Maxine Waters puts bank chiefs in hot seat and gets results

House Financial Services Committee chairwoman is also preparing a hearing with executives from U.S. regional lenders

May 6, 2019 @ 11:01 am

By Bloomberg News

Maxine Waters hauled seven Wall Street bank chiefs to a hearing that had all the elements of a show trial: contrite executives, lecturing lawmakers and TV cameras to magnify every exchange. Civil rights activist Jesse Jackson even showed up.

Yet the theatrics were secondary to changes the House Financial Services Committee chairwoman won even before the hearing began — Bank of America Corp. raised its minimum wage, Goldman Sachs Group Inc. set minority hiring goals and JPMorgan Chase & Co. vowed to stop financing private prisons. The policy wins show how Ms. Waters plans to wield power in a divided Congress as she oversees the banking industry and joins other Democrats in probing President Donald J. Trump's finances.

(More: Building dialogue with lawmakers to advance women's careers)

"They simply understand that it's a new day and a new way," Ms. Waters said of the executives in an interview. "I am the first African-American and first woman chair. They know that I have expectations." She said she doesn't want banks coming to her pushing deregulation. She wants to hear about what they're doing differently, whether it's a diversity program, a new product or some other innovation.

And Ms. Waters is planning to put even more CEOs in the hot seat. The committee is preparing a hearing with executives from U.S. regional lenders, she says. Another with executives from foreign banks is also on the table, she said. The format for those sessions is likely to follow the April 10 hearing where JPMorgan's Jamie Dimon, Goldman Sachs's David Solomon and other Wall Street bosses answered questions for most of the day.

Ms. Waters, a California Democrat, has also used her committee post to scrutinize Mr. Trump, partnering with fellow committee chairs Adam Schiff and Elijah Cummings. She has subpoenaed Mr. Trump's banking records as a part of a wide-ranging investigation of both his finances and Russian money-laundering, provoking criticism from her committee's Republicans as well as the president, who has sued to halt some of the subpoenas.

The committee's agenda is pleasing progressives who have demanded more crackdowns on Wall Street.

"Waters gets the oversight function of Congress in a way that few Democratic chairs do,'' said Jeff Hauser, executive director of the Revolving Door Project, a Washington group that has been pushing the new House majority to scrutinize banks and other corporations. "She understands the power — and the enormous potential — of convening the nation's bankers, the media and members of Congress.''

Committee member Katie Porter, a California Democrat elected last year, said the panel's use of hearings helps provide genuine oversight of the financial services industry and serves to "focus the minds" of industry executives.

"I think other executives should take note of what's going on in these hearings and they should reflect before a hearing on what they need to be doing — and how they need to be good corporate citizens," Porter, a law professor and consumer rights advocate, said in an interview.

The committee is stocked with some of the most liberal and outspoken first-term Democrats, including Porter, Alexandria Ocasio-Cortez of New York and Rashida Tlaib of Michigan. It drew attention a few weeks before the April 10 hearing with a withering examination of Wells Fargo & Co. head Tim Sloan, who had been dealing with the fallout of years of scandal at the bank. He resigned a short time later.

(More: Democrats back legislation to require investor-testing of SEC advice rule)

The other CEOs sought to separate themselves from Wells, Ms. Waters said.

"Some of the other banks did not even want to be on the same hearing panel with him — that's why we sent him on first," Ms.Waters said in the interview.

In a further step, the other CEOs came to their hearing armed with new initiatives designed to appeal to Ms. Waters and her fellow Democrats.

JPMorgan announced on March 5 that it would stop financing private prisons after years of outcry and protest from immigration activists.

On March 18, Goldman Sachs said it would boost diversity goals companywide: entry-level hire classes in the Americas will have goals of 50% women, 11% black and 14% Hispanic, according to a company memo. The firm also introduced a version of the National Football League's Rooney rule for experienced hires, mandating the interview of two diverse candidates for every opening.

A day before the April 10 hearing, on MSNBC's "Morning Joe," Bank of America CEO Brian Moynihan unveiled plans to raise his company's minimum wage to an industry-leading $20 an hour.

The effect of the Democrats' strategy is still limited. Morgan Stanley and Citigroup Inc. didn't announce policy changes ahead of the hearing, although Citi won plaudits from Democrats for a move last year to restrict gun sales by business customers. Many practices that raised the ire of the left, such as lending to Saudi Arabia and redlining, are still going on. And criticism of the wages at JPMorgan was sternly rebuffed by Mr. Dimon.

Still, Democrats were pleased by the progress and promised to seek more.

(More: Building dialogue with lawmakers to advance women's careers)

"I think we've made great strides, probably more than people expected," Representative Joyce Beatty of Ohio, who leads the panel's diversity subcommittee, said in an interview. "That was just the warm-up act."


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