• Subscribe
  • Log In
  • Home
  • Daily Diary
  • Asset Class
    • U.S. Equity
    • Fixed Income
    • Global Equity
    • Commodities
    • Currencies
  • Sector
    • Basic Materials
    • Consumer Discretionary
    • Consumer Staples
    • Energy
    • Financial Services
    • Healthcare
    • Industrials
    • Real Estate
    • Technology
    • Telecom Services
    • Transportation
    • Utilities
  • Latest
    • Articles
    • Video
    • Columnist Conversations
    • Best Ideas
    • Stock of the Day
  • Street Notes
  • Authors
    • Bruce Kamich
    • Doug Kass
    • Jim "Rev Shark" DePorre
    • Helene Meisler
    • Jonathan Heller
    • - See All -
  • Options
  • RMPIA
  • Switch Product
    • Action Alerts PLUS
    • Quant Ratings
    • Real Money
    • Real Money Pro
    • Retirement
    • Stocks Under $10
    • TheStreet
    • Top Stocks
    • Trifecta Stocks
  1. Home
  2. / Investing
  3. / Stocks

Charts of the Day: Anticipating Congressional Questions for Wall Street

A cheat sheet of expected questions for investors and political theater enthusiasts.
By KEVIN CURRAN Apr 09, 2019 | 03:44 PM EDT
Stocks quotes in this article: C, JPM, MS, BAC, STT, BK, GS

Ten years on from the Great Recession, the regulatory risk on Wall Street has not come too far out of focus.

The CEOs of numerous major banks in the United States are set to appear before the House Financial Services Committee tomorrow to assess the adjustments each have made in compliance and safety over those years to avoid a similar disaster.

Citi (C) CEO Michael L. Corbat, JP Morgan (JPM) CEO Jamie Dimon, Morgan Stanley (MS) CEO James Gorman, Bank of America (BAC) CEO Brian T. Moynihan, State Street (STT) CEO Ronald O'Hanley, BNY Mellon (BK) CEO Charles Scharf, and Goldman Sachs (GS) CEO David Solomon will all be appearing together to present arguments.

So far, each CEO has generally argued that the financial system is on as firm a footing as ever as liquidity requirements and Dodd-Frank rules have worked to stabilize the industry.

However, judging by the stats produced in the House Finance Committee's ahead of the hearing, this argument could be quickly challenged.

"The U.S. [Global Systemically Important Banks] G-SIBs, along with the rest of the banking sector, have made record profits in recent years," a report from chairwoman Maxine Waters reads. "In 2018, the six largest U.S. banks made more than $111 billion in profits. However, these institutions have faced a long list of compliance breakdowns since the financial crisis."

While the fines incurred by each bank may at first glance appear significant, the total of fines pale in comparison to the profits garnered.

As a result, it would be unsurprising for the committee to push back against the deregulation efforts that helped lead to record profits under the Trump administration.

"Despite proposing to reduce capital for the G-SIBs, the Federal Reserve's own research has indicated current capital requirements are on the lower end of requirements that best balances benefits associated with mitigating systemic risk with a bank's funding costs," Waters' report states. "Furthermore, the Federal Reserve has also been working on making stress testing more transparent to banks, potentially undermining the value of the regular exercise."

The committee is likely to seize on this point and seek to strengthen the regulations in place, potentially eating into each bank's ability to continue in their currently highly profitable path that has charted into the hundreds of millions since the Great Recession

Talking Points Memo

Judging by the stats provided, the discussion could quickly shift to executive compensation and pay fairness, a popular topic among some of the prominent Democrats on the committee.

The conversation has differing implications for each executive.

Interestingly, Goldman Sachs, a company whose name is used seemingly synonymously with the excesses of Wall Street, has reduced its CEO to median worker pay ratio since the accession of David Solomon.

The reduction was only eclipsed by BNY Mellon, which saw its pay ratio plummet after CEO Charles Scharf took a significant pay reduction as compared to his predecessor Gerald Hassell. The reduction is also in stark contrast to both Citi and JP Morgan which each saw the pay ratio balloon despite the relatively longer tenure of each executive.

To be sure, the absolute pay of Goldman's CEO Solomon still eclipses Corbat's payout in absolute dollar terms.

