The heads of seven of the largest U.S. banks came before the House Financial Services Committee Wednesday after weeks of preparations for a battle with House Democrats. But much of the questioning fell flat, with Democrats’ barbs largely missing the mark or revealing a surprising lack of knowledge of the business of the big banks.
As a case in point, Financial Services Committee Chairwoman Maxine Waters pressed the executives on the burgeoning crisis of student loans. Total student-loan debt now exceeds $1.5 trillion, making it the second largest category of consumer debt after home loans. Over a million borrowers default on student loans each year. If current default trends continue, close to 40 percent of borrowers are expected to default on their student loans by 2023, according to a Brookings Institute study.
“What are you guys doing to help us with this student loan debt? Who would like to answer first? Mr. Moynihan, big bank,” Waters asked, directing her question first to Bank of America CEO Brian Moynihan.
“We stopped making student loans in 2007 or so,” Moynihan said.
“Oh, so you don’t do it anymore. Mr. Corbat?” Waters said, turning her attention to Citigroup CEO Michael Corbat.
“We exited student lending in 2009,” Corbat said.
It fell to JPMorgan Chase CEO Jamie Dimon to break the news to Waters that the big banks are no longer in the business of making student loans. The federal government forced commercial banks out of the student loan business back in 2010. The Department of Education now makes almost all student loans directly.