Big bank CEOs uncertain about the economy, warn of Fed’s high rates

(Kitco News) US lawmakers have grilled the CEOs of the largest US banks on everything from inflation, the state of the economy, the climate and more. The main concerns of Big Bank CEOs were the Federal Reserve’s ability to achieve a soft landing and unease that interest rates would remain high for longer.

JPMorgan’s Jamie Dimon, Citigroup’s Jane Fraser, Bank of America’s Brian Moynihan, Wells Fargo’s Charles Scharf and others faced a series of questions from the US Congress as they testified before the House Financial Services Committee on Wednesday.

Dimon described the US economy as a classic tale of two cities ruled by opposing forces.

“We continue to see strong consumer spending on solid consumer balance sheets fueled by unprecedented stimulus and consumer loan writedown rates that remain historically low. Job openings abound… At the same time, eroding high inflation is crushing real incomes for many Americans, particularly from higher gas and food prices. Supply chain problems persist, as does a devastating war in Ukraine,” Dimon said.

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The future remains uncertain, but lawmakers should be prepared for the worst. “Due to the war in Ukraine and the insecurity that is causing global energy and food supplies, there is a possibility that things could get worse,” he said. “We don’t know the full result.”

There is a small chance of a soft landing. But there’s also the possibility of a mild recession and the possibility of a deeper recession, Dimon added.

Fraser also spoke of “tougher times ahead” and explained that if Fed interest rates stay high longer, it would weigh on consumers and slow growth.

“We are very concerned about the high prices consumers in America and around the world are facing,” she said.

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This is the third time since 2019 that these CEOs have testified together before the US Congress. They are also scheduled to appear before the Senate Banking Committee on Banking, Housing and City Affairs on Thursday.

The topic of banks, which have to hold more capital, was also in the foreground. Dimon warned that exaggeration could hurt banks’ ability to lend, especially during an economic downturn. “JPMorgan will be sitting with $1 trillion and not be able to deploy it to help our clients at exactly the wrong time in intermediate markets,” he said.

Other topics raised included central bank digital currencies (CBDCs), diversity, consumer protection, compliance, climate, energy, cybersecurity and ties to Russia and China.

As for CBDCs, Dimon noted that he doesn’t trust the Federal Reserve to properly execute them.

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The full list of CEOs who spoke included: JPMorgan’s Jamie Dimon, Wells’ Charles Scharf, Bank of America’s Brian Moynihan, Citi’s Jane Fraser, US Bancorp’s Andy Cecere, PNC Financial’s William Demchak, and Truist’s William Rogers.

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