US banks defend themselves against “wokeism” charges

The CEOs of the six largest US banks have defended themselves from accusations that “stakeholder capitalism” was drawing their institutions into political meddling, in testimony before two US congressional committees.

The Senate Banking Committee held its first “Annual Oversight of Wall Street Firms” on 26 May, bringing together the CEOs of Wells Fargo, Goldman Sachs, Citigroup, JPMorgan Chase, Bank of America and Morgan Stanley. The US House Committee on Financial Services followed suit on 27 May for a five-hour session with the same group of bankers.

Republican ranking member Pat Toomey aired concerns about “wokeism”, or as he put it, activists from what he termed the “far left” applying pressure to banks to adopt liberal social agendas.

“I worry that continuing down this path may lead to distorted credit allocation, activists seeking to make political change through the financial system instead of the democratic process, and ultimately, diminished prosperity for Americans,” he said.

Republican senators followed Toomey’s lead, delivering largely unanswered questions on banks’ public criticism of recent voter restriction legislation in Georgia, reduced financing for fossil fuel and gun companies, and diversity goals.

Senator Steve Daines, a Republican, pressed Bank of America’s Brian Moynihan on a commitment his bank had made last year to net zero greenhouse gas emissions in its financing activities, asking if his institution would refuse financing to companies without zero carbon emissions. Moynihan replied that they would finance companies in their efforts to make the transition.   

Republicans backed up their critiques on 27 May with a “No Red and Blue Banks Act”, introduced by Senators John Kennedy and Kevin Cramer, which would prevent government contracts being awarded to any banks which avoid doing business with certain companies “based solely on social policy considerations”.

The issue of access to finance to “unpopular” industries – including gun manufacturers and carbon-intensive energy and resources companies – has been a growing point of concern for Republicans since the Obama administration.

Last year, under the Trump administration, the Office of the Comptroller of the Currency issued a controversial rule that would prevent banks from limiting their lending to particular industries. The rule was swiftly abandoned in January, days after the Biden administration came into power.

Senate banking committee chair Sherrod Brown, who pledged to shift the focus of the Senate Banking Committee to tackle questions including racial inequity, and climate change when he became chairman in January 2021, opened the hearing by focusing on the “record profits” enjoyed by Wall Street during the pandemic.

He grilled the CEOs on why they were paid “900 times” the amount they pay their lowest-paid workers, prompting responses that compensation was set by banks’ boards.

Responding to Democratic senator Kyrsten Sinema’s question about “concerning instances of fraud” during the US government’s’ distribution of stimulus paycheques, Citigroup CEO Jane Fraser called for a reformed distribution platform for future crises.

“Some of the challenges were building our digital platforms to be able to disburse” the funds, Fraser said. “It will be a worthwhile investment to make sure we do have a technology platform at the [Small Business Administration] or any of the other relevant institutions”.

Another Senate Democrat, Tina Smith, raised the possibility of standardised climate disclosure requirements.

While the CEOs all largely expressed openness to the concept, David Solomon, CEO of Goldman Sachs, emphasised that it was “very important that you’re very specific about the form it take and in particular the consistency across regimes”.

Smith also advocated legislation that would allow investors to consider sustainable investment options in their pension plans. Moynihan said that a consistent and simplified set of disclosures was needed across industries and investments to help investors make informed choices. “The key is to standardise this,” he added.

Moynihan also engaged in some advocacy, telling Maxine Waters’ House Financial Services the Committee that the Supplemental Leverage Ratio (SLR) should be re-evaluated in light of the pandemic.

He said that “completely riskless assets may not have a place” in leverage ratios, describing how a surge in deposits caused by relief measures increased “overnight cash” in the Federal Reserve from US $100 billion to three or four times that, with banks still having to hold capital against it.

“That doesn’t quite make sense, and can work against the idea of injecting monetary support into the economy,” he said.

The American Bankers’ Association advocated for the same thing in March, saying that declining leverage ratios caused by the pandemic could force banks to turn away deposits. The association urged regulators to extend the SLR relief to avoid “unnecessary balance sheets rigidity during times of stress”.


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