U.S. Sens. Elizabeth Warren (D-MA) and Jack Reed (D-RI) sent inquiries to the largest U.S. banks seeking information on why deposit interest rates were much lower than loan interest rates.
The lawmakers noted that the Federal Reserve began raising the federal funds rate in March of 2022. The banks followed suit by raising rates for borrowers for mortgages, auto loans, and credit cards. However, the senators noted that they did not match those increases with higher interest rate payouts on savings accounts.
Research by Federal Reserve staff confirms that big banks did not meaningfully pass through savings from recent interest rate drops to depositors. While noting that deposit rates for savers always lag behind the federal funds rate, the senators said the gap is larger for customers of big banks than for regional and community banks.
Warren and Reed wrote letters to the heads of Wells Fargo, JPMorgan Chase, Bank of America, Citibank, US Bank, Truist, and PNC Bank with several questions to several related questions.
The senators noted that several large bank CEOs, including JPMorgan Chase CEO Jamie Dimon, testified before the Senate Banking Committee in 2022. At that hearing, said the senators, Dimon said the bank expected to increase rates for savers as well, but at a slower pace. More than two years later, JPMorgan’s interest rates for savers have not changed. While interest rates on the accounts JPMorgan keeps at the Fed rose from 3.15 percent to 4.65 percent, JPMorgan’s customers earn.01% on their savings.
Charging borrowers more and paying savers a little, while keeping interest paid by the Federal Reserve, has enabled U.S. banks to rake in record profits, they said.
The senators requested answers about how the banks’ yields from higher interest rates, their decisions to adjust yields in response to changing interest rates, and how much executives and shareholders benefited from profits derived from higher interest rates. The answers are due by Feb. 14.