Over the last few months, the U.S. government has been trying to convince the public that a pandemic is coming and that they must prepare for it. The President has repeatedly said that the government is ready to deal with the threat of a flu pandemic, but so far little has been done to prepare the country for an outbreak of such magnitude.

The New York Stock Exchange Board of Directors were grilled yesterday by the United States Senate’s Banking Committee, and the overwhelming majority of the world’s financial executives who testified were worried about the country’s ability to cope with a pandemic.

WASHINGTON – The heads of six major U.S. banks will testify before Congress, where they will face conflicting pressures from Democrats calling for action on racial disparities in lending and Republicans arguing that banks should avoid taking a stand on social issues.

During the two-day hearing, which began Wednesday, executives from the company, including

JPMorgan Chase

JPM 0.38

& Co. Jamie Dimon,

Citigroup Inc.

C 0.36%

Jane Frazier.

и

Wells Fargo

WFC 0.80

& Co.

Charles Scharf.

painted a positive picture of the industry, which they said has helped the economy recover from the recession caused by the pandemic, according to their prepared remarks.

The Democrats, led by

Senator Sherrod Brown

of Ohio and

MP Maxine Waters

in California want to pressure CEOs to commit to supporting minority communities, including by investing in small financial firms, such as minority depository institutions.

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The pandemic has exposed a number of vulnerabilities in the economy and financial system, including pervasive racial inequality, unequal access to traditional banking products and services, and unmitigated systemic risks that threaten U.S. financial stability, Waters’ team wrote Monday in a memo to the committee.

Republicans should ask the banks if they are going too far in their proclaimed support of shareholder capitalism. Dimon led a group of executives who said in 2019, business solutions must take into account all stakeholders – employees, customers and society as a whole.

While the financial system has proven remarkably resilient, I fear that increased political pressure will distort the distribution of credit, jeopardizing our continued prosperity and undermining public policymaking in America, Senator Pat Toomey of Pennsylvania, the top Republican on the Senate Banking Committee, said in a statement Tuesday.

Citigroup CEO Jane Fraser addressed lawmakers Wednesday in a virtual hearing.

Photo:

U.S. Senate Committee on Banking, Housing and Urban Development

The hearing is the first joint appearance by major bank executives before U.S. lawmakers in two years. The directors gave testimony Wednesday at a virtual hearing hosted by Brown, and will testify Thursday before the House Financial Services Committee, chaired by Waters.

The hearing comes after Wall Street reported impressive first quarter results. JPMorgan posted a record quarterly profit, helped by record equity trading earnings. Wells Fargo reported its best quarterly results in corporate and investment banking.

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Profits are rising, stock prices have skyrocketed, your own pay has reached incredible heights, but employees are getting a smaller and smaller share of the wealth they create….. and are working harder than ever, Brown said in a prepared statement.

Since the financial crisis of 2008, the CEOs of the big banks have become lightning rods for the anger and misery caused by millions of foreclosures, rising unemployment and a deepening recession. Today the populist anger against business has subsided and the banking sector says it is contributing to the economic recovery.

Banks were part of the solution to avert the economic consequences of the global pandemic, and now we must continue to work together to ensure a fair and equitable recovery, Scharf said in a prepared statement.

Banks say they played a key role in keeping businesses and consumers afloat during the pandemic. By the end of May, they had helped provide nearly $796 billion in loans through the federal payroll protection program, allowing many small businesses to pay their employees and cover rent and other expenses.

Banks must continue to work together to ensure a fair and equitable recovery from the pandemic, Wells Fargo CEO Charles Scharf said in a statement.

Photo:

U.S. Senate Committee on Banking, Housing and Urban Development

However, some of the larger banks have restricted lending to existing clients or clients who have borrowed before. Smaller banks accounted for most of the deficit. According to the Federal Deposit Insurance Corporation, they made 28% of PPP loans, compared to only about 12% of industry assets in 2020.

Overall, loans grew by 3.3 percent in 2020, the slowest annual growth rate since 2013, according to the…

Jason Goldberg,

a bank analyst at Barclays. Excluding about $407 billion in PPP loans last year, lending fell 0.6 percent in 2020, the first decline since 2009, when the 18-month recession ended.

Last spring, as some lenders prepared for a severe recession, banks significantly tightened their lending standards. Terms and conditions on credit cards, car loans and mortgages remain stricter than before the pandemic.

Demand has also fallen. Government borrowing and historically low interest rates have allowed companies to obtain liquidity at a lower cost, reducing their dependence on bank loans.

Write to Andrew Ackerman at [email protected] and Orla McCaffrey at [email protected]

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