Two US lawmakers are accusing seven of the largest American banks by total assets of failing to pass the benefits of a high interest-rate environment to customers.
In a letter to the CEOs of Bank of America, Citibank, JPMorgan Chase (JPMC), US Bank, PNC Bank, Truist and Wells Fargo, US senators Elizabeth Warren (D-Mass.) and Jack Reed (D-R.I.) say the lenders have increased the interest rates they charge borrowers while keeping the rates they pay to savings accounts low.
“Deposit rates for savers always lag behind the federal funds rate, but this gap is larger for customers of big banks than for regional and community banks.”
Warren and Reed are both members of the Senate Committee on Banking, Housing, and Urban Affairs.
According to the senators, the seven banks made record profits of $1 trillion in 2023 by “charging borrowers more, paying savers a little, and pocketing interest paid by the Federal Reserve.”
Warren and Reed say that the CEOs of the seven mega banks have not kept their word after testifying before the US Senate three years ago that they would increase interest rates for savers.
On the CEO of the largest US lender by assets, Jamie Dimon, the two senators say,
“When the Federal Reserve began raising the federal funds rate in March 2022, JPMC was very quick to increase the interest rates that it charged borrowers for mortgages, auto loans, and credit cards.
In September 2022, you [Dimon] testified before the Senate Banking Committee that you expected to also increase the rates that JPMC pays savers—albeit at a slower pace.
At that time, JPMC was charging 6.98% for a mortgage, and 18% to 27% for a credit card, while paying its customers .01% on a demand deposit account.
But two years later and despite your testimony, JPMC’s interest rates have not budged. While the interest rate that JPMC earns on the balances that it maintains in its own accounts at the Federal Reserve has risen from 3.15% to 4.4%, JPMC’s customers continue to earn a negligible 0.01% on their savings.”
The two US senators also accuse the heads of Wells Fargo, Bank of America and Truist of keeping the interest rates their savings account holders earn at “negligible 0.01%” despite the lenders generating between 3.15% to 4.4% on their Federal Reserve balances. The CEOs of PNC, Citi and US Bank are also accused of keeping interest rates on savings accounts at 0.02%, 0.03% and 0.05%, respectively, while generating more than three-hundredfold from their bank balances with the Fed.
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