[House Hearing, 116 Congress]
[From the U.S. Government Publishing Office]




                     HOLDING MEGABANKS ACCOUNTABLE:
                    AN EXAMINATION OF WELLS FARGO'S
                       PATTERN OF CONSUMER ABUSES

=======================================================================

                                HEARING

                               BEFORE THE

                    COMMITTEE ON FINANCIAL SERVICES

                     U.S. HOUSE OF REPRESENTATIVES

                     ONE HUNDRED SIXTEENTH CONGRESS

                             FIRST SESSION

                                 __________

                             MARCH 12, 2019

                                 __________

       Printed for the use of the Committee on Financial Services

                            Serial No. 116-7
                            
                            
               [GRAPHIC(S) NOT OMMITTED IN TIFF FORMAT]             
                            
                            
                                  ________
                       
                       U.S. GOVERNMENT PUBLISHING OFFICE
                
36-462 PDF                     WASHINGTON: 2019




                            

                 HOUSE COMMITTEE ON FINANCIAL SERVICES

                 MAXINE WATERS, California, Chairwoman

CAROLYN B. MALONEY, New York         PATRICK McHENRY, North Carolina, 
NYDIA M. VELAZQUEZ, New York             Ranking Member
BRAD SHERMAN, California             PETER T. KING, New York
GREGORY W. MEEKS, New York           FRANK D. LUCAS, Oklahoma
WM. LACY CLAY, Missouri              BILL POSEY, Florida
DAVID SCOTT, Georgia                 BLAINE LUETKEMEYER, Missouri
AL GREEN, Texas                      BILL HUIZENGA, Michigan
EMANUEL CLEAVER, Missouri            SEAN P. DUFFY, Wisconsin
ED PERLMUTTER, Colorado              STEVE STIVERS, Ohio
JIM A. HIMES, Connecticut            ANN WAGNER, Missouri
BILL FOSTER, Illinois                ANDY BARR, Kentucky
JOYCE BEATTY, Ohio                   SCOTT TIPTON, Colorado
DENNY HECK, Washington               ROGER WILLIAMS, Texas
JUAN VARGAS, California              FRENCH HILL, Arkansas
JOSH GOTTHEIMER, New Jersey          TOM EMMER, Minnesota
VICENTE GONZALEZ, Texas              LEE M. ZELDIN, New York
AL LAWSON, Florida                   BARRY LOUDERMILK, Georgia
MICHAEL SAN NICOLAS, Guam            ALEXANDER X. MOONEY, West Virginia
RASHIDA TLAIB, Michigan              WARREN DAVIDSON, Ohio
KATIE PORTER, California             TED BUDD, North Carolina
CINDY AXNE, Iowa                     DAVID KUSTOFF, Tennessee
SEAN CASTEN, Illinois                TREY HOLLINGSWORTH, Indiana
AYANNA PRESSLEY, Massachusetts       ANTHONY GONZALEZ, Ohio
BEN McADAMS, Utah                    JOHN ROSE, Tennessee
ALEXANDRIA OCASIO-CORTEZ, New York   BRYAN STEIL, Wisconsin
JENNIFER WEXTON, Virginia            LANCE GOODEN, Texas
STEPHEN F. LYNCH, Massachusetts      DENVER RIGGLEMAN, Virginia
TULSI GABBARD, Hawaii
ALMA ADAMS, North Carolina
MADELEINE DEAN, Pennsylvania
JESUS ``CHUY'' GARCIA, Illinois
SYLVIA GARCIA, Texas
DEAN PHILLIPS, Minnesota

                   Charla Ouertatani, Staff Director
                   
                   
                   
                   
                   
                   
                   
                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on:
    March 12, 2019...............................................     1
Appendix:
    March 12, 2019...............................................    79

                               WITNESSES
                        Tuesday, March 12, 2019

Sloan, Timothy J., President and Chief Executive Officer, Wells 
  Fargo & Company................................................     5

                                APPENDIX

Prepared statements:
    Sloan, Timothy J.............................................    80

              Additional Material Submitted for the Record

Waters. Hon. Maxine:
    ``The Case for Holding Megabanks Accountable: An Examination 
      of Wells Fargo's Egregious Consumer Abuses,'' report 
      prepared by the Democratic Staff of the Financial Services 
      Committee, dated September 29, 2017........................   190
    Letter from the National Association of Consumer Advocates, 
      dated March 11, 2019.......................................   228
    Article from The New York Times entitled, ``Wells Fargo Says 
      Its Culture Has Changed. Some Employees Disagree.'', dated 
      March 9, 2019..............................................   230
    Article from The Wall Street Journal entitled, ``Wells Fargo 
      Regulators Weigh Executive Shakeup as CEO Heads to 
      Washington,'' dated March 11, 2019.........................   236
Ocasio-Cortez, Hon. Alexandria:
    Data Brief by Make the Road New York and the Center for 
      Popular Democracy entitled, ``Private Detention Industry 
      Expected to Swell from `Zero Tolerance' at the Border,'' 
      dated June 2018............................................   240
Tlaib, Hon. Rashida:
    ``Riding the Stagecoach to Hell: A Qualitative Analysis of 
      Racial Discrimination in Mortgage Lending''................   246
Sloan, Timothy J.:
    Written responses to questions for the record submitted by 
      Chairwoman Waters and Representatives Beatty, Garcia of 
      Illinois, Perlmutter, Porter, Pressley, and Tlaib..........   265
      
      
      

 
                     HOLDING MEGABANKS ACCOUNTABLE:
                    AN EXAMINATION OF WELLS FARGO'S
                       PATTERN OF CONSUMER ABUSES

                              ----------                              


                        Tuesday, March 12, 2019

             U.S. House of Representatives,
                           Committee on Financial Services,
                                                   Washington, D.C.
    The committee met, pursuant to notice, at 10:08 a.m., in 
room 2128, Rayburn House Office Building, Hon. Maxine Waters 
[chairwoman of the committee] presiding.
    Members present: Representatives Waters, Maloney, 
Velazquez, Sherman, Meeks, Clay, Scott, Green, Cleaver, 
Perlmutter, Himes, Foster, Beatty, Heck, Vargas, Gottheimer, 
Gonzalez of Texas, Lawson, Tlaib, Porter, Axne, Casten, 
Pressley, McAdams, Ocasio-Cortez, Wexton, Lynch, Adams, 
Gabbard, Dean, Garcia of Illinois, Garcia of Texas; McHenry, 
Wagner, Lucas, Posey, Luetkemeyer, Huizenga, Duffy, Barr, 
Tipton, Williams, Hill, Zeldin, Loudermilk, Mooney, Davidson, 
Kustoff, Hollingsworth, Gonzalez of Ohio, Rose, Steil, Gooden 
and Riggleman.
    Chairwoman Waters. The Financial Services Committee will 
come to order. Without objection, the Chair is authorized to 
declare a recess of the committee at any time.
    Today's hearing is entitled, ``Holding Megabanks 
Accountable: An Examination of Wells Fargo's Pattern of 
Consumer Abuses.''
    I now recognize myself for 4 minutes to give an opening 
statement.
    Today, we examine Wells Fargo's egregious pattern of 
consumer abuses. Our witness today is Mr. Timothy Sloan, 
President and Chief Executive Officer of Wells Fargo & Company. 
I would like to begin by recounting some of Wells Fargo's 
recent harmful actions of which we are aware.
    Between 2011 and 2016, Wells Fargo fraudulently opened 
millions of unauthorized accounts, costing their customers 
millions of dollars. In September 2016, the Consumer Financial 
Protection Bureau (CFPB), the Office of the Comptroller of the 
Currency (OCC), and the Los Angeles City Attorney imposed a 
collective $185 million fine.
    From 2006 to 2016, the bank charged servicemembers illegal 
fees, failed to disclose their active-duty status in eviction 
proceedings, and unlawfully repossessed their vehicles, 
resulting in a $20 million fine and $10 million returned to 
servicemembers.
    From 2005 to 2016, the bank charged customers for 
automobile insurance policies they did not need, resulting in 
some customers going into default and losing their vehicles.
    From 2013 to 2017, Wells Fargo inappropriately charged 
prospective home loan borrowers fees for extending the period 
for a mortgage interest rate lock. Together, these abuses led 
to a collective fine of $1 billion by the CFPB and the OCC.
    In 2017, the OCC and the SEC, respectively, found that 
Wells Fargo or its subsidiary failed to comply with anti-money 
laundering laws. The SEC also found that from 2009 to 2013, 
Wells Fargo advisers unlawfully sold complex financial products 
to retail investors, reducing their investment returns. 
Recently, Wells Fargo self-reported that between 2010 and 2018, 
the bank erroneously denied or failed to offer modifications to 
customers, resulting in over 500 people losing their homes.
    What this long but impartial list makes clear is that Wells 
Fargo is a recidivist financial institution that creates 
widespread harm with a broad range of offenses. What's more, 
this misconduct appears to persist, with The New York Times 
reporting Saturday that Wells Fargo's employees continue to see 
internal rule-breaking to meet aggressive sales goals.
    In 2018, the Federal Reserve Board imposed a cap on the 
bank's growth, which remains in place today. But this 
punishment and the fines imposed have not changed the bank's 
behavior, and Wells Fargo continues to rake in huge profits.
    Also concerning is that Wells Fargo's regulators seem 
unwilling to take forceful actions against the bank, but 
instead are weakening the Dodd-Frank Act safeguards which 
protect consumers and the economy from large firms like Wells 
Fargo. This includes diluting big bank capital liquidity, 
leverage and stress-testing requirements, and the Volcker 
Rule's ban on gambling with taxpayers' deposits.
    This committee will scrutinize what is happening at 
megabanks like Wells Fargo, and at the regulators who oversee 
them. Wells Fargo's ongoing lawlessness and failure to right 
the ship suggests the bank, with approximately $1.9 trillion in 
assets and serving 1 in 3 U.S. households, is simply too-big-
to-manage.
    Mr. Sloan, this committee is putting consumers first and 
holding financial institutions accountable. We will expect you 
to be forthcoming.
    And now, the Chair recognizes the ranking member of the 
committee, the gentleman from North Carolina, Mr. McHenry, for 
4 minutes for an opening statement.
    Mr. McHenry. I thank the gentlelady for yielding.
    For several years now, we have been hearing about all sorts 
of mismanagement and misconduct with Wells Fargo. In fact, just 
yesterday we learned the Securities and Exchange Commission is 
taking due action against your advisory business.
    Each time a new scandal breaks, Wells Fargo promises to get 
to the bottom of it. It promises to make sure it doesn't happen 
again. But then a few months later, we hear about another case 
of dishonest sales practices or gross mismanagement, another 
case of a consumer who has been harmed by the bank's business 
practices.
    In fact, since 2016, the bank has entered into settlements 
with every single one of its Federal regulators: the Consumer 
Financial Protection Bureau; the Commodity Futures Trading 
Commission; the Office of the Comptroller of the Currency; the 
Federal Reserve; and the Securities and Exchange Commission.
    The various settlements required the bank to develop plans 
to identify and remediate customers who were harmed. The orders 
also require the bank to address internal deficiencies. The 
bank is still in the process of complying with the terms of 
those settlements now, 2\1/2\ years since the unauthorized 
account scandal first came to light.
    And we know several of the consent orders are still active 
because of the bank's inability to develop a sufficient 
customer remediation plan. These are the facts.
    In October of last year, Comptroller of the Currency Joseph 
Otting testified before the Senate Banking Committee that the 
OCC was ``not comfortable with Wells' remediation progress to 
date.'' Meanwhile, you announced that the bank is expected to 
remain under the Fed's unprecedented asset cap, at least until 
the end of the year.
    So obviously, the bank has a ways to go before the Federal 
Reserve is satisfied. Furthermore, I am concerned that we don't 
know with certainty how many consumers were affected, what 
business lines were implicated, and the full extent of the 
damage. We still don't have a full picture of how many 
customers were harmed and whether they have been made whole.
    Every single member of this committee has constituents in 
their State who were impacted by Wells Fargo. The bank's 
behavior has real-world consequences. Our constituents should 
be able to trust their own bank. Some of them don't have access 
to an alternative.
    We know you have taken steps in the right direction, Mr. 
Sloan. Some were mandated by regulators, actually, in fact, 
most were mandated by the regulators, and others were imposed 
by you in your 2\1/2\ years as Chief Executive.
    For example, just 3 of the 10 members of the Wells Fargo 
Operating Committee who were in place in February of 2016 
remain there today. You hired a new Chief Risk Officer and a 
new Chief Compliance Officer. That is progress, but obviously 
it hasn't been enough to satisfy your regulators.
    So I want to use this hearing today to get your commitment 
as the leader of this corporation that you will do what is 
necessary to make sure this does not happen again. I want to 
know more about the internal controls you put in place to 
address the history of gross mismanagement.
    I want to know specifically how you are changing the 
culture at Wells Fargo. These bad acts don't conform with the 
strong legacy that I know of Wachovia and First Union in my 
home State.
    Be assured, though, this is not the end of the 
conversation. This is an important hearing, and you will hear 
bipartisan criticism of the actions you have taken and the 
failures that you have overseen under your watch. I yield back.
    Chairwoman Waters. The Chair now recognizes the Chair of 
our Subcommittee on Oversight and Investigations, Mr. Green, 
for one minute.
    Mr. Green. Thank you, Madam Chairwoman. I thank the 
witness, as well.
    Mr. Sloan, you became the CEO of Wells on October 12, 2016. 
We need to know what you know and when did you know it. Here is 
why: On September 8, 2016, the Consumer Financial Protection 
Bureau issued a consent order which found that from January 1, 
2011, to September 8, 2016, thousands of Wells Fargo employees 
opened deposit accounts for existing customers without their 
consent, submitted credit card applications in the names of 
customers without their consent, enrolled customers in online 
banking services without their consent, and requested debit 
cards for customers without their consent.
    The question that we need to have answered is, is there a 
culture of corruption at Wells? I yield back.
    Chairwoman Waters. The Chair now recognizes the 
subcommittee ranking member, Mr. Barr, for one minute.
    Mr. Barr. Thank you, Madam Chairwoman.
    Mr. Sloan, thank you for appearing today, and let me be 
blunt: You are here today because Wells Fargo mistreated and 
defrauded its customers. As a consequence, your bank is 
operating under consent orders and a damaged reputation.
    But Wells Fargo's reputation is not my chief concern. The 
bank's actions have given a voice to those who want to unfairly 
taint the reputation of the entire banking sector, including 
the community bankers who serve the people of Central and 
Eastern Kentucky with the highest of integrity.
    Your bank's misconduct has fueled the kind of unfair, 
hyperbolic, and anti-bank rhetoric that you will hear today, 
which threatens access to capital, job creation, and economic 
growth.
    Today is your chance to convince this committee and our 
constituents that you are going above and beyond to make things 
right and bring your bank in line with industry standards to 
restore not only Wells Fargo's reputation, but the reputations 
of the vast majority of banks in America who serve their 
customers with professionalism, integrity, and the highest 
ethical standards.
    While I recognize you have taken significant steps to 
compensate customers who were harmed, the Fed's asset cap is 
still in place and several consent orders are still active. So 
clearly, there is more work to do. I look forward to your 
testimony, and I yield back.
    Chairwoman Waters. I want to welcome to the committee 
Timothy J. Sloan, President and Chief Executive Officer of 
Wells Fargo & Company. Mr. Sloan has been the Chief Executive 
Officer of Wells Fargo & Company since October 12, 2016, and 
its President since November 17, 2015. Mr. Sloan also served as 
the Chief Operating Officer at Wells Fargo from November 17, 
2015, to October 12, 2016, where he oversaw the community 
banking division that we will be discussing today.
    Prior to his appointment as President and Chief Executive 
Officer, Mr. Sloan held a variety of positions at Wells Fargo 
over his 31-year career at the company, including as Chief 
Financial Officer, and leading the company's wholesale banking 
businesses.
    Without objection, your written statement will be made a 
part of the record. Before we begin, I would like to swear the 
witness in.
    [witness sworn]
    Chairwoman Waters. Thank you. Let the record show that the 
witness answered in the affirmative.
    Mr. Sloan, you will have 5 minutes to summarize your 
testimony. When you have 1 minute remaining, a yellow light 
will appear. At that time, I would ask you to wrap up your 
testimony so that we can be respectful of the committee 
members' time.
    So, Mr. Sloan, you are now recognized to present your oral 
testimony.

