Posted on

What Counts as Race Discrimination? A Suit Against JPMorgan Is a Test

Over 18 years of working as a secretary at JPMorgan Chase, Wanda Wilson had learned to brush aside remarks directed at her race.

“Wanda, do you mind if I tell a Black joke?” a colleague once asked her. Another co-worker told her that she disliked Black people in general but made an exception for Ms. Wilson.

Ms. Wilson saw no reason to complain. JPMorgan had been a good employer, giving her opportunities to rise through the secretarial ranks and providing assistance during a fraught time in her personal life. She felt proud defending her career to her family, which included several prominent civil rights activists. (Her mother is the poet Amina Baraka, and her stepfather was Amiri Baraka, the playwright and poet. Her younger brother is Ras Baraka, the mayor of Newark.)

But things soured in 2016 after a new colleague began to bully Ms. Wilson and order her around, according to a lawsuit Ms. Wilson filed against JPMorgan and its chief executive, Jamie Dimon. For the first time, Ms. Wilson felt that she was not on equal footing with her white colleagues, according to the suit. She complained to JPMorgan officials, but the bank’s response shattered her faith in her employer, she said. After she was unable to find a different job within JPMorgan, the bank fired her. She then sued, alleging race discrimination and retaliation and seeking an unspecified amount in damages.

JPMorgan said its officials had done everything in their power to make things right for Ms. Wilson. “The firm denies that it engaged in any race discrimination or harassment or retaliation with respect to Ms. Wilson’s employment,” said Joe Evangelisti, a JPMorgan spokesman.

The bank tried to have the lawsuit, filed in 2018, dismissed. This month, a judge ruled that the two sides should engage in mediation instead.

Wall Street has come under growing scrutiny for how it treats people of color, and Black employees in particular. Last year, The New York Times detailed allegations of racism at Phoenix-area branches of JPMorgan. Recently, a former head of global diversity at Morgan Stanley, a Black woman, sued the bank for discrimination.

Credit…Seth Wenig/Associated Press

But while such cases claim broad and systemic discrimination involving banks, Ms. Wilson’s lawsuit tells the complicated story of interactions between co-workers that can carry racist undertones. It shows how allegations of racism in a workplace can be difficult to verify, even when a company conducts an investigation. That’s especially so in the absence of explicit language or actions — such as a racial slur or blackface — that are easily identifiable as racist.

“This isn’t the ’60s or the ’50s,” said David Carlor, a financial adviser who is Black. “No one’s going to tell you: ‘Because you’re Black, go get us coffee.’ You’re just going to find that you’re the one that’s being treated most disrespectfully in the office.”

At JPMorgan, Ms. Wilson was often the first to arrive and the last to leave, according to three of her former colleagues, who spoke on the condition of anonymity. She got lunch and coffee for her superiors and ran errands that seemed well outside her job description, like buying a mirror for her boss’s office.

In March 2016, Ms. Wilson joined the audit department as an executive administrative assistant — a coveted position among secretaries because it involved handling duties for one senior executive in that department.

Around the same time, Janet Jarnagin was also assigned to Ms. Wilson’s boss as a team leader. A midlevel executive, Ms. Jarnagin’s duties included helping the audit department prepare presentations and reports, according to a publicly available résumé.

Over the next few months, Ms. Jarnagin began ordering Ms. Wilson to hang coats, get coffee and lunch, or carry out requests — such as making photocopies — by visitors to the department, according to the lawsuit.

Once, Ms. Jarnagin stood up from her desk and announced that she was “sending Wanda out for coffee,” asking if anyone else wanted to place an order with her. Other Black secretaries who had overheard Ms. Jarnagin later teased Ms. Wilson about being treated like Kizzy, an enslaved character in the book and television mini-series “Roots.”

Ms. Wilson said that she asked Ms. Jarnagin not to use the term “sending” any more, but that Ms. Jarnagin ignored her. Ms. Wilson described the incident in a 2017 interview with a JPMorgan official, a recording of which she provided to The Times.

In her lawsuit, Ms. Wilson described how Ms. Jarnagin had been making these demands only of her — the lone Black secretary in the vicinity. She tried to distance herself. When she rearranged her desk so that the two women no longer had an unobstructed view of each other, Ms. Jarnagin mocked her for trying to build a “Mexican wall” out of a stack of folders on her desk, according to the lawsuit.

Ms. Wilson complained about Ms. Jarnagin to their boss, who told her to work things out on her own, according to the complaint. She then told a human resources representative that Ms. Jarnagin was ordering her around and bad-mouthing her work. JPMorgan’s Mr. Evangelisti said the bank had begun investigating Ms. Wilson’s complaints immediately.


Credit…Chang W. Lee/The New York Times

Henry Klingeman, a lawyer for Ms. Jarnagin, dismissed the allegations. “In the high-intensity, high-stress world of New York banking, Janet was no more rude than a male employee who is assertive,” he said in an email. “That she asked an administrative assistant to get coffee for senior management is one of the criticisms made against her. There is nothing to this, much less implied racism.”

Ms. Wilson eventually emailed Mr. Dimon: “I have followed the chain of command and have not received any assistance.” Mr. Dimon did not personally respond, but her complaint was promptly shared with senior bank officials who stepped up their investigation.

Bank officials interviewed people in the immediate vicinity of Ms. Wilson and Ms. Jarnagin, two people familiar with the investigation said. The investigators determined that Ms. Jarnagin had behaved rudely toward Ms. Wilson. However, since Ms. Jarnagin had been rude in the past to other employees who were not Black, they concluded that her behavior was not racially motivated, the people said.

Mr. Evangelisti said the officials’ conclusions had been “based on information provided by Ms. Wilson at the time.”

Ms. Jarnagin was given two “coaching” sessions, including one by her boss, the people said. She was never formally disciplined, but was advised to treat Ms. Wilson more gently, they said. Ms. Jarnagin left JPMorgan in November 2017.

JPMorgan officials also did a broader “climate study” of the area where Ms. Wilson worked, the people familiar with the matter said. The study concluded that there did not appear to be a problem with racism.

However, two Black employees interviewed for the study, who did not want to be identified for fear of retaliation, told The Times that race was a constant undertone in their interactions with non-Black employees. One said Black secretaries felt it was harder for them to get promotions, and they believed they were underpaid. But the Black employees said they downplayed the racism they witnessed to bank officials, partly because it wasn’t directed at them.

JPMorgan officials have recently acknowledged that some employees still do not feel safe speaking up. In March, the bank announced that it had reviewed its anti-discrimination practices and identified several areas for improvement.

Things didn’t improve for Ms. Wilson after her complaint.

Mr. Evangelisti said JPMorgan gave her nearly a year to search for a new job inside the bank as well as a raise and bonus during that time. Ms. Wilson said the only job the bank offered her was a role working for a man who had become enraged at her over a disagreement with her boss when she worked in the audit department.

Mr. Evangelisti said the role would have come with the same title, grade and compensation as her prior job, “but Ms. Wilson declined the role and refused to provide any context about an ‘unpleasant exchange’ she claims to have had.”

Read More

Posted on

Paid Time Off, Free Fries: How Corporate America Is Getting Out the Vote

Bank of America is offering employees up to three hours of paid time to vote this year. The spirits company Diageo North America has declared a no-meeting day on Nov. 3. Best Buy is closing stores until noon that day, and PayPal is offering a half day, paid, to workers who volunteer at polling places.

