As interest rates rose, major banks charged borrowers more for mortgages and auto loans, yet never increased payouts to savers, despite telling lawmakers they would do so, two U.S. senators wrote to seven CEOs. said in the letters, which were shared exclusively with CBS News.
In March 2022, the Federal Reserve began raising the federal funds rate, after which banks raised rates for mortgages, auto loans, and credit cards. But according to lawmakers, these increases are not matched by higher interest rates paid on savings accounts at banks including Bank of America, Citibank, JPMorgan Chase, PNC Bank, Truist, US Bank and Wells Fargo.
“This strategy—charging borrowers more, paying savers little, and keeping the interest paid by the Federal Reserve in their own pockets—has enabled U.S. banks to make record profits of $1 trillion and JPMorgan alone “Enables record profits of $49.6 billion in 2023.” Senators Elizabeth Warren (D-Massachusetts) and Jack Reed (D-Rhode Island), authors of the letters. Meanwhile, “savers have struggled to keep up with inflation,” he said.
JPMorgan CEO Jamie Dimon and his counterparts at half a dozen other financial institutions testified before the Senate Banking Committee in September 2022 that their respective banks are expected to raise rates for savers, albeit at a slower pace. The lawmakers said interest rates on accounts held by JPMorgan at the Fed increased from 3.15% to 4.65%, with JPMorgan customers continuing to earn .01% on their savings.
“These banks pledged before the United States Congress that they would offer meaningfully higher savings rates to their customers after raising the cost of loans to boost their profits. Families across the country are struggling with inflation – these CEOs needs to make its point, will not double down at the expense of its customers' savings,” Warren told CBS News in an emailed statement.
“Experts have called the megabanks' current net interest income a 'Goldilocks situation,' where banks have benefited from high Federal Reserve interest rates and kept deposit rates low,” Warren and Reed said in their letters. His compensation was based on his banks' “interest-rate profiteering over the past two years.”
Wells Fargo declined to comment, while none of the other six banks responded to requests for comment.