Office (CIO) has introduced initiatives to
promote the representation of women and people of color among asset managers on
our wealth management platform and across the industry. The CIO is now incor-
porating diversity analysis into the review and selection of all existing and new
asset managers who are available to Merrill and Bank of America Private Bank cli-
ents.
In 2020, the CIO Due Diligence team enhanced its investment process to evaluate
all asset managers’ policies and practices on diversity and inclusion at both their
organizational and investment team levels. Going forward, this analysis will be used
in the CIO team’s overall investment assessments and factor into their level of con-
viction in investment strategies. In addition, this team will collaborate with asset
managers and industry groups who are focused on developing investment solutions
that serve to (1) aggregate and direct capital to diverse managers, and (2) provide
capital to diverse-owned businesses and populations as part of their underlying in-
vestment mandates.
Competitive Wages and Benefits. We want teammates who are invested in our
company and our clients, and want to enjoy long careers with Bank of America.
To do so, we provide competitive starting wage and benefits, and then continue
to invest in our teams over time. This includes a progressive compensation model.
Each year, teammates with lower salaries, on average, receive higher compensation
increases as a percentage of salary when compared to employees with higher sala-
ries, with the highest increases going to those teammates earning less than $50,000.
You can see our average compensation growth rates broken down by salary in Chart
1 in the Appendix. This illustrates, for example, how a teammate who joined our
company in 2010 at a salary below $50,000 has, on average, seen a 7 percent in-
crease in his/her comp each year since.
In 2020, we moved our minimum hourly rate of pay for U.S. teammates to $20—
roughly $42,000 per year—one year earlier than planned. And we recently com-
mitted to raising our U.S. minimum hourly wage to $25 by 2025. Additionally, for
teammates earning lower salaries, we provide higher company subsidies for medical
premiums. For the tenth consecutive year, in 2022 there will be no increase in med-
ical premiums for teammates earning less than $50,000.
The employees of our vendors are also integral to our ability to serve and deliver
for our customers. We have been working with vendors to ensure all of their employ-
ees within the U.S. who are working exclusively on our account receive competitive
wages. All of our U.S. vendors are now required to pay their employees dedicated
to the bank at or above $15 per hour. Today, over 99 percent of our more than 2,000
U.S. vendor firms and 43,000 vendor employees are at or above the $15 per hour
rate, as a result of the implementation of this policy.
We offer ongoing training and resources to support our teammates’ continuous de-
velopment. That includes providing up to $7,500 (up to $5,250 tax-free) tuition reim-
bursement per year for eligible undergraduate or graduate courses and discounts at
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a number of universities—plus free, unlimited individual academic advisory serv-
ices. These resources help our teammates grow and thrive within our organization
and, in 2020 alone, we helped more than 18,000 employees find new roles within
the company.
The many steps we took in 2020 to support our teammates helped them individ-
ually, and contributed to an even stronger company culture. In the most recent com-
panywide survey, our employee engagement scores were at an all-time high. At the
same time, by increasing our support for our teammates, we enabled them to better
serve our clients and deliver for our communities.
Compensation Policies. At Bank of America, we are committed to ensuring that
all employees are compensated equitably and competitively based on market rates
for their roles and their job performance. We regularly benchmark compensation
against other companies, both within and outside our industry, to ensure that our
pay is competitive with comparable roles in the market.
This commitment to fair compensation has benefited all our employees, regardless
of their position in the company. That includes our move to a minimum hourly rate
of pay for U.S. teammates of $20, as described above, and our planned move to $25
per hour by 2025.
For our senior-level employees, we have developed a strong pay-for-performance
governance framework that rewards long-term, sustainable results that are aligned
with stockholder interests. And, for 2020, we recognized approximately 97 percent
of our teammates globally with special compensation awards—the fourth year in a
row we’ve done so.
Consistent with the principles embedded in Dodd–Frank, including a requirement
for an annual shareholder ‘‘Say on Pay’’ vote, the company’s CEO is compensated
through base salary, cash-settled restricted stock units, performance-restricted stock
units and time-based restricted stock units. From 2013 to 2020, CEO base salary
was $1.5 million, while from 2010 to 2012 base salary was $950,000. The vast ma-
jority of CEO compensation (93.9 percent in 2020) was variable and directly linked
to company performance. As has been the case since 2010, all variable compensation
was awarded in equity-based awards. Each year, the CEO pay structure is put be-
fore shareholders for an advisory Say on Pay vote. In our most recent annual share-
holder meeting (2021), 94.4 percent of the 6.4 billion votes cast voted in favor of the
structure. Since 2011, the shareholder vote in support of the company’s compensa-
tion plan has averaged 94.2 percent.