 TESTIMONY OF TIMOTHY J. SLOAN, PRESIDENT AND CHIEF EXECUTIVE 
                 OFFICER, WELLS FARGO & COMPANY

    Mr. Sloan. Thank you. Chairwoman Waters, Ranking Member 
McHenry, and members of the committee, good morning, and thank 
you for this opportunity to discuss the transformation at Wells 
Fargo and the progress we are making to work to become the most 
customer-focused and innovative Wells Fargo ever.
    The past few years have been a very difficult time in Wells 
Fargo's storied history. When I became CEO more than 2 years 
ago, our bank was facing unprecedented and well-deserved 
scrutiny. I pledged to look back years to examine every 
business at Wells Fargo to ensure that no similar problems 
existed anywhere else in the company.
    We discovered issues that we needed to address. Every one 
of those was a disappointment to me, but when I stepped into 
this role, I promised that accountability and transparency 
would define our efforts, and they have.
    Above all, Wells Fargo is committed to making things right 
for our customers and to earning back the public's trust. We 
are dedicated to compensating every customer who suffered harm 
because of our mistakes. We continue to proactively identify 
customers, contact them, and compensate them appropriately.
    For the retail sales practices issue, for example, we 
looked back more than 15 years, reviewed 165 million accounts, 
contacted more than 40 million customers via 246 million 
individual communications, and have provided tens of millions 
of dollars in compensation to our customers to date. We are 
taking responsibility for any fees customers should not have 
been charged, and for related effects, such as impacts on 
credit scores.
    Our guiding principle has been to err on the side of 
customers and we are taking an overly inclusive approach in 
doing so. To be sure, getting this right for each customer 
takes time, longer than I would like, frankly. We make every 
effort to refund customers for mistakes as soon as we discover 
them. But mistakes do not affect every customer in the same 
way, so we developed processes for taking customers' individual 
circumstances into account to ensure that we fully compensate 
them.
    Solving past problems is not enough; we must also prevent 
new ones from developing. Our past problems were the product of 
an old decentralized structure, so we have centralized 
enterprise controls including risk, finance, and human 
resources, and have hired impressive new leaders, many from 
outside the company, to oversee them. We have also added more 
than 3,000 new risk professionals. Changes like these enable us 
to avoid errors, identify issues earlier, and address them 
faster.
    Our Board of Directors has undergone a similar 
transformation. In the past 2\1/2\ years, we have refreshed the 
board with seven new independent directors. Our new board 
Chair, Betsy Duke, is a former Federal Reserve Governor and is 
the first woman to Chair a major U.S. financial institution.
    Our corporate culture has substantially improved. Team 
members see this improvement in the elimination of product 
sales goals that contributed to the unauthorized accounts 
problem. They see it in a performance evaluation system that 
prioritizes serving customers and managing risk.
    They see it in enhanced leave and increased compensation, 
including a new $15 per hour minimum wage. They see it in 
restricted stock rights granted to approximately 250,000 team 
members in 2018 to recognize their commitment to the company's 
future success. And they see it in a corporate culture that 
encourages team members to speak up without fear of retaliation 
when they see a problem.
    By the end of 2018, these and other changes helped us bring 
our team member voluntary attrition down to its lowest level in 
6 years. All of this enables us to serve the one-third of 
American households who bank with Wells Fargo.
    I am proud that our customer experience and customer 
loyalty scores are now at their highest levels in the past 2\1/
2\ years. And I am especially proud that Wells Fargo is 
deepening its commitment to underserved communities, including 
$185 billion in commitments to support African-American and 
Hispanic homeownership.
    We are using the resources of a big bank to make a big 
difference. The past few years have reinforced to us that our 
company does well by doing right. And doing right does not stop 
with simply repairing harm and rebuilding trust. We have more 
work to do and that is an ongoing commitment by all of Wells 
Fargo's 260,000 team members, starting with me, to put our 
customers' needs first, to act with honesty and integrity and 
accountability, and to strive to be the best bank in America.
    Thank you again for this opportunity, and I look forward to 
your questions.
    [The prepared statement of Mr. Sloan can be found on page 
80 of the appendix.]
    Chairwoman Waters. Thank you very much.
    Wells Fargo's 2018 10-K reports show that, in accordance 
with the Consumer Bureau's and the OCC's April 2018 auto 
insurance and mortgage rate lock consent orders, the bank 
submitted to the regulators an enterprise-wide compliance plan, 
a plan to enhance the bank's internal audit program, and plans 
to remediate customers affected by these matters. According to 
the consent orders, the required plans are subject to the 
Consumer Bureau's and the OCC's review and determination of 
non-objection.
    Has the OCC indicated its non-objection to the bank's 
compliance audit on customer remediation plans? Has the 
Consumer Bureau indicated its non-objection?
    Mr. Sloan. Madam Chairwoman, I can't respond specifically 
to your question, because that would mean that I would be 
disclosing confidential supervisory information that has been 
shared with us by both the OCC and the CFPB. But I can assure 
you that we are working very constructively with what we have 
in place and we are executing that plan that reflects the 
fundamental changes that I have made since I have become the 
CEO.
    Chairwoman Waters. Thank you very much.
    For those who are listening, I am simply asking whether or 
not the bank is in compliance, based on reviews that are done 
by the OCC and the Consumer Bureau, and you heard that answer--
    Mr. Sloan. We are in compliance with those plans. Excuse 
me.
    Chairwoman Waters. Thank you.
    During an October 2, 2018, hearing before the Senate 
Banking Committee, Comptroller of the Currency Joseph Otting 
testified that the OCC was not comfortable with Wells Fargo's 
remediation progress to date. Has the bank disclosed to 
investors the status of the plans that it submitted to the OCC 
and the Consumer Bureau, including whether the regulators have 
raised any objections to the bank's submitted plans?
    Mr. Sloan. Again, we cannot disclose confidential 
supervisory information in terms of the give-and-take that we 
have with either the OCC or the CFPB. But I can assure you that 
we have plans in place and we--
    Chairwoman Waters. Thank you very much.
    On February 2, 2018, the Federal Reserve, in response to 
recent and widespread consumer abuses and other compliance 
breakdowns, issued an order restricting Wells Fargo's asset 
growth until it sufficiently improves its governance and risk 
management. In announcing the order, the Federal Reserve stated 
that in recent years, Wells Fargo pursued a business strategy 
that prioritized its overall growth without ensuring 
appropriate management of all key risks.
    The firm did not have an effective firm-wide risk-
management framework in place that covered all key risks. This 
prevented the proper escalation of serious compliance 
breakdowns to the Board of Directors. Mr. Sloan, are you aware 
of the Federal Reserve restricting the asset growth of any 
other large bank holding company under its supervision other 
than Wells Fargo?
    Mr. Sloan. No, I am not.
    Chairwoman Waters. Okay. Given the unprecedented nature of 
the Federal Reserve growth restriction which remains in place 
today, is Wells Fargo simply too-big-to-manage?
    Mr. Sloan. No, we are not. And I think that the changes 
that I described in my opening statement in terms of 
fundamentally reorganizing the company, centralizing our risk 
and control functions--
    Chairwoman Waters. Thank you very much.
    Mr. Sloan. --changing leadership--
    Chairwoman Waters. I only have a few minutes here.
    In your October 4, 2017, testimony to the Senate Banking 
Committee, you stated that you have the knowledge, ability, and 
support to make changes at Wells Fargo; indeed, you testified 
that you have been making changes at this company for 30 years, 
including fundamental changes as CEO.
    Since you gave that testimony, Federal regulators have 
announced several enforcement actions relating to customer 
abuses at Wells Fargo. The Federal Reserve, in February 2018, 
imposed, again, an unprecedented asset freeze on the bank. On 
and on and on, with all of this experience and the length of 
time that you have been there, and the roles that you have 
played, you have not been able to keep Wells Fargo out of 
trouble. You keep getting fined. Why should Wells Fargo 
continue to be the size that it is or should it be downsized? 
Or what else could be done?
    Mr. Sloan. Well, I believe that Wells Fargo serves our 70 
million customers and one out of three U.S. households in a 
very effective way today. And I think the way in which we serve 
our customers is reflective of the changes that I have made 
since I have become CEO, not only in terms of the fundamental 
changes that I have mentioned in addressing past issues, but 
also in terms of the new customer capability, customer focus--
    Chairwoman Waters. Thank you very much, Mr. Sloan, I 
appreciate that. All of the changes that you said that you have 
made are not evident. And you do not have the kind of customer 
satisfaction to which you are alluding. Again, is Wells Fargo 
too-big-to-manage?
    With that, I will yield to the gentleman on my right, Mr. 
McHenry.
    Mr. McHenry. Mr. Sloan, I mentioned in my opening statement 
that you have been fined by every one of your Federal 
regulators. You have entered into consent decrees with every 
one of these Federal regulators. So how many consent decrees 
total have you entered into?
    Mr. Sloan. It is my count that we have approximately 14 
that are open right now.
    Mr. McHenry. Fourteen. How many customer accounts are we 
talking about?
    Mr. Sloan. Related to what?
    Mr. McHenry. Well, you define it.
    Mr. Sloan. It depends on the underlying issue. For the 
retail sales practices issue, we engaged an outside third party 
to look at over 165 million accounts, and what we concluded was 
that there could have been, but not necessarily were, up to 3.5 
million accounts that were opened inappropriately.
    Mr. McHenry. Okay.
    Mr. Sloan. We have reached out to those customers, and my 
guess is that once we complete that remediation the number will 
be smaller than that, but I do not know what the number is.
    Mr. McHenry. So, when do you plan to complete that 
remediation on those 3.5 million customers?
    Mr. Sloan. I'm sorry?
    Mr. McHenry. When do you plan to complete that remediation 
for those 3.5 million customers?
    Mr. Sloan. We have completed that remediation for those 
customers. In addition, we have entered into the settlement of 
a class action suit, and customers have an additional 
opportunity to be part of that suit. And then once those 
payments are made, we will have a better idea in terms of 
numbers.
    Mr. McHenry. So, 14 separate consent decrees with your 
regulators. You talk about confidential supervisory 
information, that means you have ongoing conversations with 
your regulators that you can't disclose to us in a public 
setting. We understand the law. We constructed that law, we 
created these regulators, and so that means you have ongoing 
conversations.
    So let me just ask this broad question: You are the CEO of 
a major American company, so does the buck stop with you?
    Mr. Sloan. Absolutely.
    Mr. McHenry. So what are you doing to change your culture? 
In your 2\1/2\ year- reign, I can hold you accountable to the 
public, and your shareholders and your Board of Directors 
should hold you accountable, and are, for your actions as CEO. 
What are you doing to change the culture?
    Mr. Sloan. The first thing that I did when I took the 
responsibility as CEO is to take responsibility for our past 
actions.
    Mr. McHenry. How are you changing that front-line culture, 
those people that my constituents interact with in a branch 
bank in North Carolina, how are you changing that culture? 
Because those are the ones--not North Carolina interestingly, 
but those broadly across your footprint, established Wells 
footprint, those are the ones who took the action. How are you 
changing that culture?
    Mr. Sloan. In our retail banking business, this is what we 
have done. We have changed the leadership. We ended the 
incentive plan that drove inappropriate behavior, we increased 
the amount of training that we give to our team members called 
``Change for the Better.'' We have improved the products and 
services that we have been encouraging them to work with their 
customers over. And we have also delegated more responsibility 
for them in terms of resolving customer issues. The feedback 
that we get from--
    Mr. McHenry. I understand the feedback, we have it in your 
written statement. So can you give me your personal assurance 
that this is the end of customer harm?
    Mr. Sloan. I can't promise you perfection, but what I can 
promise you is that the changes that we have implemented, the 
substantive changes that we have implemented since I became CEO 
are going to prevent them from occurring as best we can. 
Centralizing our risk and control functions is a fundamental 
change in our company. The way that we get information today is 
different than we got information before.
    Mr. McHenry. You have been fined $4 billion.
    Mr. Sloan. I'm sorry?
    Mr. McHenry. You have been fined by your Federal regulators 
for $4 billion. Do you think that is sufficient or adequate?
    Mr. Sloan. I think that the reputational damage that our 
company has endured because of our mistakes has created 
significant damage to the company and it is my job as CEO to 
make sure things change, and they are changing.
    Mr. McHenry. Okay. Your personal assurance?
    Mr. Sloan. Yes.
    Mr. McHenry. You have entered into 14 consent decrees by 
what you just said publicly. Can you give this committee and 
the public assurance that you will comply with all of those 
consent decrees on a going-forward basis?
    Mr. Sloan. I absolutely will.
    Mr. McHenry. And you will give your personal attestation 
that you will follow those consent decrees?
    Mr. Sloan. Our team is working very hard to respond to 
all--
    Mr. McHenry. Will you give us that assurance that you will 
follow the letter of the regulators' consent decrees entered 
into with your bank?
    Mr. Sloan. We will do our absolute best to comply with--
    Mr. McHenry. And is this the end of scandal at Wells? Are 
we going to see more headlines coming up? Are we going to have 
another hearing about this?
    Mr. Sloan. I can't control the media, but--
    Mr. McHenry. Are your customers going to hear of more bad 
actions taken by your company?
    Mr. Sloan. There is nothing else that I am aware of that we 
haven't disclosed, and we changed the standard of disclosure at 
Wells Fargo after I became CEO. It is not materiality of level 
of disclosure anymore; it is one of reputation.
    Chairwoman Waters. The gentlewoman from New York, Mrs. 
Maloney, Chair of our Subcommittee on Investor Protection, 
Entrepreneurship and Capital Markets, is recognized for 5 
minutes.
    Mrs. Maloney. Good morning.
    Mr. Sloan. Good morning.
    Mrs. Maloney. And welcome.
    Mr. Sloan, on page five of your testimony under the 
heading, ``Corporate Citizenship,'' you share, ``Our commitment 
to helping address some of the country's most pressing social 
and economic issues is only growing.''
    I would like to talk to you about corporate citizenship. I 
went to your website and looked up your environmental, social, 
and governance guide, and it is an impressive list of corporate 
citizenship policies.
    To take one example, Wells Fargo's human rights statement 
says that your company is committed to respecting human rights 
and that, ``This effort is done with the understanding that in 
some circumstances, we may go above and beyond what the law and 
industry standards require.'' Does that all sound accurate, yes 
or no?
    Mr. Sloan. It does.
    Mrs. Maloney. Great. Now, I want to take you back to 
February 14, 2018. That was the day a lone gunman opened fire 
at a high school in Parkland, Florida, and killed 17 children 
and staff members with an AR-15-style semi-automatic rifle.
    After this horrific massacre, two of your biggest 
competitors, Citibank and Bank of America, adopted new policies 
to ensure responsible lending in their businesses with the gun 
industry. Under the Citi policy, all of the bank's business 
partners in the gun industry must require a background check 
before they sell a firearm and they must prohibit the sale of 
firearms to teenagers. These are commonsense policies that will 
increase public safety, and they are also smart business 
decisions.
    Yet, when asked about your competitors' new policies, a 
Wells Fargo spokesman said that progress on these issues had to 
