Senators Criticize U.S. Mega Banks – Here is Why

Two U.S. senators have called out the country’s largest banks for failing to pass on the benefits of a high interest rate environment to their customers.

In a letter to the CEOs of major banks, including Bank of America, Citibank, JPMorgan Chase, and Wells Fargo, Senators Elizabeth Warren and Jack Reed argue that these financial institutions have raised interest rates for borrowers but have kept savings account rates low.

The lawmakers, both members of the Senate Banking Committee, expressed concern over the growing gap between the interest rates charged to borrowers and those paid to depositors, noting that the disparity is more pronounced at large banks compared to smaller regional institutions.

In 2023, these seven banks posted record profits exceeding $1 trillion, largely driven by higher borrowing rates, minimal payouts to savers, and interest income from Federal Reserve balances. Warren and Reed point out that despite previous testimony from these banks’ CEOs, promising increased interest rates for savers, little progress has been made.

For instance, JPMorgan Chase CEO Jamie Dimon had indicated in 2022 that his bank would gradually raise rates for savers, yet two years later, the interest paid on savings remains a mere 0.01%, despite JPMC profiting from a 4.4% return on its own Fed balances. Similarly, other banks such as Wells Fargo and Bank of America have kept savings account rates at similarly low levels, despite profiting from larger returns on their Fed holdings.

This lack of action contrasts with the promises made by the CEOs during their Senate testimonies and raises questions about the financial institutions’ commitment to supporting savers.