The CEO’s direct reports receive a portion of their total compensation as base sal-
ary and the remainder as variable pay—a majority of which is delivered as deferred
equity-based awards. Finally, the Board of Directors’ Compensation and Human
Capital Committee oversees all compensation plans and practices with periodic
input from the Chief Risk Officer. Additionally, compensation plans are reviewed
and certified annually by our risk management team and Management Compensa-
tion Committee of which the Chief Risk Officer is a member, and all variable pay
awards are subject to clawback policies.
In 2009, we made equity-based awards to executive officers and other key risk-
takers subject to a performance-based clawback to encourage sustainable profit-
ability over the vesting period. If losses occur during the vesting period, awards may
be canceled in whole or in part. Also beginning in 2009, equity awards have been
subject to a detrimental conduct clawback to encourage compliance with policies and
appropriate behaviors. If an executive officer engages in detrimental conduct,
unvested awards can be canceled and previously vested awards can be recouped. An
additional recoupment policy, instituted in 2007, permits the Board to require reim-
bursement of any incentive compensation paid to an executive officer whose fraud
or intentional misconduct caused the company to restate its financial statements.
Our Corporate Governance Guidelines require the CEO to hold at least 500,000
shares of common stock, and for executive officers other than the CEO to hold at
least 300,000 shares of our common stock. The Guidelines also require that (i) our
CEO retain at least 50 percent of the net after-tax shares from future equity awards
until 1 year after retirement and (ii) our other executive officers retain at least 50
percent of the net after-tax shares until retirement. This ensures that executive offi-
cers have a significant and long-term financial stake in the company.
Furthermore, since 2011, certain executive officers have received a portion of their
incentive compensation in the form of performance restricted stock units (PRSUs).
Our performance-based awards continue to use a re-earn approach, meaning 100
percent of the award is the maximum that can be earned, and vest only if perform-
ance standards are met over a 3-year period. Future performance below these stand-
ards will decrease the amount paid, and no PRSUs will be re-earned if results are
below the minimum standards. As has been consistent practice, the Committee does
not exercise discretion to change payouts.
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In 2016, our Incentive Compensation Forfeiture & Recoupment Disclosure Policy
became effective. Pursuant to this Policy, we will disclose publicly the incentive for-
feitures or clawbacks recovered from certain senior executives in the aggregate pur-
suant to our Detrimental Conduct and Incentive Compensation Recoupment policies,
subject to certain privacy, privilege, and regulatory limitations.
Bank of America is committed to equal pay for equal work through our pay-for-
performance philosophy. We maintain robust policies and practices that reinforce
equal pay for equal work, including reviews with oversight from our Board and sen-
ior leaders. We have a standard U.S. practice that restricts the solicitation of com-
pensation information from candidates during our hiring process. This helps ensure
that we consider new hires for their individual qualifications and roles, rather than
how they may have been previously compensated. For over 15 years, we have con-
ducted rigorous analysis with outside experts to examine individual employee pay
before year-end compensation decisions are finalized, and we adjust compensation
where appropriate. Results of our most recent review of employee compensation at
Bank of America showed that compensation received by women is on average great-
er than 99 percent of that received by men, and compensation received by people
of color is on average greater than 99 percent of non– people of color teammates,
as validated by third-party analysis.
In 2020, the CEO to median employee pay ratio was 274:1.
Our compensation policies reflect the principles and requirements of Dodd–Frank.
Transparent, equitable, competitive compensation is central to being a great place
to work, which, in turn, is a fundamental element of Responsible Growth.
Sharing Our Success With Our Communities
One of the ways we ensure our growth is sustainable is by sharing our success
with the communities in which we work and live and, at the same time, doing our
part to deliver progress against society’s biggest challenges. Last year, we signifi-
cantly increased investments to do both.