be made through the legislative process, that your company 
would not go above and beyond what the law required.
    But as we have already seen when I read your human rights 
statement, in some cases your bank does go above and beyond 
what the law requires. And to make it worse, last October, 
Wells Fargo issued a new $40 million line of credit to the 
manufacturer of the exact gun that was used to kill 17 people 
in the Parkland shooting.
    So, I have two questions for you. First, why does Wells 
Fargo continue to put profits over people by financing 
companies that are making weapons that are literally killing 
our children and our neighbors?
    And, second, why are you willing to go above and beyond 
what the law requires on some issues like human rights, but not 
go above and beyond the law when it comes to financing the gun 
industry? How bad does the mass-shooting epidemic have to get 
before you will adopt commonsense gun safety policies like 
other banks have done?
    Mr. Sloan. Congresswoman, we don't put profits over people. 
We bank many industries across this country. We do our best to 
ensure that all of our customers whom we bank follow the laws 
and regulations that are in place on a local and a State and a 
national level.
    Mrs. Maloney. But--
    Mr. Sloan. My view, our view, is that we don't think it 
is--
    Mrs. Maloney. Reclaiming my time, because my time is almost 
up, but why are you willing to go above and beyond what the law 
requires for human rights, but not for gun safety? Why is one 
more important than the other?
    Mr. Sloan. That isn't the case. We just don't believe that 
it is a good idea to encourage banks to enforce legislation 
that doesn't exist.
    Mrs. Maloney. Well, you go--
    Mr. Sloan. I view that as your responsibility and not mine.
    Mrs. Maloney. --above and beyond the law in others.
    Second, very quickly, as my time is almost up, as part of a 
massive scandal uncovered in 2016 where Wells Fargo defrauded 
millions of customers by opening more than 3.5 million fake 
accounts, Wells Fargo attempted to force its customers, when 
they sought justice, into arbitration. If investors deserve to 
seek justice and accountability through the civil justice 
system, why do you think that Wells Fargo customers don't 
deserve the same treatment?
    May he answer, Madam Chairwoman?
    Mr. Sloan. I'm sorry, am I able to answer the question?
    Chairwoman Waters. Please, take a minute to answer.
    Mr. Sloan. Sure. Congresswoman Maloney, we took your advice 
that you gave my predecessor in the last hearing. That is, you 
asked us in the instance of retail sales practices to go beyond 
just a couple of years. That is why we went back more than 15 
years to make sure that we were able to capture all of the 
potential customers who were harmed. We thought that was a very 
good idea.
    And as I mentioned in my opening statement, we have looked 
at more than 165 million accounts, contacted more than 40 
million customers through 264 million interactions, to make 
sure that we have made things right for them, and I believe we 
have.
    Mrs. Maloney. Okay. Thank you.
    Chairwoman Waters. The gentlewoman from Missouri, Mrs. 
Wagner, the vice ranking member, is recognized for 5 minutes.
    Mrs. Wagner. I thank the chairwoman for yielding.
    Good morning, Mr. Sloan.
    Mr. Sloan. Good morning.
    Mrs. Wagner. I want to start by expressing my continued 
anger and frustration that your company was taking advantage of 
your customers and our constituents for years. You had a 
responsibility to your customers. Placing one's money and 
wealth in the custody of an organization like Wells Fargo is 
one of the biggest displays of the public's trust.
    And your company betrayed that trust and took advantage of 
customers in order to meet sales performance goals and 
fraudulently improve earnings and share prices. While you have 
apologized, paid millions and billions of dollars in fines, 
and, after reviewing your recently released business standards 
report, made numerous changes to your corporate structure, I 
think we can agree there is still more to be done.
    Mr. Sloan, there were over 15,000 accounts in Missouri 
affected by misconduct and scandal since 2012. These include 
many of my constituents whom I represent. I care deeply about 
these customers.
    Have all of these customers been made whole, sir, and not 
just for any fees charged, but also for related effects, such 
as impact on credit scores and such?
    Mr. Sloan. The answer is yes, by us. And the way that we 
have done that is by the extensive outreach that I mentioned in 
my opening statement and--
    Mrs. Wagner. Outreach, meaning what?
    Mr. Sloan. Meaning that we looked at 165 million accounts, 
we had a third--
    Mrs. Wagner. And they have been made whole and their credit 
scores have not been impacted, you have made sure of that?
    Mr. Sloan. We have corrected any improper information that 
we provided to the credit bureaus. And in addition to 
reimbursing customers for fees and expenses, we have asked them 
to come in and see us to the extent that they felt like there 
was additional harm.
    Mrs. Wagner. What percentage came in to see you, sir?
    Mr. Sloan. A very small percentage came in to see us, 
notwithstanding our best efforts to contact everyone. And then 
to the extent that they weren't satisfied with what our offer 
was, we hired a mediator at our expense on their behalf, and we 
have resolved all of those customers who have come in. In 
addition, those customers have the ability to take part in the 
class action settlement that we have entered into where we have 
paid $142 million.
    Mrs. Wagner. Thank you. I have limited time. After the 
scandals that had been brought to light since 2016, Wells Fargo 
decided to hire a new Chief Compliance Officer to ensure that 
the bank is mitigating risk. I would like to know when that new 
Chief Compliance Officer was in fact hired and has the new 
Chief Compliance Officer been empowered to make changes 
throughout the company?
    Mr. Sloan. He has. Mike Roemer was hired and joined us in 
January of 2018.
    Mrs. Wagner. In January of 2018?
    Mr. Sloan. That is correct.
    Mrs. Wagner. What was going on between 2016 and then? That 
is a lot of time before you hired a Chief Compliance Officer, 
sir.
    Mr. Sloan. That is correct. We had a compliance program 
that was in place. It wasn't working as well as I would have 
liked. We dismissed our--we asked our prior Chief Compliance 
Officer to step aside and we went out and I think we have hired 
the best Chief Compliance Officer in the industry, who has a 
demonstrated capability of--
    Mrs. Wagner. Did the regulators tell you to get rid of your 
Chief Compliance Officer?
    Mr. Sloan. No, I made that decision.
    Mrs. Wagner. Yes. In your testimony you mentioned that 
Wells Fargo has worked to address the root causes that allowed 
these issues to occur in the first place. Mr. Sloan, in your 
opinion, what are these root causes? Was there something in 
your business model, something in your organizational structure 
that led to this malfeasance?
    Mr. Sloan. Well, I think there were a number of root 
causes, Congresswoman. First, it was reflective in our 
decentralized structure where our control functions were part 
of our businesses as opposed to separate.
    I have changed that since I have become CEO. I think it was 
also reflective in our retail banking business in an incentive 
plan that was much too focused on selling products as opposed 
to providing good service and advice.
    We have ended that incentive plan and we have a new plan in 
place that is being received quite well by not only our team 
members but also by our customers. That is reflective in the 
improvement in customer service, customer loyalty, and customer 
experience scores. The feedback that we get from our team is 
that those fundamental changes like that are being very well 
received.
    Mrs. Wagner. My time is about to expire. I have more 
questions about risk management and the board. I hope that some 
of my other colleagues will get to that. I thank you for your 
testimony, and I yield back, Madam Chairwoman.
    Mr. Sloan. Thank you.
    Chairwoman Waters. Thank you very much. The gentleman from 
California, Mr. Sherman, is recognized for 5 minutes.
    Mr. Sherman. Madam Chairwoman, I thank you for holding this 
hearing. This hearing is at least a year, maybe 2 years late, 
and I am glad to see that when 3.5 million consumers are 
adversely affected, that the Financial Services Committee will 
take that seriously.
    Mr. Sloan, this is not a trick question, because I told you 
in my office that I would ask it. You have hurt consumers, you 
have talked about remediation, but now it is time for you to be 
in the vanguard of consumer protection. One way you could do 
that is to endorse Representative Carolyn Maloney's bill on 
overdraft protection.
    This bill will make sure that overdrafts are reasonable and 
proportional, that you do not reorder transactions, and that no 
other bank reorders transactions in order to increase the 
amount of fees, that there are notifications at ATMs, et 
cetera. I asked your senior staff to look at the bill, and to 
advise you. Can you be on the right side of history and endorse 
that bill now?
    Mr. Sloan. I think we are already on the right side of 
history, because when you look at the changes that--
    Mr. Sherman. I am not asking what your practices are, Mr. 
Sloan, because even your practices only affect your bank. You 
have a powerful lobbying organization in this City. Will your 
organization be on the right side of history?
    Mr. Sloan. Again, I can tell you what we do--
    Mr. Sherman. No, I am asking what your lobbyists will do, 
not what your banking computers will do.
    Mr. Sloan. We don't have lobbyists who are lobbying on 
overdraft protection.
    Mr. Sherman. Your lobbyists don't lobby on bills affecting 
all of your customers and the bank's relationship with them? 
Why do you pay them?
    Mr. Sloan. Congressman, what I would like to do is describe 
the industry leading changes that we--
    Mr. Sherman. No. Because it is my time, and I asked you 
whether you would support the bill, and you are trying to 
filibuster it by talking about your practices. Somebody else 
may ask you that question. Will your lobbying organization, 
which you have here to lobby on bills relevant to your bank--
nothing could be more relevant--support this legislation?
    Mr. Sloan. Congressman, I have not spoken to our industry 
trade groups about that bill, but I will speak to them about 
it.
    Mr. Sherman. Oh, so you will talk about it behind closed 
doors?
    Mr. Sloan. I would like to talk to you--
    Mr. Sherman. Okay. I have to go onto the next question.
    Mr. Sloan. This hearing is about--
    Mr. Sherman. Sir, I need to go on to the next question. You 
told the gentlelady from Missouri that you have done full 
remediation. It occurs to me that some people had a worse FICO 
score and didn't get a house. They just didn't qualify.
    Now, that house is worth several hundred thousand dollars 
more than when they were denied credit. If somebody is in that 
circumstance, sure, you will pay for a mediator, but will you 
enforce the arbitration provision or will you let them go to 
court if they want to go to court?
    Mr. Sloan. They don't need to go to court.
    Mr. Sherman. If they want to go to court. You know, the 
courts were established by the U.S. Constitution, and these 
other ways of dealing with disputes are fine for those people 
who want them, but will you force those people into arbitration 
if they decide that is not what they want?
    Mr. Sloan. Congressman, in the situation of the retail 
sales practices mistakes that we made, our customers don't need 
to go to court because--
    Mr. Sherman. So you are smart, they are dumb, you have 
their interest at heart, they have lawyers, they want to go to 
court, and you are telling them they are stupid for wanting to 
go to court. Let's say they want to go to court. Will you force 
them out of court by using the arbitration provisions?
    Mr. Sloan. Congressman, I don't think our customers are 
stupid, in fact, I think--
    Mr. Sherman. Well, then, some of your customers want to go 
to court. Are those customers stupid? Or are you going to use 
your clever arbitration provisions, applicable to accounts they 
never signed up for, in order to keep them out of court if that 
is what they decide they want?
    Mr. Sloan. Congressman, our remediation for customers who 
were impacted by retail sales practices is extensive and 
comprehensive--
    Mr. Sherman. And you refuse to let people go to court, and 
you use your arbitration provision for the account they did 
sign up for to keep them out of court with regard to the 
account they didn't sign up for, and then you come before 
Congress and say, ``Oh, but that is wonderful for the consumer. 
The consumer must be wrong if they want to go to court.''
    Mr. Sloan. I didn't say that, Congressman. What I have been 
trying to--
    Mr. Sherman. Will you let them go to court if that is what 
they want? Yes or no?
    Mr. Sloan. We settled 140--
    Mr. Sherman. I am asking for a yes or no, not a filibuster. 
That is the Senate side, not here. Yes or no?
    Mr. Sloan. Congressman, I have answered your question in 
terms of--
    Mr. Sherman. No, you haven't. I have asked you, yes or no, 
and you haven't given me an answer.
    Mr. Sloan. Congressman, in certain circumstances, we 
enforce our arbitration provisions of our customer agreements. 
In the case--
    Mr. Sherman. Even for the accounts they didn't sign up for?
    Mr. Sloan. Congressman, in the case of sales practices, as 
I have mentioned, we have had an extensive remediation effort. 
Every customer who has come in to see us, we have resolved 
their issue. They have been taken care of.
    Chairwoman Waters. Mr. Sherman, obviously Mr. Sloan is not 
going to answer your question. We are going to move on.
    Mr. Posey, the gentleman from Florida, is recognized for 5 
minutes.
    Mr. Posey. Thank you, Madam Chairwoman.
    Mr. Sloan, they have piqued my interest a little bit 
talking about these overdraft fees. They don't want to have 
overdraft fees. Does that mean that people who don't bounce 
checks should share the expense of people who do bounce checks? 
Am I understanding that right?
    Mr. Sloan. I think that customers who overdraw their 
accounts should be charged a reasonable fee for that. At Wells 
Fargo, what we have done is tried to live up to our vision of 
satisfying our customers' financial needs and helping them to 
succeed financially by giving them all the information that we 
have to be able to manage their financial situation the best.
    So, for example, in May of 2017, we introduced a new 
capability called real-time balance alert. It is very simple. 
You tell us what balance you want to know about. When your 
account hits that balance, we will push out that information to 
you. That has saved our customers hundreds of millions of 
dollars, in the last year and a half since we have introduced 
that, of overdrafts. We push out 43 million real-time balance 
alerts a month.
    In addition, we introduced another capability in November 
of 2017 called overdraft rewind. We find that more likely than 
not, some of our customers will overdraw their accounts the day 
before they get paid.
    If you have a direct deposit into Wells Fargo on a Friday, 
and we know that is happening, and you overdraw your account 
the night before, we are not going to charge you that overdraft 
the next day, because you are a customer, and we know you are 
going to go ahead and get paid. That has saved 2.3 million 
overdrafts since we introduced that, again, about a year and a 
half ago.
    We are very pro-consumer in terms of our overdraft policies 
and I think that they are industry-leading. If we have 
information about our customers that can help them manage their 
finances better and avoid an overdraft, absolutely. But if a 
customer decides to overdraw their account on their own, they 
should have to pay a fee for that.
    Mr. Posey. About how many employees does your bank employ?
    Mr. Sloan. 260,000.
    Mr. Posey. Okay. The topics before us today are somewhat 
complex and I would like to ask you to simplify some matters 
and tell the committee the most important lessons that our 
constituents should draw from the events and violations that 
brought you before the committee today.
    Mr. Sloan. Well, I think, first and foremost, if you see a 
problem, deal with it as aggressively and as quickly as you 
can. And that is a lesson learned by us and it won't be 
repeated.
    I think that when you see a fundamental issue in terms of a 
company's organization that needs to be dealt with, even if it 
means making massive change in the company, you need to go 
ahead and do that. And it also means that if you see leaders 
who are not living up to the standards that you expect for your 
company, you need to make changes.
    Mr. Posey. You testified that the sales culture at Wells 
Fargo and the incentives to sell accounts and credit cards 
contributed to the violations. Was that a culture unique to 
Wells Fargo? I mean, have you had experience with others during 
the enforcement process?
    Mr. Sloan. I can't speak for our competitors. I think many 
of our competitors have incentive plans. I don't necessarily 
know whether they were they were the same or different. I think 
