When JPMorgan Chase (JPM) told investors this month about a possible enforcement action by the Consumer Financial Protection Bureau (CFS) against the bank’s own payments app Zelle, it also warned regulators.
The New York banking giant said it is considering whether to sue the CFPB over the Zelle requests, according to an Aug. 5 quarterly filing. Regulators and some lawmakers are concerned about fraud on the platform, which is owned by seven lenders, including JPMorgan.
“The company is considering next steps, including legal action,” the bank said in a statement.
Read more: What is Zelle and is it safe to use?
This is not the first time in 2024 that JPMorgan has ruled out the possibility of a lawsuit against its DC supervisors.
This was also the case in January, when Jeremy Barnum, chief financial officer of JPMorgan, openly discussed the possibility of suing banking regulators over higher capital requirements for banks, known as Basel III.
Suing the bank’s regulator was “never a preferred option,” Barnum told reporters in January, but “that option cannot be ruled out.”
The aggressive stance by the nation’s largest bank is part of a larger pushback by many major lenders seeking to get their way in Washington, DC.
And they have had some success in doing so, especially after publicly pressuring regulators last year to reconsider Basel rules that would require them to have larger buffers for future losses.
This year, Fed Chairman Jerome Powell and other regulators made it clear that this proposal would be significantly revised.
Concerns about the capital rule – the most aggressive proposal to change banking regulation since the 2008 financial crisis – range from potential harm to the U.S. economy to ways it could limit access to mortgages for disadvantaged homebuyers.
The willingness of regulators to change proposals already made shows how much more leeway the big banks have in Washington, even in a highly charged election year. It stands in sharp contrast to the harsh political criticism they faced in the wake of the 2008 financial crisis.
Then-President Barack Obama summed up this view in December 2009 when he told 60 Minutes: “I did not run for office to help a bunch of rich bankers on Wall Street.”
“They’re still confused why people are so angry with the banks. Well, let’s see,” he said during the television interview in 2009.
“You guys are collecting $10 million to $20 million in bonuses after America had its worst economic year in decades and you guys caused the problem.”
An “opaque” stress test
Fifteen years later, JPMorgan is not the only major bank that is now willing to make public its dissatisfaction with certain central bank measures.
For example, David Solomon, CEO of Goldman Sachs (GS), made his criticism of the US Federal Reserve public after the bank was recently dissatisfied with a stress test result. He described the process as “opaque”.
The Fed asked the Wall Street giant to raise its stress capital buffer by 94 basis points, one of the largest increases among participating banks.
“This increase does not appear to reflect the strategic evolution of our business,” Solomon said.
JPMorgan also disagreed with the result and pointed out in a statement that the Fed had underestimated the amount of losses that would arise in the event of severe shock scenarios – based on the bank’s own weekly stress tests.
“If the company’s analysis is correct, the resulting stress losses would be slightly higher than those reported by the Federal Reserve,” the bank said in a press release.
Another top JPMorgan executive, Marianne Lake, warned that new federal rules limiting overdraft and late payment fees would force the bank to charge fees for services that are currently free.
“The industry is facing a flood of regulatory and potentially legislative changes,” Lake, CEO of JPMorgan’s sprawling consumer bank, told investors in May. “The people who will be most affected by this are ordinary Americans,” she added.
Read more: 5 common banking mistakes that can lead to wasted money
Meeting with Jay Powell
Even though the big banks are becoming more and more aggressive, they have no difficulty taking some of the senior officials of these banks to court.
CEOs of some of the largest banks – including Dimon, Bank of America (BAC) CEO Brian Moynihan and Morgan Stanley (MS) CEO Ted Pick – met with Powell in Washington, DC last month to discuss capital rules and other issues.
The meeting with the Fed chairman, which was arranged by the industry advocacy group Financial Services Forum, was not necessarily unusual. According to Powell’s schedule, it was already the third meeting of the year in which Dimon was also involved.
One took place in person in May, another in January virtually with several other bankers, including Solomon, Moynihan, Charlie Scharf, CEO of Wells Fargo (WFC), and Jane Fraser, CEO of Citigroup (M).
In Washington, however, the question remains how the presidential election in November might affect the approach to regulating these banks.
A victory for Republican Donald Trump could mean a more relaxed attitude, even though his running mate JD Vance said last month that Trump’s agenda “will not cater to the wishes of Wall Street.”
Democratic candidate Kamala Harris, on the other hand, described her tough stance on major banks after the 2008 crisis as one of the biggest assets on her resume.
A key test of how the financial giants fare next year will be whether regulators approve Capital One’s (COF) $35 billion purchase of Discover (DFS). The deal would make Capital One the largest credit card provider in the U.S., bigger than JPMorgan in that regard, and the sixth-largest U.S. bank.
At a public meeting last month, critics said the deal would hurt consumers and create another bank that was too big to fail. Democrat Maxine Waters called on regulators to block the deal, while Capital One CEO Richard Fairbank argued for approval.
“This acquisition promotes financial stability and increases competition in the industry, while providing significant new benefits to the communities in which we operate,” he said.
No matter what happens in November, a recent Supreme Court decision in June may have strengthened the position of banks hoping for a change in certain federal regulations.
The Supreme Court struck down a 40-year-old legal doctrine that gave federal agencies latitude in interpreting laws, removing regulators’ ability to intervene in many industries, including financial services.
“This decision opens the door for banks to challenge regulations more aggressively in court,” Kairong Xiao, associate professor at Columbia Business School, told Yahoo Finance.
“The last time there was substantial deregulation in the financial sector was during the global financial crisis of 2008,” he added.
David Hollerith is a senior reporter for Yahoo Finance, covering banking, cryptocurrency, and other areas of finance.
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