Despite the substantive issues reflected in the charts, many analysts aren't holding their breath, instead expecting the hearing to take a quick detour into simple political posturing.

"If you are looking for a nuanced consideration of the regulatory regime for the nation's largest banks, we recommend looking elsewhere," Compass Point Director of Policy Research Isaac Boltansky said on Monday. "There are undoubtedly substantive issues that could be considered when the CEOs of the nation's largest banks meet legislative leaders in a public forum, but we doubt that this hearing will provide anything beyond curt questions, corporate sound bites, and a continuation of the status quo."

"Given the divided Congress and the leadership atop the financial regulators, our sense is that this hearing will be little more than riveting political theater," he concluded.

As the theater kicks off, it will be important for investors to remain cognizant of these data points, if any substantive conversation can indeed occur. Analysts simply advise you don't get your hopes up.

Get an email alert each time I write an article for Real Money. Click the "+Follow" next to my byline to this article.

Employees of TheStreet are restricted from trading individual securities.

TAGS: Regulation | Federal Reserve | Investing | Markets | Politics | Stocks | Asset Manager | Banking | Financial Services | Stock of the Day

More from Stocks

Specific Stocks Appear Solid but Upward Momentum Can't Yet Be Trusted

James "Rev Shark" DePorre
May 19, 2022 4:29 PM EDT

I remain convinced that we can't begin to talk about a bottom in the indexes until the S&P 500 is in a technical bear market.

Is This the Time to Buy Costco?

Bruce Kamich
May 19, 2022 3:05 PM EDT

Buy a falling knife? No, but this one's intriguing.

TJX Cos. Is Ignoring the Market's Downdraft

Bruce Kamich
May 19, 2022 1:25 PM EDT

Does this strength have staying power?

These ETFs Will Meet You in the After-Hours Club

Mark Abssy
May 19, 2022 12:30 PM EDT

Let's check three funds that are set to buy the close and sell the open.

After Wednesday's Bloodbath, a Battle Is Brewing in the Market

James "Rev Shark" DePorre
May 19, 2022 11:56 AM EDT

We see traders hunting for an oversold bounce, while investors are dashing for the exits. Here's my take on the wild action so far -- and whether we're in a recession yet.

Real Money's message boards are strictly for the open exchange of investment ideas among registered users. Any discussions or subjects off that topic or that do not promote this goal will be removed at the discretion of the site's moderators. Abusive, insensitive or threatening comments will not be tolerated and will be deleted. Thank you for your cooperation. If you have questions, please contact us here.

Email

CANCEL
SUBMIT

Email sent

Thank you, your email to has been sent successfully.

DONE

Oops!

We're sorry. There was a problem trying to send your email to .
Please contact customer support to let us know.

DONE

Please Join or Log In to Email Our Authors.

Email Real Money's Wall Street Pros for further analysis and insight

Already a Subscriber? Login

Columnist Conversation

  • 01:44 PM EDT STEPHEN GUILFOYLE

    Stocks Under $10 Portfolio

    We're making a series of trades here.
  • 03:07 PM EDT PAUL PRICE

    Why Is Walmart Down Big Today?

    Besides its poor earnings report Walmart was way...
  • 07:14 PM EDT PAUL PRICE

    A New, Very Scary Movie

  • See More

COLUMNIST TWEETS

  • A Twitter List by realmoney
About Privacy Terms of Use

© 1996-2022 TheStreet, Inc., 225 Liberty Street, 27th Floor, New York, NY 10281

Need Help? Contact Customer Service

Except as otherwise indicated, quotes are delayed. Quotes delayed at least 20 minutes for all exchanges. Market Data & Company fundamental data provided by FactSet. Earnings and ratings provided by Zacks. Mutual fund data provided by Valueline. ETF data provided by Lipper. Powered and implemented by FactSet Digital Solutions Group.

TheStreet Ratings updates stock ratings daily. However, if no rating change occurs, the data on this page does not update. The data does update after 90 days if no rating change occurs within that time period.

FactSet calculates the Market Cap for the basic symbol to include common shares only. Year-to-date mutual fund returns are calculated on a monthly basis by Value Line and posted mid-month.

Compare Brokers

Please Join or Log In to manage and receive alerts.

Follow Real Money's Wall Street Pros to receive real-time investing alerts

Already a Subscriber? Login