Less than two weeks before the general election, corporate America is having a civic awakening, with thousands of companies encouraging voter participation by offering their workers paid time off, voter-education tools and interactive sessions on how elections work. Some are even providing marketing and free legal advice to local election boards or nonprofit get-out-the-vote groups.

“Companies can’t do everything, but we can function in civil society in a way that really helps to encourage and enable civic participation,” said Franz Paasche, head of corporate affairs at PayPal, where the efforts have varied from paid time off to hosting a speaker series on elections.

Two years ago, when executives from PayPal, Patagonia and Levi Strauss founded Time to Vote, a nonpartisan project that asks companies to encourage workers to participate in elections, there were around 400 members. In recent weeks, membership has shot up to more than 1,700. A similar initiative, called A Day for Democracy, has attracted more than 350 companies since it began with seven Boston-area companies in July., sponsored by the nonprofit organization, has gathered pledges from more than 800 companies promising employees paid time to vote.

Most companies are quick to say that their goal isn’t to wade into politics or get any particular candidate into office. Rather, many executives say that they were galvanized by recent upheavals that have put issues of race and gender discrimination, economic inequality, climate change and other topics at center stage for employees and customers, and voting is a way to take a stand.

Keep up with Election 2020

“The Black Lives Matter and the civil unrest has been a call to arms for C.E.O.s in terms of informing corporate behaviors and civic actions,” said Peter Palandjian, a private-equity executive in Boston who started A Day for Democracy with commitments from the Red Sox and Bank of America. “And I think that’s what’s very different this year.”

Earlier this week, Goldman Sachs announced that it would give workers up to half a day off to vote, paid, for the first time. Other companies that have offered paid time to vote in the past, including Citi and Gap Inc., have announced that they’re providing additional paid hours if needed as well as voter-education resources this year.

The extra hours are likely to be necessary given that a record turnout is expected this year, which could mean long lines and additional safety procedures in light of the pandemic. In anticipation, Diageo North America, which owns brands like Guinness and Smirnoff, is changing course and allowing employees to take whatever time they need to vote without a written request. Previously, employees were given up to two hours of paid time off to vote, which they had to request in advance. The company also plans to set up a team for workers to call if they run into any trouble casting their ballots, said Laura Watt, its executive vice president of human resources.

Some companies are hoping to encourage voter turnout in general. Shake Shack is giving away free french fries to customers who vote early. Tory Burch, the clothing label, designed a T-shirt that reads “VOTE,” the proceeds from which go to a nonpartisan get-out-the-vote project called I Am a Voter. Coca-Cola dispatched a team of marketers to create public-service announcements on the importance of early, in-person voting that ran on radio, television and at bus shelters around its home state of Georgia; broadcast spots featured the voices of Ed Bastian, chief executive of Delta, the Atlanta Hawks forward Cam Reddish and other local celebrities.

Corley Kenna, who runs communications at Patagonia and co-founded Time to Vote, took advantage of additional benefits her employer is providing this year to work at election sites in Atlanta, her hometown, with two colleagues. Between morning and afternoon shifts at the State Farm Arena and the Southwest Arts Center this month, she caught up on work.

“I think it is on all of us — the private sector, nonprofit, academia — to help provide safe and secure elections,” said Ms. Kenna, a Democrat and environmental advocate who was a senior adviser in the State Department under President Obama.

Credit…Audra Melton for The New York Times

Old Navy, the biggest brand owned by Gap, said it would pay employees to be poll workers, on top of what they get paid by county election commissions. The retailer said it hoped its policy would fuel voter turnout among its young store staff, more than 60 percent of whom are between the ages of 18 and 29. Levi’s extended its paid time off for voting to poll worker training this year and has been featuring environmental and racial justice activists on its Instagram account to talk about voting.

The push by retailers and restaurant chains is significant because it can be especially difficult for hourly workers to find time to vote. After health care, retail is the second-biggest private sector employer in the United States.

In addition to making sure that their efforts are not being seen as partisan externally, companies have been careful about how they communicate internally. Diageo North America has been holding weekly events in the run-up to the election with the African heritage group and women’s network, for example, discussing the issues at stake for their communities, but in a “neutral way,” Ms. Watt said. “We’ve been very clear about not being partisan or not having a particular view leaning one way or another,” she said.

Still, not every company is being so proactive. Workers at Amazon, who have been pushing unsuccessfully for a paid day off to vote, are threatening to shut down warehouses temporarily on Oct. 31 if the e-commerce giant doesn’t meet their demands. And on Thursday,, a digital platform that helps people register to vote online and provides information about polling sites, called on more than two dozen companies that have not yet committed to giving workers time off to do so. It cited Pew Research Center statistics from 2014 showing that in the past, 35 percent of registered voters didn’t vote because of work or school conflicts.

Tory Burch, which employs nearly 3,000 people in the United States, was one of the few companies offering employees paid time off to vote in 2016, when its founder wrote an op-ed encouraging other company bosses to do the same. At the time, fellow chief executives, some from Fortune 500 companies, told Ms. Burch that they couldn’t follow suit because doing so would be regarded as a partisan act, intended to favor Democratic candidates.

The feedback was “eye opening,” Ms. Burch recalled, given that “encouraging Americans to use their vote is patriotic and not a Democratic initiative.” This year, she is closing all stores and offices on Nov. 3 and encouraging her staff to volunteer as poll workers, believing that the employee good will it generates far outweighs the lost revenue.

In a note to employees Thursday morning reminding them of their options to take paid time off to vote, Jamie Dimon, the chief executive of JPMorgan Chase, talked about the importance of a smooth political process.

“The peaceful and stable transition of power — whether it is to the second administration of a president or a new one — is a hallmark of America’s 244-year history as an independent nation,” Mr. Dimon wrote, adding that while he acknowledges the “tremendous passion and strong opinions” that have played into the current race, respecting the democratic process “is paramount.”

Michael Corkery and Karen Weise contributed reporting.

Read More

Posted on

Bank Earnings Show Diverging Fortunes on Wall Street and Main Street

Hundreds of thousands of small businesses are closing for good. Temporary layoffs at larger companies are becoming permanent. But the country’s largest banks, which together serve a majority of Americans through loans, credit cards or deposit services, are not raising an alarm.

In their third-quarter earnings reports this week, big banks have said they are generally prepared for a wave of loan defaults they expect in the second half of next year. And their own fortunes are just fine: A trading and investment banking bonanza on Wall Street is helping them stay profitable.

A few common themes have emerged from the reports.

The pandemic has made for a turbulent year across a wide range of markets, but all the trading that investors have done in response has kept the revenue rolling into the banks.

Goldman Sachs reported strong markets revenue on Tuesday, helping it generate profits of $3.62 billion — far surpassing analyst expectations of $2 billion. Trading of bond products linked to interest rates, corporate credit, mortgages, and the prices of oil and other commodities lifted the bond division’s quarterly revenue 49 percent higher from the same period last year. In stocks, divisional gains were 10 percent.

In a call with analysts, Goldman executives said some of the boom had come because the firm increased its share of trading activity on behalf of the market’s 1,000 biggest money managers and other active traders who give business to Wall Street.

