JPMorgan Chase, Wells Fargo and Citigroup all beat investors’ expectations upon reporting their second-quarter earnings Friday morning. And while the earnings releases gave investors a look at the banks’ recent performances, the executives’ remarks on subsequent conference calls offered a glimpse of how they expect the President Donald Trump and the Republican-dominated Congress — which they’ve bankrolled with campaign funding and lobbying expenditures — to affect their bottom lines.
JPMorgan’s Jamie Dimon Lambasts ‘Stupid Shit’
JPMorgan CEO Jamie Dimon was memorably explicit in expressing his frustration with the current state of U.S. politics, striking a tone markedly different from the optimism he conveyed in his shareholder letter just several months ago. Although Democratic presidential candidate Hillary Clinton was the top individual recipient of the bank’s campaign donations by a long shot, with over $555,000, according to OpenSecrets, Dimon’s annual letter to investors, published in early April, was filled with implicit praise of the new administration’s deregulatory stance, envisioning “a more business-friendly environment.”
“It is… appropriate to open up the rulebook in the light of day and rework the rules and regulations that don’t work well or are necessary,” Dimon wrote in the letter. “Rest assured, we will be reasonably engaged on this front.”
But on Friday morning, in his second-quarter earnings conference call, Dimon sounded far more forthright — and more frustrated — about government bureaucracy and post-recession rulemaking. Asked how the political system dampened his confidence in the economy and JPMorgan’s potential, Dimon fumed about the administration’s sluggishness in addressing corporate tax and regulatory reform, as well as aging infrastructure — or, as he put it, “stupid shit.”
“I don’t buy the argument that we’re relegated to this forever; we’re not. And if this administration can make breakthroughs in taxes and infrastructure and regulatory reform, you know — we have become the most, one of the most bureaucratic, confusing, litigious societies on the planet,” Dimon said. “It's almost an embarrassment being an American citizen travelling around the world and listening to the stupid shit we have to deal with in this country.”
He also criticized the media for portraying reduced corporate tax rates as a benefit to corporations when in reality, he said, it’s “important for businesses and business growth.”
Under Dimon, JPMorgan has donated generously to the campaigns of elected officials in congressional committees with jurisdiction over banking and finance policy. The company gave over $365,000 to members of the House Financial Services Committee and more than $104,000 to members of the Senate Committee on Banking, Housing and Urban Affairs during the 2016 election cycle, according to OpenSecrets data.
Like that of many other large corporations, JPMorgan’s political spending doesn’t end with campaigns. In the first three months of 2017, the bank spent nearly $1 million on federal lobbying involving issues like tax policy, bankruptcy reform, the Dodd-Frank Act and its deregulatory replacement, the Financial CHOICE Act, along with other related legislation, according to the Senate lobbying database.
Those expenses, however, were small change in comparison to the $25.5 billion in revenue the bank pulled in during the second quarter of 2017.
Citigroup Exec Hopes To ‘Get People In The Seats’ To Address Regulatory Laws
In Citigroup’s earnings conference call, CEO Michael Corbat implied that increasing the number of bank-friendly regulators would help the company get the changes it hopes for. He referred to a June Treasury Department report that suggested adjusting required leverage ratios, or the ratio of how much debt to equity a bank has on hand. The Treasury also proposed allowing banks with leverage ratios of at least 10 percent to sidestep the Volcker Rule, a measure of Dodd-Frank that separates commercial banking, such as checking and savings accounts, from proprietary trading. In the report, the department dubbed this provision a “regulatory off-ramp.” As the Brookings Institution noted in its analysis of the paper, banks would, as a result of this “off-ramp,” “have incentives to increase their risk exposures since they are not penalized for higher risks… This proposal would over time lead to a much riskier, not more stable, financial system.”
Corbat said in the conference call that Citi has “no issue… with Volcker,” but pointed to the “conflict disagreement” caused by a crowd of regulatory agencies overseeing compliance with such rules, as “they all believe they have the voice at the table.”
“The good news, I think, in most of the [Treasury] paper is that the things that are in there don't require changes of law to implement,” he said. “So hopefully as we get people in the seats, some of the heads of the agencies start to come together. We can actually start to affect some of this change, which hopefully we can start to make some meaningful progress on hopefully in the fourth quarter of this year.”
On the lobbying front, Citi has spent more than $1.9 million this year on lobbying efforts involving tax reform, the Financial CHOICE Act, Russia sanctions, Dodd-Frank and other financial regulatory issues, according to the Senate’s lobbying database. It contributed more than $321,000 to members of the House Financial Services Committee and nearly $180,000 to members of the Senate Banking, Housing and Urban Affairs Committee, according to OpenSecrets. Its reported second-quarter revenues, by contrast, amounted to $17.9 billion.
Wells Fargo’s Sloan Foresees End of False Accounts Debacle
Days after a California judge’s approval of a $142 million payment by the bank to a class of customers as part of its fake-accounts scandal, multiple investigations and lawsuits of which are still ongoing, Wells Fargo CEO Tomthy Sloan said the bank expected “the settlement to resolve substantially all claims in 10 other pending class actions.”
But Sloan also voiced the bank’s worries about the Consumer Financial Protection Bureau’s recently-issued rule barring sellers of financial products from including small-print clauses in their contracts that keep customers from filing class-action lawsuits. One analyst on the call, for instance, asked whether the new regulation, known as the arbitration rule, applied to past contracts. In his reply, Sloan hinted that expectations for the rule's survival were low.
“I don’t think it’s retroactive,” Sloan said. “But I think there is a lot of concern about this decision and I think that my guess is that, based on the feedback, that we’ll see legislative or administrative and legal action against it.”
Citigroup and the U.S. Chamber of Commerce, which doesn’t disclose its membership, have been some of the biggest spenders on recent anti-arbitration rule lobbying efforts. But Wells spent $2.3 million in the first quarter of 2017 on lobbying efforts related to Dodd-Frank, tax reform, congressional investigations of the bank itself and other financial regulatory issues, according to the Senate’s lobbying database.
During the 2016 election cycle, Wells also contributed $192,000 to members of the House Financial Services Committee and $58,500 to members of the Senate Committee on Banking, Housing and Urban Affairs, according to funding data from OpenSecrets. Still, that's a fraction of the bank's reported second-quarter revenue, which stood at $22.2 billion.