that our incentive plans, though, went off the rails because it 
focused too much in our retail banking business on selling 
products as opposed to providing the right advice and service.
    In addition, we created a legacy of managers who weren't 
managing anymore; they were enforcing incentive plans. We have 
changed all that since I have become CEO. That should have 
never happened and it won't happen again.
    Mr. Posey. Okay. Looking forward, what are you doing now to 
protect your customers from cyber theft?
    Mr. Sloan. From cyber? Well, we are doing two things. One 
is that we have hired a very impressive cyber team and we have 
cyber threat fusion centers all around the world to monitor 
cyber risks for the company. We have invested hundreds of 
millions of dollars, by now billions of dollars in 
cybersecurity, including having third parties come in and 
provide us with ideas.
    In addition, we are using artificial intelligence to 
monitor our customers' accounts. So if we see some sort of a 
transaction that looks odd for that customer, like maybe you 
sending a million dollars to a bank account in a country that 
you have never had a relationship with, then we would try to 
surface that for the customer. There is more to do. I think the 
biggest risk that American consumers face today is one of 
imposter fraud.
    Mr. Posey. Thank you.
    Chairwoman Waters. The gentleman from New York, Mr. Meeks, 
the Chair of our Subcommittee on Consumer Protection and 
Financial Institutions, is recognized for 5 minutes.
    Mr. Meeks. Thank you, Madam Chairwoman.
    Hello, Mr. Sloan.
    Mr. Sloan. Good morning.
    Mr. Meeks. Do you realize how serious this scenario is with 
Wells Fargo?
    Mr. Sloan. Yes, I do, Congressman.
    Mr. Meeks. Because your predecessor, when he was before us, 
I took it that he wasn't really serious when we talked about 
the grievous actions of Wells Fargo and how it affected Main 
Street. Do you realize that if someone on Main Street caused 
such hazardous results, whether it was stealing their money or 
conning them, they would go to jail. That is what they do. They 
go to jail.
    And what you have done, your industry--or I shouldn't say 
your industry, your bank that you have been a part of for 31 
years--no one has paid a punishment at all. People have left. 
Some still received a bonus. People have stayed, as you have, 
and got promoted. So when the general public looks at this, 
they do not see any justice at all, nothing.
    You say that there have been changes. I am looking at a 
news report now that just came out last week that says that 
maybe the practices that were utilized on these accounts have 
shifted to your debt collection procedures, where those who are 
collecting debt, going after individuals, they have incentives. 
They have to be there for 30 hours and collect X amount--I 
think it is $45,000--or collect X amount of money, and one 
person has been fired. Are you aware of that?
    Mr. Sloan. Congressman, I am not necessarily familiar with 
the news report that you are referring to.
    Mr. Meeks. Well, the news report, and I will refer it to 
you, is dated March 9th and it talked about as recently as 
December, there was an employee out of your Iowa facility who 
said that it is a joke that the climate has changed, and that 
they have been fired as a result of this incentive package that 
was placed on these employees. Are you aware of that?
    Mr. Sloan. I am not aware of that specific circumstance. 
But what I can--we can report to you, Congressman, is that is 
not--that is inconsistent with the feedback that we get from 
our team members who survey information, through the 
interaction that I have with them in our town halls.
    Mr. Meeks. But you do your own debt collections, right?
    Mr. Sloan. I'm sorry?
    Mr. Meeks. Wells Fargo does their own debt collection?
    Mr. Sloan. In some circumstances, that is correct.
    Mr. Meeks. And in that case, those that do their own debt 
collections are exempt from the protections against harassment 
that is in the Fair Debt Collection Practices Act.
    Mr. Sloan. That is inconsistent. We follow the laws and 
regulations of this country.
    Mr. Meeks. But I understand that you, as your bank, since 
you don't hire someone from the outside to collect your debt, 
you are not subject to the Fair Debt Collection Practices Act, 
you are not subject to them. And so, therefore, the harassment 
of individuals to get the debt continues on a regular basis.
    Mr. Sloan. Harassment has no place in Wells Fargo today.
    Mr. Meeks. Well, I am going to refer you to this article on 
March 9th. It is in The New York Times. I am running out of 
time, so I want to go one other step with you.
    You would agree, if you are serious, that the egregious 
actions of Wells Fargo violated the Community Reinvestment Act 
(CRA). Do you agree?
    Mr. Sloan. We have not violated the Community--
    Mr. Meeks. Well, you were downgraded by the OCC from 
``satisfactory'' to ``unsatisfactory,'' basically. Correct?
    Mr. Sloan. The ratings that we received under the lending 
investment and service test were outstanding, ``outstanding'' 
to ``unsatisfactory''--
    Mr. Meeks. You went from ``outstanding'' to ``needs 
improvement.''
    Mr. Sloan. And that was because--
    Mr. Meeks. A double downgrade.
    Mr. Sloan. That is correct.
    Mr. Meeks. Wasn't that appropriate?
    Mr. Sloan. Well, I don't believe it was appropriate.
    Mr. Meeks. Well, then you don't get it.
    Mr. Sloan. No, I--
    Mr. Meeks. If you don't believe a double downgrade was 
appropriate when you clearly have admitted all of the fines 
that you have had, fraudulent account scandals, and you don't 
think a double downgrade is appropriate with reference to CRA, 
you don't get it then.
    Chairwoman Waters. He doesn't get it.
    Mr. Luetkemeyer, the gentleman from Missouri, is recognized 
for 5 minutes.
    Mr. Luetkemeyer. Thank you, Madam Chairwoman.
    Mr. Sloan, when your predecessor was here previously--and I 
want to remind the committee a little bit about history here--
the initial problems that were disclosed and found by the 
regulators were actually reported by the Los Angeles Times. And 
as a result, the regulators dropped the ball on this whole 
situation, and after the fact, ran into your bank and found 
some of the stuff that is going on as a result of these news 
reports.
    The CPPB in particular, even after the other regulators 
went in, went in even later than that and found out that there 
was some stuff going on and then slapped you with a fine, which 
I am not opposing. I think that was appropriate. But my comment 
at the time, and I think it is still appropriate, is that the 
CPPB, for their inadequate and lousy regulation, should have 
been fined, as well.
    Because, quite frankly, a lot of the problems that were 
here, if it would have been regulated properly, would have been 
found at an earlier time, would not have risen to this problem 
that it is today and we wouldn't be here if they would have 
done their job in trying to provide the right oversight. So it 
is unfortunate that we have a mess on both sides here.
    But I guess my question today is, I know in your book here 
discussing the situation, ``Learning from the Past, 
Transforming for the Future,'' you identify some root causes. 
And number two is that you had a decentralized business model 
that granted too much authority and autonomy to your community 
bank, senior management teams, and deferred too much authority 
to those individuals, apparently.
    I guess that is part of the culture that needed to be 
changed. And so I would like for you to describe what you have 
done differently, how you have changed the culture? Have you 
looked at other banks' business models and changed it according 
to them or have you reinvented the wheel and have your own 
unique business model at this time?
    Mr. Sloan. Congressman, what I have done since I became CEO 
is that we moved all of the enterprise control functions--so, 
for example, the finance team, the risk team, the human 
resources team, the compliance team and so on--that used to be 
part of our business lines, we moved them out of the business 
units.
    S what we get today is a leadership team. What our board 
sees is a better check and balance in terms of when there is an 
issue that occurs in a business line, we also have a review 
from one of the enterprise risk control functions to be able to 
provide the right check and balance and to be able to provide 
information in a much different way. That is a fundamental 
change in our company.
    When I look across the industry, many other firms in the 
financial services industry have also done similar--have made 
similar changes. Every financial institution is structured a 
little bit differently. Most of our business is here in the 
U.S., so that means we're going to be structured differently 
than some of our competitors that might have more of an 
international footprint.
    But I think that fundamental change is really making a 
difference in terms of how we are dealing with issues today and 
moving Wells Fargo forward, and it gives me confidence that the 
likelihood that there would ever be something like a retail 
sales practices issue happening again at Wells Fargo is very 
low, if not zero.
    Mr. Luetkemeyer. One of the things that I discussed with 
your predecessor when he was here was that he was telling us 
that he changed the culture. Yet, he kept firing people every 
year--about 1,000, 2,000 people every year. And I said at some 
point, you are not changing the culture if you keep firing 
people, with regards to the retail sales problem that you had.
    So I guess, my question at this point is, in order to 
change the culture, you have to change not only the management, 
but you also have to change the way that employees act and 
behave. Have you gone through any sort of educational process 
with your lower level people who are delivering these services 
and then the management people over them to understand the 
relationship they need to have with their customers, how they 
need to be selling these products, and what kind of oversight 
you need to be putting over these people?
    Mr. Sloan. We have. We have done that in a number of ways. 
One is changing the incentive compensation plan that I had 
mentioned earlier.
    But since I became CEO, we have made a number of other 
changes. One, we have set out uniform standards to all of our 
260,000 team members in terms of how they should interact with 
customers, what our expectations are not only in terms of how 
they do their jobs every day but also leadership. We have done 
the same thing--and it is on one sheet of paper--with all of 
our managers.
    We have changed the incentive plans across the entire 
company and we have retrained hundreds of thousands of team 
members in Wells Fargo. We started a new--or introduced a new 
ethics training that actually was required by every one of our 
team members to be taken by February of this year, and I am 
pleased to say that 99.98 percent of our team members have 
taken it.
    Unfortunately, they have to sit through a 2 minute and 11 
second video of me describing it, but they have taken it and I 
think that is making a fundamental difference in the culture of 
the company.
    Mr. Luetkemeyer. Thank you. I yield back.
    Chairwoman Waters. The gentleman from Missouri, Mr. Clay, 
Chair of our Subcommittee on Housing, Community Development and 
Insurance, is recognized for 5 minutes.
    Mr. Clay. Thank you, Madam Chairwoman, and thank you, Mr. 
Sloan, for being here. Are you aware of the Federal Reserve 
restricting the asset growth of any other large bank holding 
company under its supervision?
    Mr. Sloan. I am not aware of any public consent order that 
is similar to ours in which our balance sheet was capped as of 
the end of 2017.
    Mr. Clay. Okay. And during the October 12, 2018, third 
quarter earnings call, you indicated that Wells was planning on 
operating under the asset cap through the first part of next 
year. Again, in a December 4, 2018, presentation at the Goldman 
Sachs Financial Services Conference, you indicated that Wells 
was still planning on operating under the asset cap for the 
first part of next year.
    However, the bank's most recent 10-K, issued on February 
27, 2018, states that the company is planning to operate under 
the asset cap through the end of 2019. Why did the bank's 
assessment of when the Federal Reserve will lift the asset cap 
change between December and February?
    Mr. Sloan. Because we received some additional feedback 
from the Federal Reserve as part of our normal give and take, 
and based upon that they indicated, and I want to be very 
careful because I don't want to disclose any confidential 
supervisory information, but they wanted us to make a little 
more progress in terms of our improvement, required 
improvements under the order, and based upon that, we believe 
it will take us a little bit longer.
    We have the same goals and objective as the Federal Reserve 
does in terms of improving board governance, which is paragraph 
two of that order, and in improving compliance and operation 
risk oversight, which is paragraph three. In fact, I want to go 
beyond that. One of the goals that I have set for our team is 
that we want to have the best risk management in every one of 
our risks in the entire industry.
    Mr. Clay. Let me ask you about that, the culture at Wells. 
Here, in an article yesterday in The Wall Street Journal, 
whistleblowers had alleged that financial advisers were pushing 
clients into inappropriate products and were shifting client 
assets around to generate greater revenue and bonuses. This was 
reported yesterday. How do you respond to that? Is the culture 
still the same? Have you all learned anything in the past 2\1/
2\ years?
    Mr. Sloan. We have learned a lot in the past 2\1/2\ years, 
and I think the changes that I have made since I became CEO are 
clear in how our team is operating each and every day. The 
report that you are referring to was one that our board 
investigated by hiring an outside law firm, and in our 10-K 
that we just filed, we indicated that that review did not find 
any substantive issues in that group.
    Mr. Clay. Okay, let me ask you this: Did the OCC previously 
force out the bank's Chief Administrative Officer, Hope 
Hardison?
    Mr. Sloan. I can't comment on whether or not Ms. Hardison 
had any sort of interaction with the OCC. It has been reported 
that she received a 15-day letter from the OCC.
    Mr. Clay. Okay, what about--did the OCC previously force 
out the bank's Chief Auditor, David Julian?
    Mr. Sloan. Again, I would give you the same answer. Both of 
those individuals are on administrative leave.
    Mr. Clay. Are you aware that the OCC is considering whether 
to force out additional top executives or directors at Wells?
    Mr. Sloan. I have had no conversations about that topic 
with the OCC.
    Mr. Clay. So you are not aware of it? Do you think they are 
considering others?
    Mr. Sloan. I have had no conversations with the OCC on that 
topic.
    Mr. Clay. Okay. In your written testimony you state that 
fully satisfying the requirements set forth in your regulatory 
consent orders is critically important. If this is true, then 
why is the OCC considering the unprecedented step of removing 
top executives or directors?
    Mr. Sloan. Again, we have had no conversations with the OCC 
on that topic.
    Mr. Clay. You don't think it is coming?
    Mr. Sloan. I have had no conversations with the OCC on that 
topic.
    Mr. Clay. Okay. Well, I yield back, Madam Chairwoman.
    Chairwoman Waters. I now recognize Mr. Huizenga.
    Mr. Huizenga. Yes, thank you, Madam Chairwoman.
    Mr. Sloan, I am going to try and plow a little new ground 
here, but I do need to emphasize publically what I said to you 
privately, and I think you are hearing echoed here, about the 
profound disappointment, anger, and frustration that so many of 
us have.
    I personally know people who were affected on both ends of 
this, on the front end with the account scandal and the things 
that were going on, but then also on the remediation side, 
where the pendulum has swung back and they have had 
difficulties potentially having bank deposit boxes being seized 
and other things.
    So, this is a management nightmare, but it is a nightmare 
for the customers who have been affected by this at every 
level. And I guess it would be remiss of me not to say, you 
better check out the March 9th article from The New York Times. 
It sounded like that was something that you were not familiar 
with.
    There are a number of very specific allegations, but the 
broad allegation in this is that--I have a quote from a teller 
in Miami who said that there was ``a disconnect between 
corporate and branch officer workers with what is going on.'' 
And I think you are hearing a repeated theme on culture.
    And before I head too far down, I do want to talk about 
your bank board makeup a little bit. You had mentioned Betsy 
Duke as your new Chair, but prior to that, you have been with 
the bank for a number of decades. Were you uncomfortable with 
bank actions at the time that these things were going on? Were 
you uncomfortable with what the previous administration's 
decision-making was?
    Mr. Sloan. Congressman, when retail sales--the initial 
retail sales practice is concerned, for example, the LA Times 
article was brought to my attention, we had a conversation--I 