Goldman’s asset-management operations benefited from a rally in stock prices as well. A rise in the value of its positions in companies like the online commerce platform BigCommerce (up more than 40 percent since its shares began trading in August) and the medical equipment maker Avantor (up nearly 30 percent this year) helped the division generate 71 percent more revenue.

But it was not just Goldman that benefited. Bank of America’s investment banking business had the second-best performance in its history in the third quarter, trailing only this year’s second quarter, according to the bank’s chief financial officer. At JPMorgan Chase, trading revenue rose 21 percent and investment banking revenue 52 percent from a year earlier.

Credit…Justin Sullivan/Getty Images

Steeling themselves for widespread defaults by customers unable to pay credit-card, home-loan or other debts because of the pandemic, the biggest banks have sent vast sums of cash into special pools they will draw from to cover losses in the future. But in general, the banks say, their customers are doing better than they expected.

The reason? Bank officials pointed to the trillions of dollars the federal government has distributed in the form of enhanced unemployment benefits, forgivable small-business loans and other programs created this spring by the CARES Act.

“Recent economic data has been more constructive than we would have expected earlier this year,” JPMorgan’s chief financial officer, Jennifer Piepszak, said on a call with journalists on Tuesday. “Over all, consumer customers are holding up well. They have built savings relative to pre-Covid levels and, at the same time, lower debt balances.”

This quarter, the banks each set aside less money than in previous quarters to prepare for losses. Bank of America and JPMorgan Chase said their credit-card customers were making their payments again.

The bank with the most strained customers seems to be Wells Fargo, which said it had spent nearly $1 billion trying to help customers who were struggling to repay their loans come up with new payment plans to keep them from defaulting. Even so, the bank said, its borrowers are less likely to fall behind now than they were earlier this year.

While government relief programs have prevented serious problems so far in the financial sector, none of the banks are banking on more stimulus.

In their economic forecasting, each bank takes a range of possible outcomes into account, from better than expected to doomsday. On Wednesday, Bank of America’s chief financial officer, Paul Donofrio, said just one of the scenarios it was looking at might contain more stimulus money. And that model is based on a consensus of various Wall Street economists’ forecasts; the bank’s own internal models aren’t counting on further relief.

JPMorgan’s economic forecast accounts for the effects of a government stimulus package only until the end of 2020. No more stimulus is built into its models for 2021.

The bank’s chief executive, Jamie Dimon, and his peers have all pointed out that the industry is grappling with a great deal of uncertainty about the future. JPMorgan might be overprepared if the economy fares better than expected — but a worst-case scenario could still expose the bank to heavy losses.

Although his bank is not expecting further federal relief next year, Mr. Dimon said another round of stimulus would be important.

“There are still 12 million people unemployed. There is still a lot of pain and suffering. There are still a lot of small businesses that need help,” he said.

Indeed, calls for more government aid to struggling businesses are growing, even as an impasse in Washington seems unlikely to end as Election Day draws near.

On Wednesday, a former Goldman Sachs executive, Gary Cohn — who served for a year as President Trump’s economic adviser — urged lawmakers to get a deal done quickly.

“This isn’t a matter of politics, this is a matter of protecting our economy as we know it,” Mr. Cohn wrote on Twitter.

Posted on

Wait, Wall Street Is Pro-Biden Now?

The suspense surrounding the next round of fiscal stimulus — will there or won’t there be a deal — has whipsawed markets this week. Investors first pushed stocks up on news of progress between Congress and the White House, only to pull back on Tuesday when President Trump said on Twitter that there would be no fresh stimulus. Mr. Trump then backtracked, demanding that Congress pass a relief bill, pushing the market up again.

But beneath the volatility, which reflects investors’ reaction to short-term developments, a subtle shift is occurring on Wall Street. Investors and analysts have begun to take into account the possibility that Mr. Trump’s time in the White House may soon be over, as Democratic presidential candidate Joseph R. Biden Jr. continues to pull ahead in polls just weeks before the election.

And that is producing some optimism on Wall Street, because many investors believe that the higher Mr. Biden climbs in polls, the lower the chance of a contested presidential election. An election with no clear winner and the fading prospects of another round of stimulus are two of the biggest threats to market stability.

Mr. Trump’s chaotic behavior in the first presidential debate, and his diagnosis of Covid-19 just days later, have been followed by polls showing Mr. Biden rising in several key swing states. On Wednesday, a new Quinnipiac University poll found that, among likely voters in the swing states of Florida and Pennsylvania, Mr. Biden had widened his lead over the president to 11 percentage points and 13 percentage points.

Also on Wednesday, the S&P 500 closed up 1.7 percent. The index has risen 2.5 percent since the first debate on Sept. 29. The market moves aren’t huge, but analysts say they are meaningful reflections of investors’ thinking at this point.

The outcome of the first debate increased “the odds of first Joe Biden becoming president, but also in line with the Democrats also taking the Senate,” said Shahab Jalinoos, global head of macro strategy with Credit Suisse in New York. “That’s obviously been a tailwind for markets since.”

Unified Democratic control in Washington is not usually high on Wall Street’s wish list, as it is associated with increased regulation and taxes. And some investors continue to have mixed feelings about a potential Biden agenda, which calls for higher taxes on corporations and the wealthy.

But largely, investors are of the view that a “blue wave” victory — in which Democrats retain the House of Representatives and retake the Senate as well as the presidency — represents the best chance to get another large injection of federal money into an economy that continues to struggle. Economists and policymakers, including the Federal Reserve chair, Jerome H. Powell, say such assistance is sorely needed, as job growth stalls, layoffs mount and temporary furloughs turn into permanent cuts.

Credit…John Taggart for The New York Times

To tease out the underlying views of investors, analysts at JPMorgan Chase & Company recently assembled baskets of shares in companies they see as potential winners or likely losers in the event of a Biden victory.

Stocks of companies in the “winners” basket included industries such as health care, renewable energy, infrastructure and companies likely to benefit from better trade relations with China. Such companies could benefit from Mr. Biden’s support for the Affordable Care Act, which has funneled significant amounts of federal dollars into the health care industry. Infrastructure, engineering and renewable energy companies could also benefit from a major stimulus push, aimed in part at countering climate change.

Potential “losers” included companies with large numbers of minimum wage workers, defense contractors and energy companies, among others. Mr. Biden’s agenda calls for raising the minimum wage to $15 an hour, and weapons makers have been beneficiaries of the Trump administration’s focus on increasing sales of American weapons overseas.

Since early September, “the Democrat Agenda Outperformers have gained 10 percent relative to the Underperformers baskets, suggesting the U.S. equity markets have been pricing in a higher probability of a Biden Presidency,” the JPMorgan analysts wrote in a research note published last week.

In the government bond market, yields on long-term Treasury bonds — which have been languishing at some of the lowest levels on record — have moved sharply higher over the last week. That suggests some are pricing a combination of faster economic growth, higher inflation and rising government deficits over the future. (Treasury bond prices tend to fall during periods of fast economic growth, pushing yields — which move in the opposite direction — higher.)

