Bank CEOs Increasingly Concerned: Is a Recession Looming?

Citigroup CEO Jane Fraser joins a growing number of bank CEOs in cautioning about challenging times ahead. Although Fraser does not anticipate a dramatic downturn in the near future, she did express concerns about an impending recession during her prepared remarks released by the Senate Banking Committee on Tuesday, ahead of an annual hearing on Wall Street oversight scheduled for Wednesday.

The recession may be caused by factors such as persistent inflation in services, increasing levels of debt, a global growth slowdown, and conflicts in Europe and the Middle East.

Fraser cautioned lawmakers that Citi data indicates a decrease in consumer spending, which is supported by recent government data. Additionally, those with the lowest credit scores are taking on the highest levels of debt since 2019.

CNN

American consumer spending has been a crucial factor in sustaining the economy during the pandemic. However, recent data suggests that this trend may be changing. According to Bank of America CEO Brian Moynihan, consumer spending appears to be stabilizing, although he noted that overall consumers are still in relatively good financial shape.

Last week, JPMorgan Chase CEO Jamie Dimon warned Americans to prepare for a recession. He also indicated that the Federal Reserve is currently working on achieving a soft landing, which involves controlling inflation without causing a significant spike in the unemployment rate.

During the 2023 New York Times DealBook Summit in New York, he warned about the potential dangers and inflationary risks. "It's important to be prepared," he emphasized. He also mentioned the possibility of interest rates rising, which could potentially lead to a recession.

During the hearing on Wednesday, Fraser publicly addressed for the first time a Consumer Financial Protection Bureau investigation. The investigation alleges that the bank unlawfully discriminated against Armenian Americans for years by targeting them on credit card applications based on their last names.

"We sincerely apologize to the Armenian American community for not meeting our fair lending expectations," Fraser stated, emphasizing that Citi has taken steps to rectify the situation and prevent it from happening again.

Apart from Dimon, Fraser, and Moynihan, legislators will also receive testimony from the CEOs of Wells Fargo, State Street, BNY Mellon, Goldman Sachs, and Morgan Stanley.