had conversations with the then-head of our community bank and 
we also discussed it at our operating committee. The then-head 
of our community bank assured us that--
    Mr. Huizenga. What were you telling them? Were you telling 
them about your concern?
    Mr. Sloan. We were asking whether or not the allegations 
were correct and whether or not there was a significant 
problem. I think the changes that I have made since I have 
become CEO are going to prevent a situation like that from 
developing again because the head of the community bank said, 
``I have this under control,'' but we didn't have the risk and 
control--
    Mr. Huizenga. Clearly, that wasn't the case.
    Mr. Sloan. --outside of the community bank at that time.
    Mr. Huizenga. Okay. Because I think there is a legitimate 
question here. What is the culpability of the entire C-suite in 
this? And I understand that you are CEO now, and ultimately the 
decision-making stops with you.
    Also, it seems to me with a publicly traded company like 
this, the culpability of the board, the previous board--I would 
like you to address what has happened at the board level to 
change this. Because we have a lot of concerns yet about 
culture and whether the culture has really changed and whether 
you are the right person to change that culture, but also your 
job rises and falls on the decisions of the board.
    I would like to know more about what that board makeup 
looks like to make sure that this is not happening again. 
Because clearly, Comptroller of the Currency Otting had said in 
October of 2018, that he was not comfortable, I believe is the 
quote, not comfortable with Wells Fargo's remediation progress 
to date. The Federal Reserve, as was pointed out by my 
colleague, in December of 2018 pointed that out, as well. And 
you had said in your booklet that there is a clear set of 
behavioral expectations and I want to know what those 
behavioral expectations are.
    Mr. Sloan. Sure, so let's start with the board if that is 
okay. When I stepped into this role, we separated the role of 
Chairman and the CEO. We have a new Chair of our Board, Betsy 
Duke, who is a former Federal Reserve Governor. Since I have 
become CEO, we have seven new board members and so more--
    Mr. Huizenga. Out of how many?
    Mr. Sloan. Pardon me? Out of 13.
    Mr. Huizenga. Seven out of 15?
    Mr. Sloan. No, no, 13.
    Mr. Huizenga. 13?
    Mr. Sloan. Yes, so 12 are from outside the company--
    Mr. Huizenga. Thirteen.
    Mr. Sloan. And I am the only inside board member.
    Mr. Huizenga. Okay.
    Mr. Sloan. So we have added an impressive new set of Board 
members, and we have a very diverse Board: five members of our 
Board are women; and four are diverse. They bring an incredible 
set of experiences. We went out and looked for Board members 
who had the experience in things like cybersecurity, risk, 
reputational issues, and operational organizations that we 
thought would add value to our Board. And they are doing a 
terrific job. In terms of the--
    Chairwoman Waters. The gentleman from Georgia, Mr. Scott, 
is recognized for 5 minutes.
    Mr. Scott. Thank you, Madam Chairwoman. Mr. Sloan, it is 
very, very important that we get to the bottom of this. And I 
want to ask you a series of questions. First of all, it is true 
that Wells Fargo opened up 1,500,000 fake customer accounts, 
correct?
    Mr. Sloan. We don't know how many accounts were opened up 
inappropriately. We believe it could be up to 3.5 million.
    Mr. Scott. Well, Mr. Sloan, the fact that you answered that 
you don't know gives us an idea of the size of the problem. But 
in fact, it has been documented that it was 1.5 million false 
accounts. Now, Mr. Sloan, Wells Fargo employees routinely 
falsified customers' signatures, is that correct?
    Mr. Sloan. No, I wouldn't describe it as routinely 
falsified customers' signatures. In certain circumstances, they 
did. They violated our code of ethics rules and were dismissed 
from the company.
    Mr. Scott. All right, Verisign. They did. Thank you. You 
were accurate there. And your employees doctored paperwork that 
was designed to help them meet anti-money laundering rules, 
correct?
    Mr. Sloan. In certain circumstances, Congressman.
    Mr. Scott. All right. Now let me ask you this, which gets 
to the heart of this matter, which is why I am asking this. All 
of these grievances, these terrible things that were done, the 
fake accounts, the signing of customers' signatures, were done 
in the Wells Fargo wholesale banking division, correct? Yes. 
And this is what is so important, Mr. Sloan. You were the head 
of this department. The wholesale banking division was led at 
that time by you, Mr. Sloan.
    The whole point of my line of questioning is to say this: 
You are the best person to help us solve this problem. So I 
want to ask you--The New York Times did an article that I read 
on Saturday, and here is what it said. It said in a survey of 
more than 27,000 employees in the bank's information technology 
department late last year--they did a survey and the top 
concern in that survey was hearing from your employees that 
they were concerned that they did not have the ability to raise 
grievances with managers in whether Wells Fargo conducts its 
business today with honesty and integrity.
    So, Mr. Sloan, we have to get to the bottom of this. You 
are the best person to do it because all of these abuses 
happened under your watch as head of that department. Now, you 
have done this survey. Let me ask you this: Have you are or any 
member of Wells Fargo's Board of Directors reviewed the results 
of this survey?
    Mr. Sloan. Of the survey that was referred to in that 
article?
    Mr. Scott. Yes, the 27,000 input--
    Mr. Sloan. I have actually reviewed surveys that are much 
broader than that for each one of the businesses--
    Mr. Scott. No, but in this survey--
    Mr. Sloan. And I have looked at that survey, that is 
correct.
    Mr. Scott. Yes, and what was your determination as a result 
of that survey?
    Mr. Sloan. My response to that is that was great feedback 
to receive from our team. We want to receive feedback like that 
in--
    Mr. Scott. All right, let me go quickly here before the 
chairman--if Wells Fargo developed the culture of compliance as 
you are saying, then why are your employees still concerned 
about their ability to raise these grievances with managers? 
And they are themselves doubtful of the bank's honesty and 
integrity?
    Mr. Sloan. I don't believe that--
    Chairwoman Waters. The gentleman from Wisconsin, Mr. Duffy, 
is recognized for 5 minutes.
    Mr. Sloan. I don't believe--
    Chairwoman Waters. Mr. Sloan?
    Mr. Sloan. I'm sorry.
    Chairwoman Waters. Your time is up. Mr. Duffy?
    Mr. Duffy. Thank you, Madam Chairwoman. Welcome, Mr. Sloan. 
You are not denying that Wells Fargo had some problems in the 
past with regard to fake bank accounts, are you?
    Mr. Sloan. No.
    Mr. Duffy. No. And so since that has been exposed, has 
Wells Fargo undertaken reforms to fix the problem?
    Mr. Sloan. We have.
    Mr. Duffy. Is the problem fixed?
    Mr. Sloan. It is fixed.
    Mr. Duffy. It is? Okay. I am surprised because as you come 
in and talk to the Congress, I am shocked that you are not in 
an orange suit in a little jail cell testifying today. It 
surprises me, because we can look back and say, we had 
problems. I was a customer.
    When Mr. Stumpf was here, I lit him up, as a customer, that 
it was absolutely inappropriate. You have a duty to treat your 
customer well, not cheat them. But I am also not here to say 
Wells Fargo should be dissolved, because you made some 
mistakes. We should give you a chance to mediate, improve, and 
move forward.
    I am a little bit frustrated looking at the questions you 
are getting today where you actually get questions that you 
can't even answer. You don't even get to respond to the 
questions that are thrown your way.
    So, I guess I am a little bit frustrated. As I watch the 
big screen, it is scandalous that Wells Fargo made a profit. It 
seems like some people want you to give interest-free loans. 
And when people don't pay those loans back, there should be no 
consequence for it.
    Frankly, I don't think they want Wells Fargo to lend. They 
want some of our post offices actually to lend, socialized 
banking, which I am absolutely opposed to. I want to just--I am 
going to get in some questions for you.
    But I want to thank you for saying you are going to follow 
the law in regard to the Second Amendment. I know you have 
people from New York and some from California who don't 
appreciate the Second Amendment. But in places in the Midwest 
where you do a lot of business, we actually appreciate the 
Second Amendment, and the fact that you will lend consistent 
with the law where we believe in our Constitutional right to 
bear arms.
    And so, unlike Citi and unlike Bank of America, I want to 
thank you for serving the customers in my community who 
actually appreciates the Second Amendment as opposed to I think 
when the others come in and you will be here--I think this is 
going to be in April. They will probably get some questions on 
this side in regard to the Second Amendment.
    Can you walk us through the changes that you have made, Mr. 
Sloan, how you have improved the bank and how these issues have 
been mitigated and remediated?
    Mr. Sloan. First, we had to start at the top. We have made 
changes at the Board level. We separated the role of the CEO 
and the Chair. We have made changes in our leadership team.
    If you look at the 10 senior leaders who report to me, the 
operating committee of the bank, 5 are new to the company and 
they come with incredible experience in their disciplines. Four 
are from within the company but are new in their roles, and one 
is in the same role.
    In addition, we have fundamentally reorganized the company 
to create a better set of checks and balances in terms of 
creating independent enterprise risk control functions. We have 
hired thousands of new risk professionals, and spent billions 
of dollars in improving our risk, as well as investing in 
technology.
    We have also addressed and reinforced to our team, the 
260,000 team members who serve our customers every day, we said 
you are important. How do we measure that? We make sure that 
everyone received at least a minimum of $15 an hour. We did 
that, and then we looked at anyone near that same compensation 
level, so we increased the wages of 86,000 people by over 10 
percent.
    We made every one of our team members shareholders to make 
sure that their interests were aligned with our shareholders. 
And the reason we did that is because when I was out talking in 
our branches, in our call centers, in our offices, talking to 
our team, I saw a disconnect.
    We changed that. We changed incentive plans across the 
company so no longer would they incent team members to just 
sell a product. It is about providing the right customer 
service and advice. That is the number one goal in the six 
aspirational goals that I introduced to our team in March of 
2017.
    We want to be the best in customer service and advice. And 
what we are seeing is a positive reaction. We are seeing our 
team member voluntary attrition down to its lowest level in 6 
years.
    Mr. Duffy. Mr. Sloan, I have been a customer of your bank 
for over 22 years.
    Mr. Sloan. Thank you.
    Mr. Duffy. And I would note that I have seen a dramatic 
improvement with the service that the bank provides. I want to 
thank you for that. I would just make one other note as some of 
my--
    Mr. Sloan. Would you send me the names of your bankers so I 
could acknowledge how they are improving your service?
    Mr. Duffy. Absolutely.
    Mr. Sloan. I like doing that.
    Mr. Duffy. And one other point I want to make is, when you 
are getting questions about mediation in regard to letting 
people litigate in court, I want to let you know that in regard 
to one thing, this is about the trial bar, and I then want to 
go to the other side of the aisle from the trial bar, they make 
big profits for coming after banks like you. It is about 
contributions, it is about a lobby, it is about the trial bar. 
It is not about people. It is not about customers; it is about 
money.
    Chairwoman Waters. The gentleman from Texas, Mr. Green, the 
Chair of our Subcommittee on Oversight and Investigations, is 
recognized for 5 minutes.
    Mr. Green. Thank you, Madam Chairwoman. Thank you again, 
Mr. Sloan.
    Mr. Sloan, CNN reports that the bank admitted to cheating 
up to 3.5 million people and that you created 3.5 million fake 
accounts, forcing customers into unneeded auto insurance and 
charging mortgage borrowers undue fees. Is it true that this 
number may be as high as 3.5 million, Mr. Sloan?
    Mr. Sloan. It may be as high as 3.5--
    Mr. Green. Thank you. And is it also true that Wells Fargo 
has a clawback provision? You understand what clawback is, you 
are the CEO.
    Mr. Sloan. In terms of executive compensation?
    Mr. Green. Yes, long-term--
    Mr. Sloan. Yes, that is correct.
    Mr. Green. --performance compensation stock.
    Mr. Sloan. That is correct. And our Board has enforced that 
clawback--
    Mr. Green. Is it true that the stock prices of Wells went 
up in some part because of the 3.5 million fake accounts?
    Mr. Sloan. I don't--
    Mr. Green. Well, let's assume that it did. If it did, and 
it is true also that 86 percent of your 2017 salary was in 
stock, is this true? 86 percent?
    Mr. Sloan. Yes, that is correct.
    Mr. Green. 86 percent in stock. As a matter of fact, you 
made 291 times what the median worker made in 2017, is that 
correct?
    Mr. Sloan. Yes.
    Mr. Green. The median worker made a little bit more than 
$60,000, so you made 291 times $60,000-plus dollars, correct?
    Mr. Sloan. That is correct.
    Mr. Green. Has any portion of your salary been clawed back?
    Mr. Sloan. No portion of my salary--
    Mr. Green. Excuse me, I must continue. No portion of your 
salary has been clawed back. Is it true that you were over this 
department where these atrocities manifested themselves?
    Mr. Sloan. I am today a CEO, but I wasn't when--
    Mr. Green. What were you doing when these atrocities were 
taking place?
    Mr. Sloan. Well, from 2011 to 2014, I was the Chief 
Financial Officer, and then I became the Head of Wholesale 
Banking, and then I became the Chief Operating Officer, so 
there was a period of time before I become CEO that the 
community bank reported to me, and that is the point in time 
when I sat down with our head of the community bank and 
suggested that she was not the right person to continue--
    Mr. Green. She reported to you?
    Mr. Sloan. She reported to me for approximately 7 months 
and she stopped--
    Mr. Green. And she was reporting to you because she was 
over this department?
    Mr. Sloan. That is correct.
    Mr. Green. So, let me just ask you this, does the buck stop 
with her, or does the buck stop with you?
    Mr. Sloan. Well, the buck stopped with her, and she is no 
longer with us--
    Mr. Green. Oh, no, no, no. It stopped with her because you 
eliminated her. But the question is, where were you? Were you 
above her?
    Mr. Sloan. So for 7 months--
    Mr. Green. Were you above her?
    Mr. Sloan. For a short period of time--
    Mr. Green. All right, for a short period of time, and for 
that short period of time, you took corrective action, is your 
point?
    Mr. Sloan. That is correct.
    Mr. Green. Okay, now, again, you made 86 percent of your 
salary in stock. That was in 2017. Prior to that, you made some 
portion of your salary in stock, is this true?
    Mr. Sloan. Most of my compensation, since I have become an 
executive officer has--
    Mr. Green. It has been in long-term performance stock, 
agreed?
    Mr. Sloan. That is correct.
    Mr. Green. So before 2017--in 2016, 2015, 2014, how much 
has been clawed back?
    Mr. Sloan. About $7.5 million.
    Mr. Green. How much of this $7.5 million was clawed back at 
the time of this dastardly deed of some 3.5 million fake 
accounts being opened, how much of it was clawed back at that 
time?
    Mr. Sloan. It was clawed back, the Board decided to cut the 
equity vest that I received for 2016--in 2016 for these 
matters.
    Mr. Green. 2016?
    Mr. Sloan. Yes, that was the way that the entire--
    Mr. Green. When did this atrocity start?
    Mr. Sloan. Well, in terms of the retail sales practice 
issue--
    Mr. Green. Yes.
    Mr. Sloan. It started before then.
    Mr. Green. All right. So you did not receive any clawback 
in years other than the one that you called to my attention?
    Mr. Sloan. I wasn't responsible for those groups--
    Mr. Green. Well, you were a beneficiary. You see, there are 
times when responsibility is not the gravamen of the 
circumstance. Being the beneficiary brings with it some 
liability, as well. You received benefits that you didn't earn 
because you inflated the stock. Not you personally, stock 
prices were inflated by virtue of 3.5 million accounts. People 
invested because of the belief that there were 3.5 million 
accounts.
    Madam Chairwoman, thank you. I yield back.
    Chairwoman Waters. The gentleman from Kentucky, Mr. Barr, 
is recognized for 5 minutes.
    Mr. Barr. Thank you, Madam Chairwoman. Mr. Sloan, you have 
blamed the unauthorized account scandal in part on the 
incentive plan that focused on product sales rather than 
customer service, is that correct?
    Mr. Sloan. That is correct.