For one, a clear victory for Mr. Biden cuts down on the chance of a contentious period after the Nov. 3 election that extends political uncertainty into the foreseeable future. In recent weeks, the possibility of a contested election — or even an outright constitutional crisis — was being priced into markets as Mr. Trump repeatedly refused to commit to a peaceful transfer of power.

The statements pushed jittery investors to cut back on their stock market risk over the last month. Starting in early September, the S&P fell for four consecutive weeks, coming close to dropping 10 percent. The likelier Mr. Biden is to notch a conclusive victory, the greater the amount of risk of political uncertainty that investors can take off the table.

“The cleaner the win, then the less likely that there is a disputed election,” said Mr. Jalinoos, of Credit Suisse. “Once you downgrade that risk, it tends to be a market positive.”

In recent days, Wall Street analysts have written that the likely large flood of federal stimulus that would follow a “blue wave” could cushion the blow of higher taxes by helping to increase economic growth more than previously expected.

“It would sharply raise the probability of a fiscal stimulus package of at least $2 trillion shortly after the presidential inauguration on Jan. 20, followed by longer-term spending increases on infrastructure, climate, health care and education that would at least match the likely longer-term tax increases on corporations and upper-income earners,” wrote analysts at Goldman Sachs this week.

Read More

Posted on

Despite Billions in Fees, Banks Predict Meager Profits on P.P.P. Loans

Loath to be seen profiting from the economic disaster caused by the coronavirus, the nation’s biggest banks were quick to pledge that they would donate to charity any money earned from helping deliver the government’s signature small-business relief plan.

That promise may be something of a mirage.

The banks that were the largest lenders under the Paycheck Protection Program, handing out government-backed loans and collecting a fee from taxpayers for their trouble, now say their expenses were so high that they expect to make next to nothing on the loans.

At JPMorgan Chase, the chief financial officer, Jennifer Piepszak, said on a quarterly earnings call in July that profit from the program “will be near zero.” Her counterpart at Bank of America, Paul M. Donofrio, said he did not expect much profit, “if any.”

The $525 billion program handed banks at least $13 billion in fees, according to a New York Times analysis of data from the Small Business Administration. The agency, which managed the program, has not released detailed fee information, and few banks have disclosed how much they took in. Their true profits won’t be known until the loans, which will be forgiven if borrowers meet certain criteria, are all paid off or resolved.

But some banks are already saying their profits will be eaten up by the costs they incurred to make the program work, including all-nighters and rushed technology projects during four frenzied months of lockdowns and business closures.

Others, including many smaller lenders, expect the revenue from the program to pad their profits.

It’s not clear why some banks are anticipating profits and others aren’t. Calculating their costs is nearly impossible because the program was so unusual, said Saul Martinez, a managing director at the investment bank UBS. Pressured by the Trump administration to get money out the door quickly to legions of desperate businesses, banks paid overtime to squadrons of employees and hired consultants and technology vendors to help.

“How much profit a bank will make is a hard thing to gauge,” Mr. Martinez said. “You can kind of guess the revenue impact, but it’s harder to figure out the cost side. Some of the banks said they invested a lot and spent a lot of money. That’s hard to verify.”

The government paid banks a sliding fee ranging from 5 percent on loans of up to $350,000 to 1 percent for loans larger than $2 million. On the program’s average loan — of $100,729 — a lender would make just over $5,000.

The government has not disclosed the total amount it paid to banks, but some details can be gleaned from government data disclosing the program’s 5.2 million loans in broad ranges. Collectively, the 5,460 lenders took between $13.7 billion and $20.9 billion, according to the Times analysis. The Small Business Administration declined to comment.

Economists think the actual number is toward the upper end of that range, because most of the program’s loans — more than 87 percent, according to the Small Business Administration — were on the smaller side, generating higher percentage fees. A research group from the University of Massachusetts Amherst’s Political Economy Research Institute, for example, estimated the banks’ total haul at $19 billion.

Analysts at Keefe Bruyette & Woods, an investment bank, believe the median fee paid to banks was around 3 percent. At that rate, JPMorgan — the program’s largest lender, distributing $29 billion to more than 280,000 businesses — would have collected fees of $881 million. Bank of America, which gave nearly $26 billion to 340,000 businesses, would have received $767 million.

Bank of America, JPMorgan, Citibank and Wells Fargo, the nation’s four biggest banks, all pledged not to profit from the program. Brian Moynihan, Bank of America’s chief executive, told NPR, “We just have to cover our costs, and then we’ll give the money to programs that we have to support small business and communities throughout the country.”

Credit…Eduardo Munoz/Reuters

But the program’s expenses were also high, the big banks said. Bank of America devoted 10,000 employees to making loans at the program’s peak, Mr. Moynihan said in July, and expects the next stage of the program — helping companies through the paperwork to have their loans forgiven, if they qualify — to be complicated and time consuming.

The fees his bank collected are “not insignificant,” Mr. Moynihan acknowledged, but “there’s a lot of cost against it.”

While the big banks said they expected their costs to wipe out their profits, some smaller banks have acknowledged a windfall: Analysts at S&P Global Market Intelligence identified 88 community banks whose Paycheck Protection Program fees are likely to surpass the bank’s entire revenue for last year. (One of them, Cross River Bank, became one of the program’s largest lenders by making loans for dozens of financial technology companies.)

Zions, one of the rare banks to break down its lending in detail, said it anticipated fees of $210 million to $220 million on its $7 billion in loans. That money will be “a nice cushion for us” amid a decline in lending because of the pandemic, said Scott J. McLean, the bank’s president.

Zions will profit from the program, but it, too, incurred heavy costs, said James Abbott, a bank spokesman. Loan officers and technology teams worked 24 hours a day in shifts, and the bank spent “tens of millions of dollars” on outside vendors and consultants, he said. Still, Zions said it would donate $30 million of its fees from the program to its charitable foundation.

Bank of America and JPMorgan declined to comment on what charitable donations, if any, they plan to make with their proceeds. (Each has made other large corporate donations in response to the pandemic.)

Some nonprofits, though, are starting to reap the rewards that banks promised. Citi, which made loans totaling $3.5 billion, has so far donated $25 million it earned in fees to the Citi Foundation, which funds community organizations focused on economic empowerment. And Wells Fargo, which is still struggling to rebuild its image after a sales scandal, is funding a philanthropic bonanza.

Wells Fargo is operating under a restriction imposed by the Federal Reserve that curbed its growth, but it struck a deal with the Fed in April to relax the limit so that it could expand its Paycheck Protection Program lending. That agreement required the bank to turn over its “benefits” from the program to either the United States Treasury or nonprofits focused on supporting small businesses.

The bank picked the second option: It is donating about $400 million in loan fees — without subtracting its costs — to a new fund to support Community Development Financial Institutions. Those lenders, known as C.D.F.I.s, focus on underserved communities and play a vital role in funding businesses and entrepreneurs that traditional banks avoid.

Wells Fargo expects to fund about 200 organizations through its donation, said Jenny Flores, the bank’s head of small-business growth philanthropy. Nearly all of the money will be spent within the next year, she said.

The banks have donated in particular to groups focused on Black-led businesses and entrepreneurs of color — a clear response to this summer’s protests over police brutality and systemic racism. Citi directed $15 million of its donation to C.D.F.I.s to support minority-led businesses and those in low- and moderate-income communities. Wells Fargo sent $15 million to the Local Initiatives Support Corporation, a nationwide support group, to match crowdfunding loans through the online lending platform Kiva to entrepreneurs of color.

