Sen. Brown Calls for Big Banks to Reinvest Tax Cut Benefits

BROWN DEMANDS BIG BANKS USE TAX CUTS TO BRING BACK US JOBS

Major Banks that Have Laid Off Workers, Sent Jobs Overseas are
Now Benefitting from Major Tax Windfall

Tuesday, May 8, 2018

WASHINGTON, DC — U.S. Senator Sherrod Brown (D-OH) — Ranking Member on the Senate Banking, Housing and Urban Affairs Committee — today wrote letters to six big bank CEOs demanding they produce plans for how they will reinvest in American workers and bring offshored jobs back to the US. The Senator's call comes as the biggest banks, have increased CEO pay and stock buybacks, while also raking in record profits and benefitting from massive tax cuts.

“Rather than use their massive tax windfalls to invest in American workers, big banks are instead using their tax cuts to line the pockets of top executives and shareholders after shipping US jobs overseas and laying off American workers. These banks need to provide Congress and the American people with detailed strategies on how their companies plan to reinvest in US workers and their communities,” said Brown. “American taxpayers shouldn't be footing the bill for to Wall Street banks that fired workers or sent jobs overseas.”

According to a recent report by the Communications Workers of America and the Committee for Better Banks, America's big banks have slashed jobs in the US while also moving and keeping jobs overseas. In fact, the nation's largest banks cut at least 8,000 jobs over the second half of 2017, including many in the call center and customer service industry. In many cases, these layoffs of American workers have come as banks are outsourcing work to overseas facilities.

Bank of America in 2013 cut 1,100 jobs in Ohio when the bank closed a customer service mortgage center in Cleveland and two smaller centers in Independence and Cincinnati. The bank offshored its business support activities to the Philippines in 2012.

Citigroup has since the financial crisis reportedly relocated call centers to overseas locations and was among the American-based corporations that relied on the Philippines for back office operations.

Goldman Sachs expanded back office operations in Bangalore, India from 300 workers in 2004 to 5,000 in 2017 to support banking operations worldwide.

JPMorgan Chase laid off 1,000 U.S. workers and announced plans to slash at least 5,000 jobs, or 2% of its workforce, by the end of 2016.

Morgan Stanley has shifted operations from U.S. cities to locations such as India and Hungary in an effort to cut $1 billion worth of costs by 2017.

Wells Fargo earlier this year announced plans to close 900 branches. This followed a 2017 decision to close a Lehigh Valley, Pennsylvania call center, eliminating 460 jobs and also announced it was building a second call center in the Philippines that would seat more than 7,000 workers.

Brown has introduced the Patriot Corporation Act, which would cut taxes only on corporations that invest in workers and keep jobs in the US.

Copies of Senator Brown's letters to the big banks can be found below:

• Brown's letter to Bank of America

• Brown's letter to Citigroup

• Brown's letter to Goldman Sachs

• Brown's letter to JP Morgan Chase

• Brown's letter to Morgan Stanley

• Brown's letter to Wells Fargo

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May 7, 2018

Brian T. Moynihan
Chief Executive Officer
Bank of America
100 North Tryon Street
Charlotte, NC 28255

Dear Mr. Moynihan:

I write to express my concerns about the continued layoffs of American workers and outsourcing of U.S. jobs by the bank you manage. Though banks are among the biggest winners from the recent partisan tax bill and ongoing unraveling of financial protections, firms like yours continue to view workers as just another cost to be cut to further juice profits. Meanwhile, executives and shareholders are enjoying record compensation packages and stock buybacks. I, therefore, write to request that your bank produce a public plan to invest a far greater share of your company's resources in American jobs.

As noted in a recent report by the Communications Workers of America and the Committee for Better Banks,¹ banks have continued to slash jobs in America and also move and keep jobs overseas. Although changes to bank employee levels have not been uniform, overall, the nation's largest banks have cut at least 8,000 jobs over the second half of 2017, including many in the call center and customer service industry.² In many cases, these layoffs of American workers come as banks are outsourcing work to overseas facilities.

Bank of America has both laid off U.S. workers and outsourced jobs. According to your FR Y-9 C financial statements, Bank of America reduced the number of full-time employees by more than 35,000 between 2013 and 2017.³ Some of those layoffs occurred in the U.S. In 2013, your bank cut 1,100 jobs in Ohio when the bank closed a customer service mortgage center in Cleveland and two smaller centers in Independence and Cincinnati.⁴ The year before, your bank offshored its business support activities to the Philippines in 2012.⁵

These job cuts and offshoring come at a time when banks are making record profits⁶ and have just received a huge gift in the form of the partisan tax bill signed into law in December 2017.⁷ In fact, banks as a sector are among the biggest winners from the tax bill.⁸ Recent analysis examining the impact of the bill found that the six biggest banks, including yours, will save nearly $14 billion in 2018 alone.⁹ According to Goldman Sachs Global Investment Research, the partisan tax bill wall reduce Bank of America's effective tax rate by 10 percentage points and increase the bank's net income by $3.5 billion and earnings per share by 16 percent in 2018 alone.¹⁰

Instead of investing in your U.S. workforce, your bank seems to be using this golden age of profitability to further boost its stock price. In mid-2017, you announced planned buybacks of up to $12 billion through mid-2018.¹¹ Last year, you paid out 92% of your earnings to shareholders.¹²

These payouts do little to help workers — either yours or others throughout the economy. Even when accounting for indirect ownership of stocks via 401 (k) retirement plans or similar investment vehicles, only around half of American households own any shares of public companies.¹³ For those who do own shares, ownership is highly concentrated among the wealthiest households. The richest 10 percent of households in the U.S. controlled 84 percent of all stocks.¹⁴ One analysis estimates that only 6 percent of the corporate tax cut will go to workers, while 57 percent will go to shareholders.¹⁵

In addition to benefiting shareholders, using last year's compensation packages as an indicator, the proceeds from the tax cut will overwhelmingly go to big bank executives. You personally received a generous compensation boost in 2017, totaling 15 percent,¹⁶ and your recently released CEO to worker pay ratio was 250 to 1.

Your bank's recent announcements about its investments in its workers do not provide enough details to compare them to your payouts to shareholders and to your own compensation. Although your bank recently announced a one-time bonus for over 90 percent of its employees,¹⁷ there have been few details on the size of this bonus. Thus, it remains unclear whether the bonus approaches anything close to the $12 billion in buybacks you announced last year.

Furthermore, your bank stands to gain an additional short-term boost from a rolling back of protections established after the financial crisis. The Administration is, at your bank's urging, in the midst of a widespread undoing of financial rules, which will boost your short-term profits substantially. According to a recent Congressional Research Service analysis, your bank could benefit from a $36.1 billion windfall that lets it operate on more borrowed money.¹⁸ As noted in a research report from Morgan Stanley, “the financial industry [will] be the biggest beneficiary of Republican deregulation attempts."¹⁹ However, this will inevitably come at the long-term expense of workers, consumers and investors when the next crisis hits.

As the above-referenced report documents, when times are good, American workers don't fully share in the benefits of your companies' profitability. And when times are bad, it's even worse. Eventually, the unraveling of financial protections for which banks advocate will contribute to another downturn in the economy, and your workers will be the first to suffer the consequences with layoffs and cuts to their pay, healthcare and retirement benefits.

In light of this imbalance and unfairness, I ask that you provide the public with detailed plans on how your company will reinvest in American workers and their communities.

Sincerely,

Sherrod Brown
United States Senator