Senators challenge big banks on low savings interest amid high borrower charges

U.S. Senators Elizabeth Warren and Jack Reed have addressed a letter to the heads of major banks, expressing concerns over their practices related to interest rates on savings accounts. The letter, sent to executives at Wells Fargo, JPMorgan Chase, Bank of America, Citibank, US Bank, Truist, and PNC Bank, highlights the discrepancy between the high interest rates charged to borrowers and the low rates offered to savers.

The issue dates back to March 2022 when the Federal Reserve began increasing the federal funds rate. In response, banks raised borrowing costs for mortgages, auto loans, and credit cards but did not proportionately increase interest payouts on savings accounts. This disparity has allowed these financial institutions to accumulate significant profits.

JPMorgan CEO Jamie Dimon had testified before the Senate Banking Committee in 2022 that savers' rates would rise gradually. However, more than two years later, there has been little change in JPMorgan's savings account interest rates. While JPMorgan's Fed account rates increased from 3.15% to 4.65%, customer savings accounts continue to earn only 0.01%.

Research by Federal Reserve staff supports claims that large banks have not passed recent interest rate reductions onto depositors effectively. The gap between federal funds rates and big bank deposit rates is notably larger compared to regional and community banks.

The senators are seeking detailed responses by February 14, 2025, regarding how these banks have managed yields from higher interest rates and how executives and shareholders have benefited from such profits.