The $13.5 million that Wells Fargo gave to Expanding Black Business Credit, a fledgling venture that is raising a fund to capitalize Black-led businesses, is a game-changer, said Bill Bynum, the group’s chairman.

The team behind Expanding Black Business Credit has been trying to get the project off the ground for four years. Banks including Wells Fargo had provided small grants and technical support, but no investor had been willing to write the first big check to stake the fund, Mr. Bynum said.

“After the health crisis, the economic crisis and now the racial crisis facing the country, a lot of businesses — a lot of banks — have paid more attention to the importance of strong action to close the wealth gaps that disproportionately affect communities of color,” he said. “We hope Wells Fargo’s infusion of support will inspire others to step up in a substantial way.”

Read More

Posted on

Coronavirus Tests the Leadership Style of Goldman Sachs’s C.E.O.

David M. Solomon started 2020 on his back foot.

Mr. Solomon had been on the job as chief executive of Goldman Sachs, perhaps Wall Street’s most storied and vilified institution, for just over a year, working to broaden the bank’s offerings by pursuing lines of business that his predecessors had long avoided.

But his Main Street push had failed to impress shareholders. After Goldman’s investor day in January, the bank analyst Mike Mayo described some of these moves, including a credit card offered in partnership with Apple, as “somewhere between a distraction and a moonshot” and added that he didn’t know of a single investor who had bought Goldman’s stock for those reasons.

If stockholders were scratching their heads at the direction of the bank under Mr. Solomon, employees weren’t much clearer on what kind of leader he was. Lloyd C. Blankfein, the previous chief executive, was seen as a coolheaded strategist who had steered Goldman through the 2008 financial crisis. Mr. Solomon, a spare-time disc jockey, had a reputation for being blunt and pragmatic, but also intuitive and flexible.

Then, as Mr. Solomon was still getting situated, the pandemic hit, presenting him with the biggest leadership challenge — and opportunity — of his short time atop the bank. The crisis has shown Mr. Solomon to be a deft navigator who quickly adapted to changes that caught some of his bank’s bigger competitors flat-footed. But it brought an unforced error by Mr. Solomon that underscored the perils of a fun-loving attitude he has viewed as an asset when dealing with Goldman’s young work force.

Other challenges remain, including investigations by U.S. prosecutors and bank regulators into Goldman’s role in helping raise billions of dollars for 1MDB, a Malaysian sovereign wealth fund that some officials used as a personal piggy bank. A framework for the settlement with the U.S. authorities has been reached but not finalized, a person familiar with the matter said. Prosecutors declined to comment.

When New York City went into lockdown in March, Mr. Solomon sent most of the bank’s 40,000 employees home immediately and blessed the firm’s procurement of thousands of monitors and landline phone systems for use in home offices. He also got on hundreds of Zoom calls with clients to reassure them that Goldman would help see them through their mounting obstacles — and not necessarily for a fee.

Credit…September Dawn Bottoms/The New York Times

Goldman’s early embrace of working from home helped traders capitalize on surging market activity in the first and second quarters. Their efforts pushed the firm’s stock and bond-trading revenues to recent records, while minimizing disruptions and encouraging worker loyalty. By contrast, JPMorgan Chase and Bank of America stumbled initially as they struggled to ready backup sites and, in some cases, created an atmosphere in which trading-floor workers felt pressured to go to the office.

“David has done a solid job navigating the Covid crisis,” said Justin Gmelich, a partner at the hedge fund King Street and longtime Goldman markets executive before that. He praised the firm’s flexible work-at-home policies and the insights that analysts and traders had provided him as a client, although he said he had concerns about the talent pool because at least a half-dozen senior traders had left the bank since Mr. Solomon’s ascension.

With nearly half the bank’s employees under the age of 30, his messaging appears attuned to the mores of a changing finance industry. Already, Mr. Solomon — a yogi and music lover — had brought a different vibe to the job, ripping up the firm’s stodgy dress code and talking about bringing one’s “whole self” to work. In managing Goldman’s response to the virus, he is also becoming an unlikely poster boy for a softer era on Wall Street, where personal well-being can take precedence over profits and displaying anxieties isn’t a matter of embarrassment.

Mr. Solomon, 58, did stumble into a minor scandal recently while indulging his favorite hobby. Last month, he took the stage to D.J. at a concert in New York’s affluent Hamptons beach community, while a large crowd partied in close quarters. The gathering drew the ire of Gov. Andrew M. Cuomo, who demanded an investigation. A spokesman for the state’s health department said the inquiry was continuing.


Credit…Kevin Mazur/Getty Images for Safe & Sound

Credit…Kevin Mazur/Getty Images for Safe & Sound

In two separate meetings with Goldman Sachs partners and members of the firm’s management committee after the event, he acknowledged that he had made a mistake, according to two people familiar with the matter.

And while he has long said that mixing and recording music is an enjoyable outlet that helps him connect with Goldman’s younger generation, some of the firm’s directors raised concerns last summer about the optics of his hobby, the people said. In side conversations, some directors have suggested that golf might be a better alternative, one of those people said.

“David admits it was a mistake to participate, and he’s told people at the firm that,” a Goldman spokesman, Jake Siewert, said of the Hamptons concert. Mr. Siewert added that Mr. Solomon had put live events on hold for the foreseeable future but planned to continue recording electronic music.

Since the earliest days of the coronavirus, Mr. Solomon had been watching it make its way from China to the United States and worried about its potential economic impact. In early February, he spoke with David Tepper, a well-known stock investor and Goldman alumnus, who had read a dire forecast for the virus in the medical journal The Lancet. The two were at a Super Bowl event in Miami, and Mr. Tepper said he had come to believe the illness could hobble the United States.

“I was struck by the fact that he was more worried than I was, and I was worried,” Mr. Solomon recalled. He began working on larger-scale contingency plans.

By the end of February, Mr. Solomon’s senior team was holding regular 6:30 a.m. meetings to discuss what Goldman should do to safeguard both its employees and its business if the virus spread more widely.


Credit…September Dawn Bottoms/The New York Times

Credit…September Dawn Bottoms/The New York Times

In March, after the coronavirus was declared a pandemic and most of Goldman’s workers went home, Mr. Solomon chose to go into the office daily. To lead, he said, was to show up physically.

“For me, it doesn’t seem right the C.E.O. of Goldman Sachs goes out to, you know, a country house, a suburb or some other place, and is not in charge, in the office, because that’s what we do,” he said in a phone interview in late June.

Mr. Solomon’s approach to the crisis has been a contrast to some of his peers. James Gorman, the chief executive of Morgan Stanley, worked remotely until early July, worried that returning to the office would put undue pressure on employees to follow suit. A visit to the trading floor by Bank of America’s chief executive, Brian Moynihan, early in the outbreak led some employees to question their decisions to work from home. (A bank spokeswoman said that was not the intent.)

“The message from David on down was so clear, that there were no questions asked, it didn’t matter,” said Jen Roth, 39, who runs the firm’s U.S. currencies and emerging markets business, about Goldman’s quick approval of work-from-home plans. Ms. Roth, who had never worked a single day from home until this year, set up shop in a bathroom of her parents’ suburban Philadelphia house — one of the few available rooms with a lockable door to field client calls with her spouse, children and parents nearby.

