Big banks are no longer afraid to confront their DC supervisors

When JPMorgan Chase ( JPM ) told investors this month about a possible Consumer Financial Protection Bureau enforcement action targeting bank-owned payments app Zelle, it also offered a warning to those regulators.

The New York banking giant said it is weighing whether to sue the CFPB over the Zelle probes, according to a quarterly filing on Aug. 5. Regulators and some lawmakers are concerned about fraud on the platform, which is owned by seven lenders, including JPMorgan. .

“The company is evaluating next steps, including litigation,” the bank said in its filing.

Read more: What is Zelle and is it safe to use?

This is not the first time in 2024 that JPMorgan has waived the possibility of suing its DC supervisors.

It also did so in January, when JPMorgan CFO Jeremy Barnum openly discussed the possibility of suing bank regulators over a set of higher bank capital requirements known as Basel III .

Suing the bank’s own regulator is “never a preferred option,” Barnum told reporters in January, but “it can’t be taken off the table.”

The aggressive stance by the nation’s largest bank is part of a larger pushback from many big lenders as they try to make their way in Washington, D.C.

And they’ve had some success, especially after publicly pressuring regulators over the past year to reconsider the Basel rule, which would require them to keep bigger buffers against future losses.

This year, Fed Chairman Jerome Powell and other regulators have made clear that major revisions are being made to that proposal.

Concerns about the capital rule — the most aggressive proposed change to how banks are regulated since the 2008 financial crisis — range from the harm it could do to the U.S. economy to the ways it would reduce access to mortgages for disadvantaged housing. buyers.

Regulators’ willingness to change what they’ve already proposed highlights how much more leeway big banks have in Washington, even in a highly charged election year — a stark contrast to the harsh political scrutiny they’ve received since the crisis financial since 2008.

Then-President Barack Obama summed up this view in December 2009 when he told “60 Minutes” that “I didn’t run for office to help a bunch of fat cat bankers on Wall Street.”

“They’re still confused as to why people are upset with the banks. Well, let’s see,” he said during that 2009 televised interview.

“You guys are taking out $10 (million), $20 million in bonuses after America has had the worst economic year it’s had in decades, and you caused the problem.”

The story continues

An “opaque” stress test.

Fifteen years later, JPMorgan isn’t the only big bank now willing to go public with its displeasure with certain DC actions.

Goldman Sachs ( GS ) CEO David Solomon, for example, went public with his criticism of the Federal Reserve after a recent stress test result the bank didn’t like, calling the process “opaque.”

The Fed asked the Wall Street giant to increase its stressed capital buffer by 94 basis points, one of the largest increases among participating banks.

“This growth does not appear to reflect the strategic evolution of our business,” Solomon said.

JPMorgan also disagreed with its result, saying in a statement that the Fed had underestimated the amount of losses it would face under severe shock scenarios — based on the bank’s weekly stress tests.

“Should the firm’s analysis be correct, the resulting stress losses would be modestly higher than those disclosed by the Federal Reserve,” the bank said in a press release.

Another top JPMorgan executive, Marianne Lake, warned that other new federal rules limiting overdrafts and late fees will mean the bank will have to charge for services that are currently free.

“The industry is facing a regulatory onslaught and potential legislative changes,” Lake, CEO of JPMorgan’s expanded consumer bank, told them in May. “The people who will be most affected will be ordinary Americans,” she added.

Read more: 5 common banking mistakes that could be wasting your money

Meeting with Jay Powell

Even as the big banks become more aggressive, they have no trouble getting an audience with some of the officials who run these agencies.

CEOs of some of the biggest banks — including Dimon, Bank of America ( BAC ) CEO Brian Moynihan and Morgan Stanley ( MS ) CEO Ted Pick — met with Powell in DC last month to discuss the rules of capital and other subjects.

The meeting with the Fed chairman, organized by the industry advocacy group Financial Services Forum, was not necessarily unusual. It was Powell’s third meeting of the year involving Dimon, according to his meeting calendar.

One was in person in May, while another was virtual in January, with several other bankers including Solomon, Moynihan, Wells Fargo ( WFC ) CEO Charlie Scharf and Citigroup ( C ) CEO Jane Fraser.

What remains an open question in Washington, however, is how the presidential election in November might change the approach to regulating these banks.

A victory for Republican Donald Trump could mean a more relaxed stance, although his running mate, JD Vance, said last month that Trump’s agenda “will not satisfy Wall Street.”

Democratic candidate Kamala Harris, on the other hand, cited her toughness on big banks during the 2008 crisis as a highlight of her resume.

A key test of how the financial giants can fare next year will be whether regulators approve Capital One’s ( COF ) $35 billion acquisition of Discover ( DFS ). The deal would make Capital One the largest U.S. credit card lender, even bigger than JPMorgan by that measure, and the sixth-largest U.S. bank.

At a public meeting last month, critics said the deal would harm consumers and create another too-big-to-fail bank. Democrat Maxine Waters urged regulators to block the deal, while Capital One CEO Richard Fairbank argued in favor of approval.

“This acquisition promotes financial stability and increases competition in the industry while providing significant new benefits to the communities in which we operate,” he said.

Whatever happens in November, a recent Supreme Court decision in June has potentially strengthened the hand of banks hoping to change certain federal regulations.

The high court overturned a 40-year-old legal doctrine that gave federal agencies leeway to interpret laws, limiting the power regulators have to intervene in many industries, including finance.

“This decision opens the door for banks to challenge the regulations in court more aggressively,” Kairong Xiao, an associate professor at Columbia Business School, told Yahoo Finance.

“The last time we saw substantial deregulation in the financial sector, it culminated in the global financial crisis of 2008,” he added.

David Hollerith is a senior reporter for Yahoo Finance covering banking, crypto and other areas of finance.

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