Wall Street bank bosses to warn US lawmakers that new regulations will hurt economy

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WASHINGTON (Reuters) – Top bosses of JPMorgan, Morgan Stanley, Goldman Sachs and other major banks planned on Wednesday to warn lawmakers that capital hikes and other new regulations being contemplated by U.S. bank regulators will hurt credit markets and the broader economy.

Worker pay and rights, mortgages, financial stability and the economy are also likely to feature when the CEOs of the country’s eight largest banks appear before the Senate Banking Committee on Wednesday, said executives and analysts.

The industry has been waging a fierce campaign to kill the “Basel Endgame” proposal, which overhauls how banks must calculate their loss-absorbing capital, and as regulators roll out fair lending and fee cap regulations, among other rules.

It offers the CEOs an opportunity to try to convince key moderate Democratic senators that the Basel rule, which is being led by the Federal Reserve, could stifle lending, hurting small businesses and consumers.

“If enacted as drafted, this proposal will fundamentally alter the U.S. economy in ways that the Federal Reserve has not studied or contemplated,” Jamie Dimon, CEO of the country’s largest lender JPMorgan, will say in his prepared testimony published by the Committee on Tuesday.

“Many banks will simply stop offering certain products and services, and those that do will have to charge more for them.”

Other new consumer regulations also show an “alarming” lack of rigorous economic analysis, Dimon will also say.

The other CEOs appearing are: Bank of America’s Brian Moynihan, Wells Fargo’s Charles Scharf, Goldman Sachs’ David Solomon, Morgan Stanley’s James Gorman, State Street (NYSE:STT)’s Ronald O’Hanley, and BNY Mellon (NYSE:BK)’s Robin Vince.

Regulators say new rules, including capital hikes, are necessary to protect the banking system from unforeseen shocks, especially following the collapse of Silicon Valley Bank and two other lenders earlier this year. While CEOs are expected to have the support of Republicans who generally oppose tight regulations, they will have to persuade skeptical Democratic lawmakers that the banking sector is sound.

“The U.S. banking system remains strong and is the envy of the world,” Morgan Stanley’s Gorman will say. “Blanket increases in capital for the large U.S. banks – who already undergo rigorous stress testing each year and are required to maintain additional specific capital buffers – is wholly unnecessary.”

Big bank CEOs have been appearing before Congress for several years after the 2007-09 financial crisis and subsequent scandals thrust the industry into Washington’s crosshairs.

While they rarely result in legislation, hearings have led banks to make changes. In 2021, Dimon was drawn into a fiery exchange with Democratic Senator Elizabeth Warren about overdraft fees, while last year she grilled him over fraud on bank payment network Zelle. Big banks subsequently reduced overdraft fees and expanded Zelle fraud protections.