Zachary Fields, a 26-year-old associate in one of Goldman’s investing businesses, worked from his high school desk from his parents’ home in Delray Beach, Fla. “As long as I have a Wi-Fi connection, access to my computer, and Bluetooth headphones and videoconferencing, I can do my job,” he said.

But Mr. Solomon’s request this summer that some employees return to the office has led to grumbling among those who think a longer stretch of working from home is warranted. Others, however, would like to see Mr. Solomon encourage even more people to resume working from the office and have expressed those views to the C.E.O., a person familiar with the matter said.

The bank hasn’t determined when to bring all its workers back, but it won’t be this fall given the ongoing uncertainty about the virus, Mr. Siewert said.

For now, with everyone dispersed, Mr. Solomon has sought new ways to keep in touch with workers.

“Your jobs are safe during this crisis,” he said in an audio message distributed to the firm’s workers on April 2, noting that Goldman would provide additional family leave to employees. He attended an after-work “geek-out” session for employees on the topic of winemaking, and sipped the wine under discussion as he watched. All 150 participants had received the same bottle from the bank.


In late May, after a Black man, George Floyd, was killed by a white police officer, touching off nationwide protests over racial injustice, Mr. Solomon encouraged employees to speak more openly about race and intolerance. Fred Baba, a managing director in the firm’s markets division, responded with an email to a small group of colleagues discussing his experience with racism and describing the previous few months as “demoralizing.”

The email, which argued for mentoring people of color and supporting minority-owned business, soon inspired a Goldman podcast with Mr. Baba and an op-ed article on Bloomberg. Mr. Solomon also convened an emotional town-hall meeting on race, during which he choked up as Black partners shared their anguish over police violence toward Black people.

Mr. Solomon believes more openness will pay off. He recently held a virtual meeting with eight drug-industry chief executives in which they discussed race and the health crisis in a way, he said, that felt more frank than usual.

“We’re all being much more vulnerable as we’re trying to lead our people,” he said. “I think that’s effective leadership, and it’s working.”

Matthew Goldstein contributed reporting.

Read More

Posted on

Interest Rates Are Low, but Loans Are Harder to Get. Here’s Why.

As public school teachers, Tori Smith and her husband have careers that should survive the coronavirus economy, but their mortgage lender wasn’t taking any chances.

It told them that they would have to put down more money to keep the interest rate they wanted, then dialed back what it was willing to lend them. And Ms. Smith said it had checked their employment status several times during the approval process — and again a few days before the couple closed on their home in Zebulon, N.C., last month.

Ms. Smith said she had never gotten a straight answer about the new requirements, but she ventured a guess. “I felt like we had to bring more just because of Covid,” she said.

The economic crisis caused by the pandemic has driven interest rates to rock-bottom levels, meaning there has hardly been a better time to borrow. But with tens of million of people out of work and coronavirus infections surging in many parts of the country, qualifying for a loan — from mortgages to auto loans — has become more trying, even for well-positioned borrowers.

Lenders that have set aside billion of dollars for future defaults have also tightened their standards, often requiring higher credit scores, heftier down payments and more documentation. Some, such as Wells Fargo and Chase, have temporarily eliminated home equity lines of credit, while Wells Fargo also stopped cash-out refinancing.

It’s not unusual for lenders to tighten the credit reins during a downturn, but the current situation has made it especially challenging for them to get an accurate read on consumers’ financial health. Borrowers have been able to pause mortgages, halt student loan payments and delay paying their tax bills, while millions of households have received an extra $600 weekly in unemployment benefits. Those forms of government support could be masking an underlying condition.

“It makes it hard for a lender to understand what the consumer’s true state of credit quality is and their ability to pay back a loan,” said Peter Maynard, senior vice president of global data and analytics at the Equifax credit bureau.

Credit card companies, for example, mailed out 57 million offers to consumers in June, a historic low and down from 272 million a year earlier, according to Mintel, a research firm that has been tracking the offers since 1999. Some banks have stopped offering the types of cards that attract people who may be focused on paying down debt, such as BankAmericard, Mintel found.

Issuers are also being careful with cards belonging to current customers, said Mark Miller, associate director of insights for payments at Mintel.

“Some dormant accounts are being closed,” he said. “So if they have a credit card sitting in a drawer, those accounts are at risk of being closed, and credit lines with a $10,000 limit may eventually be knocked down to $8,000.”

For auto loans, borrowers with lower credit scores and thin credit histories face more rigorous requirements and less generous terms, including shorter loan periods.

“Subprime borrowers are not getting loans as readily as they were pre-pandemic or a year ago,” said Jonathan Smoke, chief economist at Cox Automotive, referring to consumers with credit scores below 620.

Interest rates for new and used vehicles remain low — below 4 percent at many banks and credit unions — but only for more qualified borrowers, said Greg McBride, chief financial analyst at

“Good credit and a down payment are required to get the best rates, with weaker credit increasingly sidelined — particularly for older-model used car purchases,” he said.

Ford Motor said it hadn’t tightened standards on loans through its financing unit, but last month it introduced a program to make wary borrowers more comfortable. Those who buy or lease a car through Ford’s financing unit before Sept. 30 can return it within a year if they lose their jobs. Ford said it would reduce the customer’s balance by the vehicle’s book value, and then waive up to an additional $15,000.

If that measure is meant to stoke demand, no such program is necessary for home buyers.

For the first time in nearly half a century of tracking, 30-year fixed-rate mortgages averaged about 2.98 percent, according to Freddie Mac. The mortgage industry made $865 billion in loans during the second quarter, the highest amount since 2003, when quarterly originations twice topped $1 trillion, according to Inside Mortgage Finance, a trade publication.

And that’s with lenders being picky about their customers and particular about their requirements. JPMorgan Chase, for example, will make mortgages to new customers only with credit scores of 700 or more (up from 640) and down payments of 20 percent or higher. USAA has temporarily stopped writing jumbo loans, which are mortgages that are generally too large to be backed by the federal government, among other products. Bank of America said it had also tightened its underwriting, but declined to provide details.

Ms. Smith and her husband, Philip Ellis, had hoped to go through a first-time homebuyer program at Wells Fargo that would require them to put down 3 percent. They even sat through a required educational course. But two weeks before closing on their $205,000 home, their lending officer said they needed to put down 5 percent to keep their rate.

A week later, Ms. Smith said, they learned their loan was for less than what they had been preapproved for — and they needed to come up with an additional $4,000. In the end, their down payment and closing costs exceeded $14,000 — about 45 percent more than they had anticipated.

The couple, who had married in April, used money recovered from their canceled wedding reception. Ms. Smith said they were also lucky to have the support of their families, who fed and sheltered them so they could save every penny. But the stability of their jobs was also most likely a crucial factor.

“I think our ability to secure the loan was due to us both being schoolteachers and having a contract for employment already for the following year,” she said.

Wells Fargo said it hadn’t increased its credit score requirements, but it has raised down-payment minimums on certain loans not backed by the government because it had to suspend most interior appraisals of homes during the pandemic. Even under normal circumstances, there are a variety of situations in which borrowers may be asked to raise their down payment or obtain a better rate by doing so, a company spokesman said.

