After two days of being grilled by the House and Senate, executives of the biggest banks in the country really opened up most during a long House Financial Services Committee hearing this week when asked about China. The question – seeing how easily they all fled Russia once that country started its military attacks in Ukraine – what would they all do if China did the same to Taiwan? Answer: they’d all leave.
Rep. Blaine Luetkemeyer (R-MO-3) didn’t mince words: “Should the CCP follow through on his threat to invade Taiwan? Are your banks prepared to pull your investments out of China?
Brian Thomas Moynihan, Chairman and CEO of the Bank of America responded first: “Sure, I think we’ll follow the government’s guidance, which is has been for decades to do work with China,” he said. “And if they change their position, (we) will immediately change it as we did in Russia.”
“We would do likewise,” said Jane Fraser, CEO of Citigroup. “We would follow the government guidance on that (although) we very much hope it doesn’t happen.”
JP Morgan CEO Jamie Dimon, who was the resident spitfire of the seven bank executives that took hours of questioning from the House and Senate this week, said his bank would “absolutely salute and follow whatever the American government said.”
Dimon was the most outspoken of the bankers in the last two days, coming out in favor of continued funding for fossil fuel companies and was skeptical of banks telling lenders where they should and should not put their money through regulatory overreach.
While Dimon gets high marks for his commentary regarding fossil fuels in an era of energy insecurity, the panel of executives all fail at understanding economic statecraft, geopolitics, warfare, and ultimately, the interests of Americans. To say they “think” they would follow the U.S. Government’s guidance and pull out of China if a war starts – but hope you do not have to – is a sorry excuse, coupled with hiding behind the U.S. Government as your cover for doing business with the U.S.’ leading adversary. Wall Street portfolio investments and business operations in China are propping up the Chinese Communist Party. It enables them to build a more modern, lethal military to threaten Taiwan, and makes it much harder for the U.S. to diversify supply chains out of China when the U.S. is busy investing in and partnering with those companies that make up that supply chain. To do business there, leading up to a possible invasion and further erosion of global peace and security, is like saying you understand you are aiding the enemy but will continue to do so until you legally cannot. This is not in the best interests of their American customers. — Robby Smith Saunders, National Security Advisor, Coalition for a Prosperous America.
The House Financial Services Committee hearing, held Wednesday, was titled “Holding Megabanks Accountable: Oversight of America’s Largest Consumer Facing Banks”. The Senate’s annual oversight hearing was held on Thursday.
Senator Cynthia Lummis (R-WY) aptly called the Senate Banking Committee hearing a “flogging” of the nation’s top Wall Street leaders. But the House was even more brutal.
Here’s a look at some of the China-centric questions House Committee members threw at some of America’s biggest investors and lenders.
Rep. Jake Auchincloss (D-MA-4) and vice chair of the House Financial Services Committee:
Xi Jinping’s zero COVID policy has been a catastrophe. The U.S. economy has grown faster than the Chinese economy in the last year, for the first time in my entire lifetime. Where can Capitol Hill and Wall Street collaborate to seize the initiative and out-compete the CCP for leadership of the world economy?
Dimon: We’re kind of doing that a little bit with some of the bills, like the CHIPS Act. Faster permitting for grids, solar, wind power, hydroelectric power building, sometimes it’s the coordinated thing, the building can’t get built because the road can’t be built, because the water is not being put in because the grid is not being built and getting our schools to do more STEM teaching which a lot of us are trying to do together.
Rep. William Timmons (R-SC-4): I think it’s worth discussing the economic relationship between the United States and China. Our two countries are obviously competing in a multitude of ways, economically, geopolitically, et cetera. But it really is more than that. It’s also a clash of civilizations. And it’s a clash of autocracy versus democracy. It’s a clash between a command economy and capitalism. And I think we all realize the vastness of the Chinese market and how lucrative it may appear to you all, but there’s a cost of doing business there. China is the CCP and the CCP is China. They control everything. Culturally, the Chinese government views it as their obligation to give Chinese businesses a competitive advantage in the global economy through a variety of avenues. So when you are doing business in China…you are also doing business with the Chinese Communist Party. Mr. Dimon, can you speak to this competition between our country and the West more broadly with China and what you see your institution’s role and other similar global institutions in that competition being and if China becomes the dominant economic power in the world, which is no doubt their goal, what do you think will be the consequences for free enterprise?