    Mr. Barr. And Wells Fargo has discontinued that incentive 
program, is that correct?
    Mr. Sloan. That is correct. When I stepped into the role as 
CEO we ended the incentive plan and we introduced a new 
incentive plan in January of 2017. The important point is that 
incentive plan was not developed the way prior incentive plans 
were done. It was done on a team basis among our business, our 
legal, our risk, and our human resources group.
    Mr. Barr. And that was a big part of the problem as you 
diagnosed it?
    Mr. Sloan. Oh, absolutely.
    Mr. Barr. Let me focus, though, on another issue that you 
have testified about, and that is the bank's decentralized 
structure, your management structure and the remedial actions 
you have taken to change that management structure. Can you 
explain how risk and compliance reporting was previously in a 
decentralized format?
    Mr. Sloan. Yes, the majority of our risk and compliance 
team were in each of the business lines. Since I have become 
CEO, what we have done is we have centralized the risk and 
compliance team, creating a much larger corporate risk and 
enterprise group that has I think now almost 10,000 people in 
it. And so, that has created a much better check and balance--
    Mr. Barr. So is it fair to say that now, after these 
changes have been put into place, all of the compliance, all of 
the enterprise controls are now reporting directly to the CEO?
    Mr. Sloan. They are reporting to the Chief Risk Officer who 
reports to me administratively, and then under our structure, 
the Chief Risk Officer also reports to the Chair of our risk 
committee.
    Mr. Barr. Whereas previously during the account scandal, 
these compliance officers were reporting independently in 
different business lines, is that--
    Mr. Sloan. Well, it was actually more complicated than that 
and confusing, and that created some of the issues in that the 
centralized corporate risk team was very small and most of the 
risk professionals were in the lines of business.
    Mr. Barr. You have now centralized these enterprise 
controls, and on March 1st, it was reported that you hired a 
Chief Enterprise Risk Officer to supervise for risk across all 
business lines.
    Mr. Sloan. That is correct, Mandy Norton.
    Mr. Barr. And what is this person's role?
    Mr. Sloan. Mandy is responsible for managing all of our 
enterprise risk and control function, including compliance.
    Mr. Barr. And whom does she report to?
    Mr. Sloan. She reports to me.
    Mr. Barr. And is this the industry standard?
    Mr. Sloan. It is.
    Mr. Barr. Okay. But you did not have that structure in 
place during the account scandal?
    Mr. Sloan. That is correct.
    Mr. Barr. So now you have made the reforms to live up to 
the industry standard on this new management structure, is that 
fair to say?
    Mr. Sloan. I would describe this as very consistent with 
the industry.
    Mr. Barr. Okay. And why did it take more than a year under 
the Fed's consent order to permanently fill this new Chief 
Enterprise Risk Officer position?
    Mr. Sloan. Well, we looked to find the best Chief Risk 
Officer that we could, and Mandy agreed to join us. She had a 
garden leave with her predecessor and that took some additional 
months, but she joined us in the summer of last year. She is 
doing a great job, by the way.
    Mr. Barr. Obviously, there is more work to be done, because 
you are still operating under these consent orders. But you 
have obviously discontinued the incentive plan, you have 
changed the management structure, and so compliance reporting 
is now centralized, now consistent with the industry standard. 
It appears to me that none of these issues that contributed to 
the account scandal have anything to do with your institution's 
size. It has to do with your management structure, your 
culture, and obviously this incentive program. Do you agree 
with that?
    Mr. Sloan. Yes.
    Mr. Barr. Okay. So the issue in the institution was not a 
matter of size, it was a matter of culture, it was a matter of 
having an incentive program that prioritized product sales 
rather than customer service, and it had to do with a deficient 
management structure, is that fair to say?
    Mr. Sloan. That is a fair summary.
    Mr. Barr. Okay, thank you. I yield back the balance of my 
time.
    Chairwoman Waters. The gentleman from Missouri, Mr. 
Cleaver, Chair of our Subcommittee on National Security, 
International Development and Monetary Policy, is recognized 
for 5 minutes.
    Mr. Cleaver. Thank you, Madam Chairwoman.
    Thank you, Mr. Sloan, for being here. Missouri, the State 
from which I come, has an average income of slightly less than 
$40,000 a year. And we have, according to the Missouri 
Department of Higher Education, about 250,000 students in 2-
year and 4-year universities or schools.
    And so my concern is, if Wells Fargo holds one-quarter of 
all the student checking accounts, and it ends up that about 
half of all fees assessed to children come from Wells Fargo, 
what do you think the cause of it is?
    I have been here for a long time. I was here when we were 
doing the Dodd-Frank Act and the aftermath, and dealing with 
the credit card companies and colleges that gave kids a 
sandwich and a credit card at enrollment. I think that was 
dumb. My son was in college, and anybody who gave him a credit 
card was dumb. And my philosophy is, you give them a credit 
card, it is the two of you, you had it.
    However, I am concerned about what seems to be a disparity 
in the number of students who receive, for various reasons, 
some kind of an assessment where fees are assessed for a 
variety of things, I am sure.
    Is there an explanation to that or is that out there in 
the--
    Mr. Sloan. Congressman, are you referring to our campus 
card program?
    Mr. Cleaver. No, no, forget that, I should have left my son 
out of it. But I am still upset about it, and it is hard for me 
to get it out, so I took advantage of this. However, my point 
was that Wells Fargo holds one-quarter of all student checking 
accounts.
    Mr. Sloan. Right.
    Mr. Cleaver. But then half of all of the assessments come 
from Wells Fargo.
    Mr. Sloan. We provide a free student checking account to 
students today, and there are some students who, because of the 
broad set of products and services that we provide to students 
that are generally broader than many of our competitors, some 
of those capabilities, some of those choices have a cost to 
them. Those are disclosed and students have the option to use 
those services or not. And I will promise to leave our my sons 
and my daughter out of my answer, too.
    Mr. Cleaver. Thank you. I do think we have made some 
repairs on that. But I have a little different take on culture 
than many people of my background.
    I think people corrupt culture. I think we create a picture 
of it that culture is something that comes and grabs people but 
people create culture and culture is what is developed by 
people. So I am wondering what the bank is doing in terms of 
bringing in people who possess the skills, the character, the 
morality to work in an institution like this? Has the human 
resources process been reshaped at the executive hiring level? 
What has changed there?
    Mr. Sloan. Sure. When we centralized our human resources 
group, meaning taking it out of all of our business lines or 
enterprise functions, we created a much--and we hired a new 
head of human resources from outside the company, David 
Galloreese, who also is doing a terrific job.
    What he has done is revamped his leadership team and 
created a much more standard set of processes in terms of 
expectations for team members, which I mentioned earlier, 
leadership expectations, management expectations. We have 
changed our training in terms of including our code of ethics 
training that I mentioned earlier.
    So there are significant changes that are going on in our 
human resources group to make sure that we hire the right folks 
not only at an entry-level, where we hire a very diverse set of 
team members, but also at a senior leadership level.
    Mr. Cleaver. Thank you.
    Chairwoman Waters. The gentleman from Colorado, Mr. Tipton, 
is recognized for 5 minutes.
    Mr. Tipton. Thank you, Madam Chairwoman.
    Mr. Sloan, you just commented to my colleague, Mr. Barr, 
that you have changed how the incentive plan works. Obviously, 
it was a perverse incentive plan that was driving your 
employees to sign up people for programs that they did not want 
to have.
    The New York Times article, which has been referenced 
several times, noted that some of your employees have said you 
simply changed the incentive plan. How do we come to a 
conclusion on that discrepancy? Have things really changed in 
terms of how incentives to be able to drive businesses are not 
going to be impacting employees' decisions maybe in terms of 
opening new accounts, moving funds for the customers that Wells 
Fargo has?
    Mr. Sloan. Now that I appreciate that the reference was 
from The New York Times article, we disagree with almost every 
statement that was made in that New York Times article. That is 
patently not true.
    The new head of our consumer banking group, Mary Mack, has 
fundamentally changed how folks are incented in a retail 
banking business. We have a new plan in place. That plan is 
overseen not only by the business but by a risk team. It 
incents our team to provide customer service and advice, there 
is risk oversight, the focus is about growing relationships 
over time and it is about working better as a team.
    When we survey our team, and we do that every quarter in 
terms of getting their feedback as to how--which we hadn't done 
historically--they appreciate and like that new incentive plan, 
they love it. And they not only say that, that is how they act 
in terms of how they think about Wells Fargo because the team 
member turnover, which was a significant issue in our retail 
bank before the changes that I have made since I have become 
CEO have been made, was very high.
    Now, it is down to its lowest level that we can remember. 
It has gone from the low 30s to the low 20s, which I think is 
leading in the industry. Mary and her team have done incredible 
work. The statements in The New York Times are just wrong.
    Mr. Tipton. I appreciate your comments. You know, 
Comptroller of the Currency Joseph Otting had suggested before 
Congress that he is uncomfortable with the management of the 
bank at Wells Fargo. I know from my experience in small 
business that typically it is from the top down is going to 
achieve some of the outcomes or some of the impacts that any 
business will have.
    What education efforts are you making at Wells Fargo for 
your managers who oversee the sales and other departments to be 
able to implement the changes that you see the bank needing to 
make?
    Mr. Sloan. We have an extensive team member training 
program that applies to everybody in the company, not just 
entry-level team members. Generally, even senior leaders 
including myself, are required to take anywhere from 10 to 15 
different training classes a year.
    In addition to that, we have changed the number of layers 
that we have by reducing them so that we have our senior 
leaders closer to our customers and to our customer-facing team 
members. I encourage our team to be out with our customers, 
with our customer-facing team members. I love doing that. That 
is how I get a lot of the information that I use to manage the 
company, by talking to our team, by taking their feedback.
    Mr. Tipton. And just to clarify, do you believe that you 
have a fiduciary responsibility to your customers, to your 
small business clients as well as a bank? Do you have that 
fiduciary responsibility?
    Mr. Sloan. I have a responsibility to serve our customers 
according to the rules and regulations of this country and to 
provide them with the best service and advice that we can. And 
I take responsibility for that as CEO.
    Mr. Tipton. In terms of some of the remediation that you 
are trying to do, you have said that you pledge to contact all 
110,000 customers who were incorrectly charged with the rate 
lock extension fee for a mortgage. How many have you actually 
contacted, and how many of them have been made whole?
    Mr. Sloan. All of them, and all of them. And when we 
contacted them, we gave them two choices. If they felt based on 
their experience that they were inappropriately charged for a 
rate lock, they would check a box and we would send them a 
check. If they felt on their--and it is their own decision--
that they were improperly charged for the rate lock, they would 
check the other box. All of those customers have been 
remediated.
    Mr. Tipton. And how about the 450 servicemembers who were 
affected by the illegal car repossessions? How many of them 
have been remediated and contacted?
    Mr. Sloan. That should have never happened to our 
servicemen and women, I feel horrible about that. We have 
remediated all of the servicemen and women and we fundamentally 
changed our SCRA oversight. We have created an SCRA Center of 
Excellence. And the consent order that was introduced by the 
OCC has now been lifted on that matter.
    Mr. Tipton. Okay. Thank you.
    Chairwoman Waters. The gentleman from Colorado, Mr. 
Perlmutter, is recognized for 5 minutes.
    Mr. Perlmutter. Mr. Sloan, good morning.
    Mr. Sloan. Good morning.
    Mr. Perlmutter. Thank you for your testimony today. And I 
can say, I have been a customer of the bank for 40 years. And 
in--
    Mr. Sloan. Thank you.
    Mr. Perlmutter. --Applewood, Colorado, the people at that 
branch have just really been excellent, so I am happy about 
that.
    I am not happy about the 14 consent decrees or the $14 
billion or so of settlements that you have that the bank has 
entered into. And I want to ask about a specific area where I 
think there is a lot that can be done to continue to remediate 
your reputation and your customers' harms, and that is on 
guaranteed auto protection, guaranteed asset protection. And 
that is the insurance, the add-on insurance that people had to 
get to cover the difference between whatever the loan amount 
was and a collision or something like that, to cover the bank.
    You say you are dedicated to compensating every customer 
who suffered harm because of your mistakes. That is your 
testimony today.
    Mr. Sloan. That is correct.
    Mr. Perlmutter. I looked at the settlement that you entered 
into with the attorneys general--
    Mr. Sloan. Yes.
    Mr. Perlmutter. --and in paragraph 22, it says, ``Wells 
Fargo has agreed to provide refunds of the unearned portion of 
the cost of GAP, guaranteed auto insurance, to auto finance 
customers in certain states whose laws impose refund-related 
obligations through statutory provisions.'' That is only 11 
States.
    Mr. Sloan. That is correct.
    Mr. Perlmutter. Okay. So for the other 39 States, and the 
District of Columbia, and the Territories, what are you doing?
    Mr. Sloan. We are not going to be refunding those customers 
because that transaction was actually a transaction between the 
customer and the auto dealer. We were not involved in the 
customer's decision to buy that insurance. In those, it was 
originally 9 States and now 11 States, there was a requirement. 
And we should have had better operational oversight to ensure 
that when the auto loan was paid off, that the GAP refunds were 
received by the customer. And those are the customers that we 
will be remediating.
    Mr. Perlmutter. So if there is a GAP, if there is a refund 
due, you are paying it?
    Mr. Sloan. That is correct.
    Mr. Perlmutter. Okay. And you paid at least that in 11 
States to these attorneys general?
    Mr. Sloan. No, we are paying it directly to the customer.
    Mr. Perlmutter. Paying it directly to the customer. But you 
are saying in the other 39 States, that wasn't the case?
    Mr. Sloan. That is correct.
    Mr. Perlmutter. I understand there is litigation as to this 
particular issue in California. And you know, just listening to 
your testimony today, I do want to believe that the bank is 
looking to correct the wrongs of the past and move forward in a 
positive way with its customers in the future.
    But as I understand it, in that litigation in California, 
which is a class action, you have demanded arbitration so that 
each individual person has to bring a claim for $100 or $200 
against Wells Fargo. Now, how do you square that with, you are 
dedicated to compensating every customer who suffered harm 
because of your mistakes?
    Mr. Sloan. Congressman, again, the transaction that you are 
describing, which is when an auto customer in dealing with a 
dealer buys that GAP insurance, is a transaction between the 
auto customer and the dealer. In 11 States, our responsibility 
was not to impact that decision; our responsibility was to make 
sure that when the auto loan was paid off, the dealer paid the 
customer back.
    Mr. Perlmutter. So you are saying the transaction was 
different in those 11 States than in the other 39 States?
    Mr. Sloan. No. The transaction was the same. Our 
responsibility in those States was different. Had our 
responsibility been similar--
    Mr. Perlmutter. Okay. Now, we are getting to the real 
point. You really, in a kind of magnanimous gesture, have said 
you were going to take care of anybody who was harmed.
    And here, you say, okay, in 11 States, you have a certain 
law, and we are going to treat you differently than the other 