Some lenders also want to know more about borrowers’ other possible sources of cash.

When Chris Eberle, a technology executive, and his wife were locking in their jumbo mortgage for a new home in Palo Alto, Calif., their lender, a California mortgage bank, wanted to know not only how much they had in their retirement accounts but how easy it was to get at that money.

“They wanted, account by account, details on the withdrawal and loan options,” Mr. Eberle said.

And they, too, had to put down more than they had planned. Before the crisis, a jumbo loan could be had with 10 percent down. Mr. Eberle said they had to put down 20 percent — and found a cheaper house to make it easier.

Other borrowers, including the self-employed, are being asked to provide more detailed proof of their earnings — at least when they’re getting a loan that will be backed by Fannie Mae or Freddie Mac. .

“Employment and income verification for self-employed borrowers is now multiple times more detailed as it previously was,” said Ted Rood, a loan officer in St. Louis who lends nationally.

Income verification is also more rigorous across the board, and Mr. Rood said he was required to do two verifications over the phone. It makes sense, he said: He had just prepared a loan for a married couple — a gym owner whose income had suffered and his wife, a speech therapist with a seemingly more stable position because she was able to work with clients remotely.

“We were set to close on a Monday in early June,” said Mr. Rood, who was working at Bayshore Mortgage Funding, which is based in Timonium, Md., at the time. But when the loan processor called the wife’s employer the Friday before, the processor learned that the woman had been laid off.

The lender withdrew the loan.

Read More

Posted on

Businesses Are Supposed to Cut Debt in a Downturn. Why Not Now?

Since the 2008 global financial crisis, American corporations have taken advantage of historically low interest rates to gorge themselves on debt. Then came the pandemic and the sharpest economic downturn in history, which resulted in an odd solution for the companies that did all that borrowing: more debt.

Through late June, giant U.S. companies had borrowed roughly $850 billion in the bond markets this year, double the pace from last year. Analysts at JPMorgan Chase anticipate that investment-grade companies will borrow roughly $1.6 trillion from investors by the time 2020 is over.

It has turned conventional wisdom on its head.

“During a standard recession, and that would include the global financial crisis as well, you would expect to see corporate debt as a percentage of G.D.P. begin to come down,” said Paul Ashworth, chief U.S. economist at Capital Economics, a consulting firm.

The increased borrowing can be traced, in part, to the actions of the Federal Reserve. The central bank slashed interest rates back to rock-bottom levels, making it attractive for businesses to refinance and borrow more to build a cushion of cash. But an even bigger factor was the Fed’s announcement — in the heat of March’s market upheaval — that it would buy corporate bonds.

Investors have been so emboldened by the Fed’s actions that even companies viewed as especially risky are having no problem borrowing heavily despite a deeply uncertain economic recovery marked by spiking infections and rolled-back reopenings.

“Now they have, like, a second life,” said Steven Chylinski, head of fixed-income trading at Eagle Asset Management in St. Petersburg, Fla.

Heavily indebted companies — with below-investment-grade, or junk, credit ratings — issued a record $48 billion in new bonds in June alone. They included Abercrombie & Fitch and Sirius XM Radio.

Other companies that were shunned by investors a few months ago because of the threat of the virus are likewise finding no shortage of willing lenders. Hotel companies like Marriott and Hilton have borrowed hundreds of millions of dollars, the online travel company Expedia borrowed more than $2.5 billion, and the concert company Live Nation borrowed over $1 billion.

Long-term strategy has effectively gone out the window, on both sides: Some investors feel free to ignore the risks of lending to companies that are focused on surviving the crisis and figuring the rest out later.

“Do they have a viable business going forward? Maybe or maybe not,” Mr. Chylinski said. “But if they didn’t have this Fed facility and the confidence that the Fed gave the market, they wouldn’t have been able to come to the market and borrow.”

The borrowing has been a boon for Wall Street, providing a rare bright spot for banks that are setting aside billions of dollars in case consumers and corporations become unable to cover their debts. Banks collect hefty fees for squiring these bonds to market, and quarterly earnings reports last week showed remarkable increases in investment banking revenue over a year earlier, including 91 percent at JPMorgan Chase. Citigroup said its underwriting business for investment-grade bonds was up 131 percent from the same time last year. Goldman Sachs reported record numbers for debt underwriting, “reflecting a significant increase in industrywide volumes.”

[embedded content]

Corporate debt has been growing steadily since the last financial crisis. Back then, the Fed slashed interest rates to near zero — and kept them there. For the next decade, there was little reason not to pile up debt: Stocks climbed ever higher, and corporate earnings more than made up for the borrowing, even as rates began to creep up. Since 2008, corporate debt held by nonfinancial companies has increased 92 percent, to nearly $6.8 trillion. (Financial firms aren’t considered because they typically borrow money to relend it, which could result in a kind of double counting.)

The pandemic’s blindside hit immediately changed the way investors looked at that pile of debt.

Bondholders sprinted to sell, fearing that even the most bulletproof companies wouldn’t be able to pay their debts. Benchmark corporate bond indexes plummeted about 5 percent in a matter of days in one of the sharpest drops in the market’s recent history.

It threatened to set off a full-blown crisis. Bond yields, which move in the opposite direction of prices, soared. Those yields are used to calculate the cost of new borrowing, such as the short-term loans that companies use to pay for basics like payroll and inventories. There was a danger that many companies — even those feeling no ill effects from the virus — wouldn’t be able to pay their bills.

The Fed took drastic measures to break the doom loop. On March 15, in a highly unusual Sunday announcement, the central bank cut interest rates to near zero. After another terrible week — the worst for stocks since the 2008 financial crisis — the Fed said it would buy corporate bonds for the first time in its history.

That seemed to do the trick. Within days, the government’s unlimited buying power virtually eliminated the panic.

“There’s the feeling there that, even if we were to have another big sell-off, the Fed would step in and do more if they have to,” Mr. Chylinski said.

Surging bond prices have pushed yields down sharply. By some measures, they’re hovering at some of lowest levels on record, meaning it has never been cheaper for companies to borrow.

[embedded content]

At first, only the bluest of blue-chip corporations were able to open investors’ wallets. Nike borrowed $6 billion. The energy subsidiary of Warren E. Buffett’s Berkshire Hathaway borrowed $2 billion. McDonald’s, Deere and Pfizer loaded up on billions more.

But the trickle became a flood, as investment-grade companies borrowed record amounts in March, April and May, when they issued more than $230 billion in debt, according to Dealogic.

Soon even the riskiest borrowers were again welcome in the market, which some critics argue might be a problem with the Fed’s approach.

The low costs of borrowing will inevitably keep some companies alive that would otherwise have gone bankrupt this year, creating a class of so-called zombie companies that stagger along but are too weak to invest and grow while sucking up cash that could be put to better use elsewhere. After Japan’s economic crash in the early 1990s, such companies were long seen as a contributor to the country’s economic stagnation.

But most market analysts say visions of American corporate zombies are far less frightening than the economic cataclysm the country was facing back in March.

And for now, the Fed’s actions have transformed the fear that racked investors into opportunity — perhaps bordering on greed — as they race to buy riskier bonds with higher payoffs.

