Dodd/Frank received the support from an important figure in the trading world. The House Financial Services Committee held a hearing entitled: “Holding Megabanks Accountable: A Review of Global Systemically Important Banks 10 years after the Financial Crisis.”
The heads of Citigroup, Morgan Stanley, JP Morgan Chase, Bank of America, State Street Corporation, Bank of New York Mellon, and Goldman Sachs, all testified for this.
During his opening statement, the Chairman and Chief Executive Officer of Goldman Sachs, David Solomon said this about Dodd/Frank.
“Dodd/Frank has made the system safer and we’ve made important progress in adopting to that regulatory environment.” He also noted. “However, after ten years of experience it seems appropriate to assess whether improvements can be made to avoid duplication, inconsistency, and undue cost, especially on our clients.”
Solomon said both Goldman Sachs and the system are much stronger than a year ago and has thirty-six thousand employees world-wide.
“Since the end of 2007, Goldman Sachs equity has more than doubled, our leverage has decreased by more than sixty percent, and our liquidity has more than tripled. We’re confident we can withstand market shocks and the Federal Reserve’s rigorous stress tests prove that.” Solomon said.
Of the financial system, he said, “Today, the US financial system is substantially safer and more resilient. Financial institutions hold significantly more capital and they have materially reduced their leverage and their holdings in illiquid assets.”
Meanwhile, top Democrats used the hearing which continues a patter.
As The Industry Spread previously reported, Democrats were using the House Financial Services Committee to fight proxy wars with President Trump.This strategy means the trading industry will largely be overlooked by the Democrats. While Trump was not mentioned much, top Democrats used much of their questioning time- each Congress person gets five minutes- to explore their pet issues. The trading industry continues to be largely ignored.
Maxine Waters is a Democrat from the State of California, and she chairs the committee. She grilled each of the chiefs on any investigation their banks took in illicit Russian money; she then moved on to student loans, and finally small business loans.
Carolyn Maloney is a Democrat from the State of New York; she used her five minutes to first pressure Jamie Dimon of JP Morgan Chase to stop doing business with gun manufacturers before moving on to overdraft fees.
Brad Sherman, a Democrat from California, took some time to also talk about overdraft fees, but he also talked about the Troubled Asset Relief Program, the bailout a decade ago of man of these same banks when the government took on the bad trades many of these same financial institutions made in mortgage backed securities.
Alexandria Ocasio-Cortez (AOC) used her time to note that in the last ten years many of these same banks were caught engaging in more malfeasance.
Some of it is trading related. “Chase had to pay seven twenty million in fines to the Fed, SEC, and UK Financial Conduct Authority, for failing to oversee its trading practices, including what is known as the London Whale.”
In the London whale incident, then Chase trader Bruno Iksil got way too heavy in credit default swaps and caused the bank to incur $2 billion in trading losses.
Largely, AOC talked about bank malfeasance in lending, bank accounts, and foreign bribery.
It is noteworthy that in March 2019, AOC introduced a financial transactions tax, which would, among others, place a tax on every trade made, regardless of whether there is a profit.
AOC was a co-sponsor of a bill to implement the financial transactions tax; this bill was introduced on March 4, 2019. However, after a few days of news, little has been said by her about it. The bill has a chance to pass the House Financial Services Committee and may pass the full House of Representatives but is dead on arrival in the Senate, where Republicans are the majority.