39 States and the District of Columbia because we are going to 
force you into arbitration. I hope that is not your testimony 
today.
    Mr. Sloan. What we are doing is my testimony, and, 
Congressman, again--
    Mr. Perlmutter. So, you are demanding the arbitration?
    Mr. Sloan. In California, we are.
    Mr. Perlmutter. And what about the other 38 States?
    Mr. Sloan. I don't believe we are responsible.
    Mr. Perlmutter. You have really been taking some positive 
steps, but now you are backing up and saying, you know what, if 
you want that $100, sue me individually or demand arbitration.
    I yield back.
    Chairwoman Waters. Thank you. The gentleman from Texas, Mr. 
Williams, is recognized for 5 minutes.
    Mr. Williams. Thank you, Madam Chairwoman.
    When your predecessor testified before this committee in 
2016, I was very concerned. Companies must be held accountable 
when they are caught scamming hardworking Americans. It seemed 
as if the only answer that he had to the questions from the 
members of this committee was, ``I don't know.''
    Well, this is unacceptable for the head of one of the 
largest financial institutions in the world to have such little 
knowledge of how his bank was functioning. And I know that 
Wells Fargo is still dealing with regulations, as we talked 
about, to try to make up for this massive mistake, and in this 
process of fixing, other issues have been found during this 
process. And we heard you say today that you have begun to err 
on the side of the consumer, well, that is not a new concept, 
but I am glad that you are beginning to do that.
    With that being said, my colleagues have addressed some of 
the issues I was interested in hearing from you about, and I am 
glad that you have better answers for us today than simply, ``I 
don't know,'' because that is not acceptable from a person in 
your position, or his either.
    So, let me start off with the first question that I ask 
everybody when they come before this committee and the question 
is this, are you a capitalist or a socialist?
    Mr. Sloan. I would put myself in the capitalist camp.
    Mr. Williams. Okay. Thank you for that answer. I would like 
to read you a quote from former President Obama, when he was 
questioned about breaking up the big banks in a New York Times 
interview.
    One of the things that he says is, ``I have consistently 
tried to remind myself during the course of my presidency that 
the economy is not an obstruction. It is not something that you 
can just redesign and break up and put back together again 
without consequences.'' So, my question to you, sir, is, do you 
agree with the sentiment from former President Obama, that 
breaking up the biggest banks is unrealistic?
    Mr. Sloan. I don't think it makes sense to break up the big 
banks, but I also believe that no bank is too-big-to-fail if 
they don't operate in an appropriate way.
    Mr. Williams. Okay. Wells Fargo and some of your 
competitors have been criticized for being too big by members 
of this committee. Some individuals across the aisle think that 
institutions of your size should be broken up into smaller 
entities. If your bank were to be broken up into a government-
mandated size, what would the effect be on innovation, 
efficiency, and access to capital for everyday Americans?
    Mr. Sloan. I think overall, it would deteriorate. I think 
there is a place in this country, and we see that today, for 
community banks, for medium-sized banks, and for large banks.
    I think the value that larger banks can bring today is that 
because of our economies of scale, we can invest billion of 
dollars in technology and innovation and services that 
sometimes our medium-sized and smaller competitors can't.
    A good example of that would be real-time balance alert or 
overdraft rewind or control tower. There are a number of 
products and services that we have been able to introduce 
because of our economies of scale and the $10 billion that we 
can spend on technology and innovation each year.
    Mr. Williams. Okay. I came to Congress as a small-business 
owner, a Main Street guy. I am a car dealer, and I know 
firsthand how access to capital works.
    Mr. Sloan. I hope you didn't take offense to my comments 
about GAP insurance.
    Mr. Williams. I know about raising capital, I know about 
taking risks and reaping the rewards, and that is crucial for 
growing the economy. When some of my colleagues consider making 
this drastic intervention in such a large portion of the 
economy, it sounds like a step towards socialism to me. And we 
don't need to look any further than Venezuela to see how that 
would work out.
    But also, some of my colleagues on the other side of the 
aisle think bank profits are bad, as we have heard today. I 
completely disagree, I think profits are great, and I want you 
to be profitable, and you are and that is a good thing. With 
that being said, I want profits to be invested back in the 
community. I want to see Wells Fargo increasing small-business 
lending.
    I want to see Wells Fargo charitable giving going to 
nonprofits and little league teams and putting money back into 
the communities they serve. I do not want to see this money 
going to attorney's fees and fines that are issued by the 
regulators because of your actions. So, my final question is, 
can you elaborate on how you are investing your profits back 
into the communities all across this country?
    Mr. Sloan. Well, first, I am pro-little leagues, I used to 
be a little league coach, and we are very focused in Wells 
Fargo in reinvesting back in our communities. The way that we 
talk about it is, we don't believe we can be successful as a 
company unless the communities that we do business in are 
successful.
    That is why I have set a goal for our company to be the 
most generous company in the industry, and if you look at the 
results from 2017, we were the second most philanthropic 
company in this country. In addition, I have set a new goal for 
our team, and that is 2 percent of our after-tax profits are 
going to be reinvested through our foundation.
    Chairwoman Waters. The gentleman from Illinois, Mr. Foster, 
is recognized for 5 minutes.
    Mr. Williams. Thank you for your testimony.
    Chairwoman Waters. Mr. Williams, if you want to describe 
what the other side of the aisle is saying, you need to get it 
right. Mr. Foster, you are recognized for 5 minutes.
    Mr. Foster. Thank you, Madam Chairwoman.
    In your very nice brochure that you provided us with, I 
have to say that there are very high production values. You 
have a section on promoting diversity and inclusion that 
includes a little box indicating that 44 percent of the U.S. 
workforce is ethnically and racially diverse, 57 percent is 
women and so on, military veterans.
    And I was wondering, can you provide either approximately 
right now or in detail for the record, what that breakdown 
would look like as a function of job classification and salary?
    Mr. Sloan. I don't have the details in the front of me in 
terms of job classification at the company, but I can tell 
you--or I can provide you with an indication of what it looks 
like in our leadership team. So, in our current senior 
leadership team, over 40 percent are women and over 20 percent 
are diverse.
    Mr. Foster. Yes, but I would be interested in the range of 
job ranks. Because if the bulk of the employees are in sort of 
intermediate levels, it would be interesting to see how the 
diversity plays out. And do you normally report that sort of 
information to any of your regulators?
    Mr. Sloan. We do.
    Mr. Foster. You do? Okay, so that the regulators at least 
have a uniform view of that?
    Mr. Sloan. Yes, we report it internally, we report it to 
our Board, and we report it to our regulators.
    Mr. Foster. All right. So I would be very interested in 
seeing--if you can just give us a copy of what you report so 
that we can actually understand it, I would appreciate that.
    Similarly, you have been talking a lot about how you 
changed the compensation of things to hopefully avoid the sort 
of problems you have been facing. And can you give us rough 
numbers of what fraction of the compensation today is purely 
hourly and salary-based? What is based on both sales and 
indirect sales, for example, if your unit sold a lot, then 
everyone in the unit gets a bonus, what fraction is based on 
customer experience or customer satisfaction and what that 
metric might be?
    Mr. Sloan. Sure. We have a number of different incentive 
plans across the company but maybe what I could do is focus on 
our retail banking business, which has been the topic of a lot 
of the conversation today. So if you look at the changes that 
we made in our retail banking business, and you look at that 
entire group, which is about 100,000 people--that would also 
include phone bankers and phone centers and the like--about 92 
percent of their compensation is in the form of salary and the 
remainder is in the form of bonuses. About half of that bonus 
would be related to risk, and then the other half would be a 
mix of customer service and advice--loyalty, customer 
experience, things like that.
    And then another portion would be related to growing 
relationships over time, not selling products.
    Mr. Foster. And by risk, you mean risk in the sense of 
having your capital position blow up or risk in the--
    Mr. Sloan. Oh no, I'm sorry, no--
    Mr. Foster. --form of getting caught doing something else?
    Mr. Sloan. No, that is where my oversight comes in or that 
affects me. In terms of folks in business, it is a risk that 
they control. So for example, it would be making sure that they 
disclose products and services--
    Mr. Foster. So it is the risk of getting--
    Mr. Sloan. --that they are responsible for, that is 
correct.
    Mr. Foster. At the retail banking level. Okay. Well, I 
guess that was my main questions here. I yield back the balance 
of my time.
    Chairwoman Waters. Thank you. The gentleman from Arizona, 
Mr. Hill, is recognized for 5 minutes.
    Mr. Hill. Arkansas, Madam Chairwoman. Thank you, Madam 
Chairwoman. Thank you, Mr. Sloan, for appearing before the 
committee today.
    I want to start out by just commenting that when your 
predecessor was here in 2016, as somebody who has spent my 
career on and off for 35 years in the community banking 
business, I just want to express to you the same thing I 
expressed to your predecessor, which is just severe 
disappointment in the disconnect that Mr. Stumpf appeared to 
have at the committee. I really agree with my friend, Mr. 
Williams, who is a former business guy as well, that that lack 
of engagement that he demonstrated was severely disappointing.
    And that comes from the fact that in the 1990s, when it 
came to Dick Kovacevich and Norwest, that was a company that 
all of us in community banking benchmarked against, including 
standards of customer service and success. And so, it was 
personally disappointing, and then professionally, as well.
    When he was here, it was said that 900 Arkansas accounts 
were affected. We don't have a big retail presence by Wells 
Fargo in Arkansas, but in the materials you sent out before the 
committee hearing, it is 60 percent higher, 1,445 accounts. So 
it is surprising that it is up that much, and I hope that all 
these issues are resolved and that people are treated fairly in 
all of these settlements.
    I was looking at some comments made by your largest 
shareholder, Warren Buffett, and he made a comment about Wells 
Fargo. Talking about the long-run earning power of Wells Fargo, 
Mr. Buffett said, ``You can't take Wells Fargo's customer base, 
it grows quarter by quarter and you make money off of its 
customers, and you make money on customers by having a hell of 
a spread on assets and not doing anything really dumb. And that 
is what Wells Fargo does.''
    But when asked as a follow-up, he said a couple of years 
later, ``They made one mistake, incentives work, and they came 
up with improper incentives that rewarded bad behavior.''
    So what I want to talk about is that. You say you have 
changed your incentive system which is at the heart of this 
issue, whether we are talking about the mortgage bank or the 
wealth management group or the consumer bank. What is your use 
of independent secret shoppers at all your locations 
nationwide? How much money do you spend on it? You have an 
independent third party doing that, I presume in addition to 
any internal audit things you--tell me about that.
    Mr. Sloan. Yes, we do two things in our retail bank to 
check how our team is responding to customer needs and desires. 
One is we have independently collected customer service and 
customer loyalty scores and we do that on a weekly basis--
    Mr. Hill. I don't mean to interrupt you but I want to--
    Mr. Sloan. We have a mystery shopper--
    Mr. Hill. Yes. I want to know about the mystery shopper 
program. How often are they in your branches monthly? How big 
is that? How much money do you spend on that?
    Mr. Sloan. Well, we do have tens of thousands of mystery 
shopper visits on an annual basis. I do not know how much we 
spend on it, but I know that we have--
    Mr. Hill. Is that a big change from prior management?
    Mr. Sloan. It is.
    Mr. Hill. Like on an order of magnitude of 100 percent 
better or 10 percent better--
    Mr. Sloan. It didn't exist before, and now it exists.
    Mr. Hill. It didn't exist. So you didn't use mystery 
shopping as a standard banking practice?
    Mr. Sloan. We may have used it from time to time.
    Mr. Hill. Periodically.
    Mr. Sloan. But not on a consistent basis, and not to the 
extent that we do today.
    Mr. Hill. Well, that is a major change. I know Mr. Green 
has mentioned that before in this committee, and really, I 
don't know a bank of any size that doesn't mystery shop its 
consumers. And I also was pleased you said that--
    Mr. Sloan. By the way, I personally mystery shop at our 
branches, too. When I visit one of our branches, I don't let 
them know I am coming. And sometimes, I don't dress like this; 
I dress like a normal customer. Sometimes they recognize me and 
sometimes they don't. It is better when they don't because I 
really get an understanding of how our team is interacting with 
our customers. I call our phone centers and don't announce--
    Mr. Hill. Would you please follow up with me and give me 
more description of the scope of your mystery shopping program? 
And I will just conclude, Madam Chairwoman, with Mr. Buffett's 
testimony before the Congress in 1991, ``If you lose money for 
the firm by bad decisions, I will be very understanding. If you 
lose reputation for the firm, I will be ruthless.'' I urge you 
to be ruthless, Mr. Sloan.
    I yield back.
    Mr. Sloan. I have had that conversation with Mr. Buffett.
    Chairwoman Waters. Thank you, Mr. Hill, and I apologize for 
assigning you to the wrong State.
    Mr. Hill. I have no interest in Arizona, Madam Chairwoman.
    Chairwoman Waters. Thank you. The gentleman from 
Washington, Mr. Heck, is recognized for 5 minutes.
    Mr. Heck. Thank you, Madam Chairwoman.
    Mr. Sloan, thank you for being here today. Others have 
already pointed out the most recent CRA exam, the result of 
which was, frankly--there's no other way to put it--terrible. 
And by my count, there were at least 10 separate consumer 
protection violations called out. I would like to mention them.
    Violations of the Fair Housing Act and the Equal Credit 
Opportunity Act in mortgage lending, violations of the FTC Act 
in mortgage lending, violation of the Consumer Financial 
Protection Act in the retail banking division, violations of 
the Servicemembers Civil Relief Act in the mortgage servicing 
division, violations of the Servicemembers Civil Relief Act in 
auto lending, violations of the FTC Act in credit cards, 
violations of the Consumer Financial Protection Act in student 
loans, violations of the Real Estate Settlement Procedures Act 
in mortgage lending, violations of the Fair Housing Act in 
mortgage lending, violations of the National Housing Act in 
mortgage servicing.
    In addition, there were two other long-running abuses that 
Wells has entered into a consent order for since the report 
citing these violations was completed. And those include 
violations of the Consumer Financial Protection Act in mortgage 
lending, and violations of the Consumer Financial Protection 
Act in auto lending.
    That constitutes a major consumer protection violation of a 
major consumer protection law in nearly every consumer-facing 
division of the company.
    And in explaining the failing grade that you got on the CRA 
exam, the OCC called this, ``an extensive and pervasive pattern 
and practice of violations across multiple lines of business 
within the bank.'' Some of your large competitors were also 
downgraded, sir, on their CRA exams for consumer protection 
violations.
    But I couldn't find one, not one, with more than three 
compared to your twelve. So, if I am understanding correctly 
what you have attempted to do to remediate this, was to start 
at the top, reorganize by making changes. You mentioned changes 
in the Board, changes in the 10 direct reports.
    You have created incentive systems, might I just affirm 
that what you incentivize, you get more of. And you have 
created more of a centralized reporting structure so that 
senior management could have eyes on these potential abuses. It 