Our support for our communities begins with $250 million in annual corporate
philanthropy. In 2020, as discussed previously, we added another $100 million to
increase access to food and medical supplies. Individual giving by my teammates,
combined with matching gifts from Bank of America, amounted to more than $65
million in additional philanthropic support in 2020. To maximize the impact of each
employee gift, we lowered the employee matching gift minimum to $1 and doubled
our match for employee donations to 17 organizations whose work aligns to our com-
mitment to racial equality and economic opportunity, through 2020.
Beyond corporate philanthropy, as important as that is, we commit all of our re-
sources and capabilities to help create positive change. We commit our operations,
our human resources practices, our client financing capabilities and the guidance we
provide to investor clients. We bring our $2.8 trillion balance sheet, our $55 billion
expense base and the trillions of dollars we raise each year for our clients to the
task. And we leverage the considerable ingenuity, innovation, and passion of our
team.
Our work to promote racial equality and economic opportunity, discussed earlier
in this testimony, demonstrates how we align all of our resources to help drive tan-
gible progress on major societal issues—and we take a similar approach in address-
ing the issue of climate change.
The Path to a Low-Carbon, Sustainable Economy. We are committed to achieving
net zero greenhouse gas emissions in our financing activities, operations, and supply
chain before 2050. This is a focus that began many years ago at Bank of America.
To accelerate the transition to a low-carbon, sustainable economy, we aim to deploy
and mobilize $1 trillion by 2030 through our recently expanded Environmental Busi-
ness Initiative to help our clients make a just transition. This opportunity is made
possible by commitments that clients themselves are making, and our ability to help
finance their commitments. This is part of a broader $1.5 trillion sustainable finance
goal aligned to addressing the United Nation’s Sustainable Development Goals
(SDGs).
To achieve our environmental targets and drive progress on this important issue,
we take a ‘‘whole of bank’’ approach.
First, we drive environmental sustainability in our own operations. We are carbon
neutral today and continuously look for opportunities to reduce emissions across our
global footprint.
Second, we provide financing and our team’s wealth of expertise to help small-
and medium-sized companies refit their own operations to become more sustainable.
Third, we help our larger corporate clients raise capital to fund the restructuring
of their operations, new facilities and clean energy. That includes helping fossil fuel
companies—and others with business activities related to ‘‘brown energy’’—make
their own transition. We are a top underwriter in Environmental, Social and Gov-
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ernance (ESG) capital markets globally and a leading underwriter of green bonds.
We have supported the sustainable business needs of more than 225 clients by rais-
ing in excess of $300 billion through more than 400 ESG-themed bond offerings—
including green, social and sustainability bonds. We also raise equity for innovative
new companies to fund their technologies and growth.
Fourth, our Global Research team helps show investors the path toward compa-
nies that prioritize sustainability and other ESG priorities in their operations, sup-
porting the flow of capital to those companies driving progress. And through our in-
vestment platform of over $3 trillion in customer assets, we bring capital from indi-
vidual investors, from whom demand for ESG funds or similar investments is grow-
ing.
All of these steps will help society’s transition to a low-carbon economy, and we
firmly believe the private sector is key to driving that transition. As more and our
more of our customers and clients make their own environmental commitments, we
are committed to helping them make this important change.
Driving Profits and Purpose. The principles of stakeholder capitalism—a concept
created by the World Economic Forum (WEF) half-a-century ago, and discussed
anew today by groups like the U.S. Business Roundtable—are embedded in Respon-
sible Growth. We must deliver for our shareholders, our clients, our teammates, our
communities and, at the same time, help deliver progress on important issues facing
society. More details about our company’s commitment to the principles of stake-
holder capitalism are available in my 2020 Letter to Shareholders, which is included
with this testimony.
As a financial institution, our success has always been tied to the success of the
communities and markets we serve. And we know from our own research that com-
panies that focus on ESG issues tend to perform better over time than companies
that do not. Our commitments to society’s priorities are therefore complementary to
the commitments we have to our shareholders.
We know what society’s priorities are: The countries of the world identified them
in 2015, when nearly 200 countries agreed to the SDGs. The SDGs reflect 17 cat-
egories of societal priorities that address equality of opportunity, affordable housing,
prosperity, access to clean water, renewable energy, and other priorities, with spe-
cific goals to be met. Leaders in each country agreed these goals are the ones we
need to address to build a sustainable future and create opportunity and prosperity
for all.