Dimon: So America, if you have to do a full comparison, we have all the food, water and energy we need. They don’t. We’ve got the Atlantic and Pacific and wonderful neighbors in Canada and Mexico. They’re the most complex region of the world. They’ve got the negatives of autocracy, they’ve got a huge amount of corruption. They don’t have our financial system, they don’t have our innovative society, they don’t have the gifts the founding fathers called free enterprise. And so I think before Americans panic about it, we should be very thoughtful. This relationship for the next 50 or 100 years is the most important thing in the world and if America wants make the next century our century, we have to be very careful around strategic, economic, trade and all those issues that really matter. I think it’s very important that you understand is that the American government sets foreign policy. The American government does not want American business to disengage from certain parts of the world because it’d probably be a bad idea. We talk to them (diplomats) quite a bit about this issue because it’s just as important to me as it is to you and your constituents.
Fraser: When we look at the clients that we serve, many of them are multinational clients in China. And we see that there is a high degree of interdependence as we’ve experienced and the Europeans have experienced as they’ve tried to decouple the Russian economy from the western economies. And so I think as we look forward, we’ve got to take a strategic view in America as to where it is that we need more strategic independence and to build that in a thoughtful manner, but also in a way that doesn’t cause crises, economic crises along the way.
Timmons: I have serious concerns that the way the Western world united against Russian aggression in Ukraine … my concern is that China was watching and learned from that moment of what I would argue is weakness for our country. And I’m just afraid that if it something happens in Taiwan, that not only will the western democracies not unite, but the global economy will not step forward and defend Taiwan.
Rep. Lance Gooden (R-TX-5): Citi’s former Global Head of Corporate and Investment Banking praised the Chinese Communist Party’s Belt and Road Initiative. In fact, he said quote, “Citi strategy is directly associated with 32 of the 69 countries, which is more than any other global institution or any other financial institution and Citi should play a leading role in this Belt and Road Initiative,” end quote. It’s my belief that the Chinese Communist Party uses this initiative to give unfair advantages to Chinese companies and forces developing countries into debt traps often with public corruption paving the way. I witnessed this on a trip to the Middle East where we were told of extreme corruption that the Chinese companies have been involved in across the African continent. And by participating in the Belt and Road Initiative, you’re supporting significant risk to our national security and global economy. Ms. Fraser, do you understand Citi’s support of the Belt and Road Initiative is directly opposed to the national security interest of the United States?
Fraser: I do not believe certainly since I took over as CEO, but I don’t believe before that either that we have played a meaningful role, if any role in the Chinese Belt and Road Initiative.
Gooden (changing subjects): Well, many of you, or some of you rather, struggled earlier today to condemn the ongoing human rights abuses in China of the Uyghurs. The Department of State, the United Nations, human rights organizations, and the like have condemned China’s actions. Will Citibank condemn the ongoing human rights abuses in China at the hands of the Chinese Communist Party?
Fraser: We certainly take any of the accusations of human rights abuses wherever they are in the world very seriously. We’ll be vocal in our distress they are occurring.
Gooden: So will you condemn the ongoing human rights abuses in China at the hands of the Chinese Communist Party?
Fraser: Condemn is a very strong word.
Gooden: Yes, it is.
Fraser: Yes. We certainly are very distressed to see it going on and we do not want to have human rights abuses happening anywhere in the world where we or anyone else operate.
Gooden: I would encourage all of you to get out of doing business with Russia and be very careful on China because they are working very strongly against our nation.
Note, however, that Fraser refused to actually condemn the ongoing atrocities in China that are happening to the Uyghurs, but also to all practitioners of faiths, Tibetans, Hong Kongers, and countless others.
The bulk of this week’s hearings was about consumer-facing products, and other Washington buzzwords such as diversity and inclusion, as well as some talk about ESG – an international investor-led framework designed to shift capital to industries deemed sustainable both socially and environmentally.
