A viewer's guide to this week's big bank congressional hearings

Persistently high annual inflation rates — currently over 8% — and the looming risks of recession may put the health of the nation's banks front and center during this week's hearings. But even against the backdrop of deep market uncertainty, expect the CEOs to tout the relative stability and strong levels of capital at their financial institutions, particularly in the wake of the early pandemic's economic disruption. 

In his prepared remarks released Tuesday, Dimon said that increasing capital requirements for his and similarly-situated banks represents not only an overabundance of caution but a source of risk to the financial system, particularly in a rising interest rate environment. 

"The continued upward trajectory of regulatory capital requirements on America's already fortified largest banks, particularly when not reflective of actual risk, is itself becoming a significant economic risk," Dimon said.

In recent months, bank profits have taken a dip in response to rising interest rates and broader geopolitical risks. But that slowdown remains trivial compared to the carnage seen in crypto markets over the last several months. The broader fintech sector has also been hit with layoffs throughout 2022, including the buy now, pay later firm Klarna, retail trading app Robinhood, along with several crypto companies — Coinbase, Gemini, and BlockFi have all made significant cuts to their workforce.

But the bank CEOs might have bigger concerns lurking among the Biden administration's regulators: Michael Barr, the recently confirmed Fed vice chair for supervision, announced last week that he would explore changes to the rules that outline banks' capital requirements. Under a Democratic administration, analysts generally expect capital rules to become stricter for all but the smallest banks. 

The CEOs representing regional banks on Capitol Hill this week face the highest stakes: Biden regulators have repeatedly stressed the potential systemic risks of a large regional bank failure, and the Wall Street Journal reported on Sunday that some federal regulators were considering the extension of long-term debt rules that have historically only implied to the most systemically important banks.

It's been a busy few years for consumer policy in and around the banking system. Much of that has been prompted either directly or indirectly by Rohit Chopra, the pugilistic director of the Consumer Financial Protection Bureau. 

Chopra has pressured banks to rethink their overdraft programs, rethink their approach to credit card late fees, and more. Democrats on both banking-focused committees are expected to press the bank CEOs on the progress they've made around those key issues. Many large national banks have made significant changes to their overdraft programs over the past two years, but lawmakers have been increasingly frustrated with peer-to-peer payments fraud on the bank-owned platform Zelle. 

Viewers can also expect a familiar — if fraught — topic to make an appearance during this week's hearings: fake account scandals. And while Wells Fargo's sham accounts catapulted the megabank to a level of notoriety not seen since the darkest days of the financial crisis, two other banks represented on the Hill this week will likely face questions of their own on the topic. U.S. Bank was fined nearly $40 million by the CFPB in late July for opening accounts without customers' knowledge, later prompting a letter from Senate Banking Chair Brown. And just last week, the Capitol Forum reported that regulators may soon hit Bank of America for a fake account scandal of its own in a probe allegedly dating back to the Obama administration.

Bankers haven't expected much public affection from either political party in recent years, but the CEOs assembled this week may find themselves in a tougher position than normal. They'll be wedged between GOP lawmakers expected to attack banks' perceived social positions, ranging from ESG investing to support for female employees' women's reproductive health. Democrats, meanwhile, will push banks to take on a bigger role in combating structural racism as well as address the risks of climate change in the financial system.

Republicans at the state level have moved with particular aggression to curtail bank involvement in climate-friendly initiatives. State officials in Texas and West Virginia, for instance, have banned some banks and other financial institutions from picking up state contracts and participating in municipal financing, accusing institutions of being biased against oil and energy companies. Among this week's Capitol Hill visitors, West Virginia banned JPMorgan and Wells Fargo for "boycotting" fossil fuel companies, which the banks deny. 

But the CEOs will also face tough questioning from Democrats on social policy, particularly around climate risk management as well as the racial justice commitments many banks introduced in the years and months after 2020's protests following the murder of George Floyd in Minneapolis. The CEOs may also be pressed on their institution's historical relationship to and profits from chattel slavery, something that House Democrats in particular have zeroed in on in the last few years.