Daniel Krieter of BMO Capital Markets called this a “yield grab” trading environment. Investors are clamoring for big returns, and the pieces are in place to support it.

“There’s demand for all this kind of debt out there,” he said.

Read More

Posted on

Banks Stockpile Billions as They Prepare for Things to Get Worse

Three of the nation’s biggest banks revealed Tuesday that they had set aside billions of dollars to cover potential losses on loans, signaling that they don’t expect consumers and corporations to be able to pay their debts in the coming months as the pandemic continues to gut employment and commerce.

Collectively, JPMorgan Chase, Citigroup and Wells Fargo have put aside $25 billion during the second quarter, they said. As a result, their quarterly profits plunged. It was Wells Fargo’s first quarterly loss since 2008.

Bank executives said government aid had so far cushioned the economic fallout from the coronavirus pandemic, which sent millions of workers home beginning in March as cities and states began to shut down. These federal programs, meant to help tide Americans over the worst of the crisis, include a $600 weekly supplement to unemployment benefits. But as the programs begin to expire in the coming months, banks expect their loan losses to mount because defaults will probably rise.

“We’ll expect to gain more visibility on the damage that we’re dealing with over the coming months,” Jennifer Piepszak, JPMorgan’s chief financial officer, said on a conference call with journalists on Tuesday.

Banks, especially the nation’s largest, have a view into almost every aspect of the economy, thanks to their businesses making home and auto loans, issuing credit cards and lending to small and medium-size businesses, as well as their Wall Street operations. Their forecasts use insights gleaned from these activities and take into account data from the Federal Reserve, so their actions can be an important gauge of the overall financial health of individuals and businesses.

“The banks are pessimistic about the course of the recovery,” said Gabriel Chodorow-Reich, associate professor of economics at Harvard University. “The banks don’t see a rapid recovery over the next six months — they see a protracted recession.”

JPMorgan is preparing for the unemployment rate to remain in double digits for the rest of the year. Wells Fargo, too, set its unemployment forecast for 10 percent until the end of 2020. Its chief executive, Charles W. Scharf, said the bank’s views “on the length and severity of the downturn deteriorated substantially” over the past three months.

Credit…Chang W. Lee/The New York Times

The Fed warned this month that consumer spending was likely to remain depressed into next year and that there was a serious chance of a double-dip downturn that could permanently scar the American labor force.

JPMorgan’s profit for April, May and June fell to $4.7 billion, just under half of what it earned a year earlier, even as its revenue came in at nearly $34 billion — a record and up from just over $29 billion in the second quarter of 2019.

The bank set aside nearly $11 billion to the pool of money it keeps ready to cover any losses, $9 billion more than last year, bringing its total credit reserves to near $34 billion. Of the new addition to the reserves, almost $6 billion was designated to handle losses on loans to consumers, including credit cards.

  • Frequently Asked Questions

    Updated July 7, 2020

    • What are the symptoms of coronavirus?

      Common symptoms include fever, a dry cough, fatigue and difficulty breathing or shortness of breath. Some of these symptoms overlap with those of the flu, making detection difficult, but runny noses and stuffy sinuses are less common. The C.D.C. has also added chills, muscle pain, sore throat, headache and a new loss of the sense of taste or smell as symptoms to look out for. Most people fall ill five to seven days after exposure, but symptoms may appear in as few as two days or as many as 14 days.

    • Is it harder to exercise while wearing a mask?

      A commentary published this month on the website of the British Journal of Sports Medicine points out that covering your face during exercise “comes with issues of potential breathing restriction and discomfort” and requires “balancing benefits versus possible adverse events.” Masks do alter exercise, says Cedric X. Bryant, the president and chief science officer of the American Council on Exercise, a nonprofit organization that funds exercise research and certifies fitness professionals. “In my personal experience,” he says, “heart rates are higher at the same relative intensity when you wear a mask.” Some people also could experience lightheadedness during familiar workouts while masked, says Len Kravitz, a professor of exercise science at the University of New Mexico.

    • I’ve heard about a treatment called dexamethasone. Does it work?

      The steroid, dexamethasone, is the first treatment shown to reduce mortality in severely ill patients, according to scientists in Britain. The drug appears to reduce inflammation caused by the immune system, protecting the tissues. In the study, dexamethasone reduced deaths of patients on ventilators by one-third, and deaths of patients on oxygen by one-fifth.

    • What is pandemic paid leave?

      The coronavirus emergency relief package gives many American workers paid leave if they need to take time off because of the virus. It gives qualified workers two weeks of paid sick leave if they are ill, quarantined or seeking diagnosis or preventive care for coronavirus, or if they are caring for sick family members. It gives 12 weeks of paid leave to people caring for children whose schools are closed or whose child care provider is unavailable because of the coronavirus. It is the first time the United States has had widespread federally mandated paid leave, and includes people who don’t typically get such benefits, like part-time and gig economy workers. But the measure excludes at least half of private-sector workers, including those at the country’s largest employers, and gives small employers significant leeway to deny leave.

    • Does asymptomatic transmission of Covid-19 happen?

      So far, the evidence seems to show it does. A widely cited paper published in April suggests that people are most infectious about two days before the onset of coronavirus symptoms and estimated that 44 percent of new infections were a result of transmission from people who were not yet showing symptoms. Recently, a top expert at the World Health Organization stated that transmission of the coronavirus by people who did not have symptoms was “very rare,” but she later walked back that statement.

    • What’s the risk of catching coronavirus from a surface?

      Touching contaminated objects and then infecting ourselves with the germs is not typically how the virus spreads. But it can happen. A number of studies of flu, rhinovirus, coronavirus and other microbes have shown that respiratory illnesses, including the new coronavirus, can spread by touching contaminated surfaces, particularly in places like day care centers, offices and hospitals. But a long chain of events has to happen for the disease to spread that way. The best way to protect yourself from coronavirus — whether it’s surface transmission or close human contact — is still social distancing, washing your hands, not touching your face and wearing masks.

    • How does blood type influence coronavirus?

      A study by European scientists is the first to document a strong statistical link between genetic variations and Covid-19, the illness caused by the coronavirus. Having Type A blood was linked to a 50 percent increase in the likelihood that a patient would need to get oxygen or to go on a ventilator, according to the new study.

    • How can I protect myself while flying?

      If air travel is unavoidable, there are some steps you can take to protect yourself. Most important: Wash your hands often, and stop touching your face. If possible, choose a window seat. A study from Emory University found that during flu season, the safest place to sit on a plane is by a window, as people sitting in window seats had less contact with potentially sick people. Disinfect hard surfaces. When you get to your seat and your hands are clean, use disinfecting wipes to clean the hard surfaces at your seat like the head and arm rest, the seatbelt buckle, the remote, screen, seat back pocket and the tray table. If the seat is hard and nonporous or leather or pleather, you can wipe that down, too. (Using wipes on upholstered seats could lead to a wet seat and spreading of germs rather than killing them.)

    • What should I do if I feel sick?

      If you’ve been exposed to the coronavirus or think you have, and have a fever or symptoms like a cough or difficulty breathing, call a doctor. They should give you advice on whether you should be tested, how to get tested, and how to seek medical treatment without potentially infecting or exposing others.