Last year, the WEF’s International Business Council, which I have the privilege
to chair—working with the accounting firms Deloitte, EY, KPMG, and PwC—devel-
oped a set of Stakeholder Capitalism Metrics (SCM) aligned to the SDGs. These
metrics create a consistent way of measuring companies’ long-term value, across in-
dustries. This, in turn, helps direct investment toward high performers and align
capital to progress on the SDG and ultimately defines stakeholder capitalism. It also
aligns capitalism’s innovation, its entrepreneurship and its massive resources to the
progress, which won’t be made without the private sector.
To date, nearly 80 global corporations have agreed to implement reporting on the
SCMs. Bank of America is one of those companies, and we published select SCMs
in our 2020 Annual Report for the first time. We believe disclosing our progress
against the SDGs creates public transparency and accountability in how we deliver
for society.
We embrace our dual responsibility to drive both profits and purpose.
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PREPARED STATEMENT OF JAMES P. GORMAN
CHAIRMAN AND CHIEF EXECUTIVE OFFICER, MORGAN STANLEY
MAY 26, 2021
Chairman Brown and Members of the Committee, thank you for having me here.
Last year, none of us could have predicted the extraordinary public health crisis
that would unfold around the world.
We remain in the midst of this crisis that has caused serious humanitarian and
economic issues, leaving an indelible mark on many of us. Our hearts go out to all
of those directly and indirectly impacted by this crisis.
In response to these extraordinary and challenging times, we were focused on
serving our clients and our communities, and taking care of our employees.
• We helped our corporate and institutional clients raise additional liquidity and
obtain financing. We raised over $50 billion of capital for the industry sectors
most affected—airline, cruise, and travel. Our team also helped raise health
care capital for both Moderna and Pfizer, including a sustainable bond issuance
by Pfizer to support patient access to medicines and vaccines, especially among
underserved populations.
• For our retail clients, we guided them to manage their investment portfolios
amidst extreme volatility.
Today’s Morgan Stanley, through its three businesses, provides a stable founda-
tion of support in any market environment.
• In our Institutional business, we are a financial advisor to companies and help
them raise equity and debt capital—from taking a company public to helping
it issue bonds so that it can grow and create jobs. We help public sector entities
raise municipal financing. We also help pension funds, mutual funds, and other
financial institutions trade and manage their assets.
• In our other two businesses—Wealth and Asset Management—we are managing
over $5.6 trillion of assets for households and institutions, including endow-
ments and pension funds that manage the retirements of our teachers, fire-
fighters, and other public employees. For millions of U.S. households, our serv-
ices help families save money—whether for college, retirement, or to put a
downpayment on their mortgages.
Beyond our day-to-day core businesses, we also support the more vulnerable in
our communities through philanthropy and employee engagement.
A number of well-publicized events last year led to a heightened and necessary
focus on racial and social justice, and a recognition that explicit support and pur-
poseful collective action will be required. Some of our efforts over the past year in-
clude:
• Providing grants to Minority Depository Institutions to bolster their loan loss
reserves in the wake of the pandemic, and to assist minority- and women-owned
businesses to ensure an equitable recovery; and
• Starting a program to provide 60 students with full 4-year scholarships to How-
ard University, Morehouse College, and Spelman College—three of America’s
leading Historically Black Colleges and Universities.
In addition, we are concerned that how we deal with climate risk over the next
decades will have a profound socioeconomic effect on our communities. Morgan
Stanley recognizes the threat that climate change poses—and we are working with
our clients to find ways to mitigate its effect.
Finally, early in the pandemic, we committed to making no reductions in our
workforce through 2020, thereby providing reassurance to our 70,000+ employees in
a very difficult time. I am proud of the commitment they have shown to our clients
and to Morgan Stanley in the extraordinary circumstances of the past year.
Chairman Brown, in your letter dated May 7, 2021, you asked me to provide infor-
mation on additional topics, which are included in the attached addendum.
I now look forward to your questions.
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ADDITIONAL MATERIAL SUPPLIED FOR THE RECORD
LETTER SUBMITTED IN SUPPORT OF THE VETERANS AND
CONSUMERS FAIR CREDIT ACT
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