As interest rates climbed, major banks charged borrowers more for mortgages and auto loans, yet never increased payouts to savers, despite telling lawmakers they would do so, say two U.S. senators in letters to seven CEOs, shared exclusively with CBS News.
In March 2022, the Federal Reserve started raising the federal funds rate, with banks following suit by hiking rates for mortgages, auto loans and credit cards. But those increases were not matched with high interest rate payouts on savings accounts at banks including Bank of America, Citibank, JPMorgan Chase, PNC Bank, Truist, U.S. Bank and Wells Fargo, according to the lawmakers.
“This tactic — charging borrowers more, paying savers a little, and pocketing interest paid by the Federal Reserve — has enabled U.S. banks to rake in record profits of $1 trillion and JPMorgan alone to make record profits of $49.6 billion in 2023,” according to Sens. Elizabeth Warren (D-Massachusetts) and Jack Reed (D-Rhode Island), the authors of the letter. Meanwhile, “savers have struggled to keep up with inflation,” they added.
JPMorgan CEO Jamie Dimon and his counterparts at half a dozen other financial institutions testified before the Senate Banking Committee in September of 2022 that their respective banks expected to increase rates for savers, albeit at a slower pace. While interest rates on the accounts JPMorgan keeps at the Fed rose from 3.15% to 4.65%, JPMorgan’s customers continue to earn .01% on their savings, the lawmakers stated.
“These banks pledged in front of the United States Congress they would meaningfully pass on higher savings rates to their customers after hiking the cost of loans to pad their profits. Families across the country are struggling with inflation — these CEOs need to keep their word, not double-dip at the expense of their customers’ savings,” Warren told CBS News in an emailed statement.
“Experts have called megabanks’ current net interest income a ‘Goldilocks situation,’ where banks have benefitted from higher Federal Reserve interest rates and kept deposit rates low,” Warren and Reed noted in their letters, which called on the CEOs to explain what portion of their compensation had been based on their banks’ “interest-rate profiteering over the last two years.”
None of the seven banks immediately responded to requests for comment.