seems to me, however, sir, that you are essentially trained to 
have it both ways.
    What I mean by that is the very argument that centralizing 
this reporting does imply that all those changes at the top may 
in and of themselves have been good, but these weren't the 
people responsible, because they didn't have eyes on this 
activity. So we have to change the reporting system.
    And at the end of the day, given the pervasiveness of this, 
it seems to me that a couple of things are obvious. Either 
there was unbelievable corruption, or unbelievable 
incompetence, or both. It is corrupt if people saw it and 
didn't do anything about it. It is incompetent if they didn't 
know it was going on.
    And yet what you have offered today is that the changes 
that have been made mostly affected the people who didn't have 
eyes on it. So, perhaps that was a structural systemic practice 
that needed to be changed now and brought more into line with 
industry practices, so good on you for that.
    But the fact of the matter is that at a lower level among 
your approximately 60 community banking--regional banking 
people, for example, not all of whom have been changed by a 
long shot, they either knew it and didn't speak up, or didn't 
know it and it was their job to know it.
    At the end of the day, as well, I guess I would suggest to 
you frankly that these structural changes and this evolution of 
Wells Fargo isn't what needs to occur. You don't need to 
evolve. You need to be reborn. And that rebirth, I respectfully 
suggest to you, has to reach into the ranks of those who either 
didn't know it and should have, or knew it and were corrupt.
    And in either case, a deeper pattern of change among the 
people that my esteemed colleague, Mr. Cleaver, suggested to 
you, are the ones who bring values and integrity and character 
to your culture. I guess I am out of time.
    I yield back, Madam Chairwoman.
    Chairwoman Waters. Thank you. The gentleman from New York, 
Mr. Zeldin, is recognized for 5 minutes.
    Mr. Zeldin. Thank you, Madam Chairwoman. Mr. Sloan, I want 
to follow up on an exchange you had with Mr. Tipton with 
regards to The New York Times story. Is it your position that 
nothing in that story is accurate?
    Mr. Sloan. Oh, it may be that some of the individual team 
members said those things. And I can't say that every one of 
our 260,000 team members--
    Mr. Zeldin. Thank you.
    Mr. Sloan. But I think in terms--
    Mr. Zeldin. Okay, I--
    Mr. Sloan. We disagree with every one of those.
    Mr. Zeldin. Okay. So, let's follow them up in more 
specifics. Melissa Canard, she worked for Wells Fargo and she 
quit in January.
    Mr. Sloan. She may have. I am not familiar with that former 
team member.
    Mr. Zeldin. The story states--and it has been reported that 
Wells Fargo would steer clients toward investments that would 
generate recurring fees for the bank, including in a case where 
it was not in the client's best interest.
    After she quit, Wells Fargo sent a letter to her clients in 
her name announcing that she would be teaming with another 
Wells Fargo employee to handle their accounts. The letter 
stated that Ms. Canard was still at Wells Fargo and that she 
endorsed the employee. Is that true?
    Mr. Sloan. I am not familiar with that situation.
    Mr. Zeldin. Okay, it has been reported that Wells Fargo 
spokesmen have confirmed that that has, in fact, happened. Are 
you aware of this being a larger problem?
    Mr. Sloan. No, I am not. And we have looked at that issue 
as part in separate from that situation very closely.
    Mr. Zeldin. You can assure us that this is a unique 
occurrence of a former employee having a letter like this that 
sent on behalf of Wells Fargo?
    Mr. Sloan. I can assure you that our team who works with 
our clients and Wells Fargo advisors and any of our wealth 
management or retail banking business that provides investment 
products works very hard to follow the rules and regulations 
that they are supposed to follow.
    Mr. Zeldin. But you can't--
    Mr. Sloan. That is the feedback that we have from our risk 
teams that oversee that unit.
    Mr. Zeldin. Okay, but you can't assure us that there 
haven't been other letters like this that have been sent out?
    Mr. Sloan. There may have been. I am not aware of any.
    Mr. Zeldin. Okay, Mr. Tipton also asked you if you have a 
fiduciary duty to your clients. You did not answer ``yes,'' you 
gave a different answer. Do you have a fiduciary duty to your 
clients?
    Mr. Sloan. Well, in certain businesses--fiduciary is a 
legal term. In certain businesses, there is a fiduciary 
requirement, for example in some of our wealth businesses and 
our Wells Fargo's financial advisor business.
    In other businesses, there is not a fiduciary standard. And 
in those businesses, we use a standard of doing the right thing 
for our customers, and making sure we are providing them with 
the right services and products.
    Mr. Zeldin. Thank you for adding additional context to Mr. 
Tipton's question. I want to get specifically though into the 
situation with veterans. I was actually deployed myself to Iraq 
during this window. I am a Wells Fargo customer myself.
    Mr. Sloan. Thank you.
    Mr. Zeldin. And can you just briefly sum up--not generally, 
but briefly sum up specifically what Wells Fargo did to wrong 
our veterans?
    Mr. Sloan. Sure. We had a system in place that we have 
changed since I have become CEO, in which each one of our 
business lines was responsible for complying with the SCRA 
responsibilities, which we take very seriously. But 
unfortunately, we didn't have a standard set of rules and 
oversight in places. The changes that we have made, it is that 
we have centralized--
    Mr. Zeldin. But I am not asking about the changes. What did 
you do to wrong the veterans specifically?
    Mr. Sloan. In circumstances--
    Mr. Zeldin. And really quick. We are short on time.
    Mr. Sloan. Yes. In circumstances where we did not know they 
had been deployed, we had not given them their full rights 
under the SCRA Act.
    Mr. Zeldin. Okay. Then I will just sum up that you were 
charging servicemembers higher rates on certain loans than were 
allowed. You weren't disclosing that servicemembers were on 
active-duty status to courts when they were facing eviction 
proceedings, repossessing servicemembers' vehicles without 
first obtaining a court order. These are some of those 
specifics.
    I would assume you would say that Wells Fargo knew that it 
was doing these things as it was doing them, correct?
    Mr. Sloan. I don't think we always knew that, and part of 
the reason was we didn't necessarily have updated information 
from the Department of Defense.
    Mr. Zeldin. Well, I mean, you were repossessing a 
servicemember's vehicle without a court order, you didn't know 
that you didn't have a court order?
    Mr. Sloan. We may not have known at that time that they 
were deployed. And so that is why we have created this SCRA 
Center of Excellence so that we get up-to-date multiple times a 
day updates from the Department of Defense. We then have that 
group take a look at it before any sort of action. And it is 
done on a very frequent basis. And our defect rate today is 
zero.
    Mr. Zeldin. And I appreciate you doing what you can to 
address this, it is very important. But I am concerned that 
your regret was that--
    Mr. Sloan. It should have never happened.
    Mr. Zeldin. --you got caught, and not that you were doing 
it in the first place. There should have been better systems in 
place as our veterans were deployed.
    I yield back.
    Mr. Sloan. I completely agree with you.
    Chairwoman Waters. The gentleman from Florida, Mr. Lawson, 
is recognized for 5 minutes.
    Mr. Lawson. Thank you. And good afternoon, Mr. Sloan.
    Mr. Sloan. Good afternoon.
    Mr. Lawson. Thanks for coming before this committee. The 
chairwoman and the ranking member from the minority party have 
really set protocol and I would like to commend you for all of 
the questions that you have answered here today.
    And walking away from this committee, I would like for you 
to just tell me for--we know what the situation is, based on 
what we have heard here. What other five or six things that 
need to be recapped again that Wells Fargo under your 
leadership has done to correct the financial crisis that was 
taking place over the last 2 years?
    Mr. Sloan. So, first, we have changed the leadership team. 
Second, we have changed and reorganized the company. And third, 
we have changed our incentive programs, not only in our retail 
banking business but we have had a look across the entire 
company related to that. So this is still part of number three. 
We have created a better check and balance in terms of the 
oversight of those incentive plans by our risk and human 
resources group.
    I think, fourth, we have changed the way the way that we 
compensate team members, including raising the minimum wage, as 
well as making sure that they had the right benefits and we 
have made them all shareholders. And then, fifth, we have 
changed the way that we communicate to our team members, 
including to encourage them to raise their hand if there is any 
concerns that they have that they see that are going about in 
the company.
    Mr. Lawson. Okay. And thank you. And in reference to, which 
I had the opportunity to look at, The New York Times article 
and I heard your statement in relation to it, and oftentimes, 
it could be considered as fake news, you know, some of the 
things that were reported--
    Mr. Sloan. I just said it was inaccurate.
    Mr. Lawson. Yes, okay. Well, it was inaccurate from your 
standpoint.
    The other thing I would ask you, which is extremely 
important to me because I have a lot of students in my 
district, is that the student debt crisis has impacted more 
Americans than any other consumer issue. Private lenders have 
placed skyrocketing interest rates on student loans, with loan 
conditions buried in pages of the legalistic language.
    What is your company doing to lower rates in the private 
market when it is appropriate and to provide more transparency 
in terms of conditions of the loans?
    Mr. Sloan. Our student loan business is relatively small. 
And we generally do not make a loan to a student unless there 
is a co-signer or a guarantor. However, we are working on a 
program that we are going to be introducing this year to allow 
non-Wells Fargo customers or Wells Fargo customers with other 
student loans to consolidate those loans and then receive a 
lower rate.
    Mr. Lawson. Okay. And one other thing you mentioned is 
about the diversity that you have. And you said that a lot of 
women have been added to the staff. Has any African American 
been involved in that diversity issue?
    Mr. Sloan. Yes. I don't have any African Americans who 
report to me directly, but if you look at the next level of 
leadership in the company, that is about 100 people, there are 
a significant number of African Americans, including Bev 
Anderson who runs our credit card business, and including Titi 
Cole who runs the operations for our retail business.
    Mr. Lawson. Okay. Thank you.
    And just before my time runs out, you mentioned about the 
veterans, I have a large number of veterans--retired veterans 
in the Jacksonville area, the largest in the State of Florida. 
And you all are continuing to work on that issue in reference 
to the problem that they had with the crisis, right?
    Mr. Sloan. Correct.
    Mr. Lawson. Okay.
    With that, Madam Chairwoman, I yield back.
    Chairwoman Waters. Thank you.
    Mr. Davidson, the gentleman from Ohio, is recognized for 5 
minutes.
    Mr. Davidson. Thank you, Madam Chairwoman.
    And thank you, Mr. Sloan, for your presence and clearly 
some thorough preparation. I have a question: Do you consider 
any crimes to have been committed?
    Mr. Sloan. No.
    Mr. Davidson. No crimes? So that would explain why no one 
has been charged with criminal fraud?
    Mr. Sloan. That is correct.
    Mr. Davidson. So when tellers from time to time or other 
people who are employed--literally hundreds of thousands of 
people employed by Wells Fargo commit crimes of theft, whether 
that is from Wells Fargo or from Wells Fargo customers, have 
any of them ever been charged with theft?
    Mr. Sloan. They may have been. To the extent that we find 
anyone has violated the code of ethics in a situation like 
that, our responsibilities are, one, to fire them, which we do, 
and then two, to file a suspicious activity report with the 
Federal authorities.
    Mr. Davidson. So in fact, there have been prosecutions and 
convictions of people who have stolen money from Wells Fargo 
and from Wells Fargo clients, in one case, $185,000 from a 
homeless man. And so, it is curious to me that as these acts of 
fraud were perpetrated that none of them violated a criminal 
statute in any of the States.
    Mr. Sloan. Again, I misunderstood your initial question as 
it relates to individual circumstances like that that may have 
occurred.
    Mr. Davidson. Okay, right. And so, in this case, aside from 
some of these folks no longer working for the company, are you 
aware of any ongoing investigations involving criminal conduct 
by employees at Wells Fargo in these scandals?
    Mr. Sloan. There are a number of investigations that are 
going on in terms of, by Federal agencies regarding Wells 
Fargo. I can't comment on anything beyond what we have 
disclosed in our 10-K and 10-Q.
    Mr. Davidson. So as encouraging as it is to hear some of 
the progress that has been made with the change of leadership, 
with the change in the organizational chart, many changes in 
terms of initiatives to try to impact and steer the culture in 
a different way, I think for a lot of people, they are going to 
feel like justice hasn't really been served, that there really 
are two standards, where employees of a big bank like Wells 
Fargo who steal in one case are held criminally responsible, 
and in another case, where it clearly was designed to meet 
performance criteria or to help the firm, well, there is no 
accountability.
    Maybe they lost their job, maybe they didn't get their 
bonus, but there is no one in jail. And customers truly do have 
a property right in their credit score, you are reimbursing 
them because they have had financial harm and financial impact. 
They have had something taken from them and Wells Fargo is 
making them whole.
    But the person who took it from them is not being 
prosecuted. And so, I feel like that is a highlight, not just 
for us here, but it is also something that might merit some 
attention by States and municipalities around the country. As 
you have highlighted, State law is important because you are 
handling cases differently with respect to GAP insurance, for 
example.
    So, I hope we move forward on that. I am encouraged, not 
just by the structural changes but by the investments that even 
predate this in innovation. So in 2015, Wells Fargo launched an 
innovation center, and I wonder if you can tell me, without 
divulging company secrets, some of the promising things that 
might help with financial technology, better position in Wells 
Fargo, but also better protect Wells Fargo customers.
    Mr. Sloan. I will give you two examples. One is that in and 
around our innovation group, we have developed artificial 
intelligence capabilities to be able to scan various 
transactions, particularly for small businesses and commercial 
customers, to look for anomalies in terms of transactions and 
if something doesn't look right, then we will notify the 
customer.
    On the consumer side, it would be our new Greenhouse 
account in relationship, it is an all mobile relationship that 
is focused on students and customers that--potential customers 
that haven't--the underbank who haven't been able to be 
customers, and what that allows them to do is have an all 
mobile relationship--
    Mr. Davidson. Yes, thank you for that highlight on the all 
mobile. And as we look at stable coins, JPMorgan just launched 
a token economy, and I perhaps look forward to more information 
on that going public if you have one in the offering. My time 
has expired and I yield back.
    Chairwoman Waters. Thank you. The gentlewoman from 
Michigan, Ms. Tlaib, is recognized for 5 minutes.
    Ms. Tlaib. Thank you, Madam Chairwoman.
    My 13-year-old boy the other day, asked, why say socialism 
or capitalism? Why not people-ism? And I thought that was 
genius. And in that spirit, Mr. Sloan, I want to address some 
of the scams that your bank launched on our people.
    You know, so many people are using the words consumer 
abuses, scandals, but if you look at the definition of scams, 
they are fraudulent acts, intentional fraudulent acts. Only 5 
months ago, Mr. Sloan, Wells Fargo reported that an internal 
investigation had thus far revealed that it erroneously denied 
or did not offer a loan modification to 870 customers due to an 
underwriting software error. Are you familiar with that?
    Mr. Sloan. I am.
    Ms. Tlaib. According to Wells Fargo, your bank, the bank 
foreclosed on 545 of these customers based on that error. Who 
is held accountable for that?
    Mr. Sloan. The issue that occurred, as you described, 
Congresswoman--
    Ms. Tlaib. No, no, we don't need to know, we know it is an 
error, right, Mr. Sloan? You are the boss. How do we--I mean, 
these 545 people didn't lose a boat; they lost their home. What 
are we doing? What are you doing to help them?
    Mr. Sloan. The first thing we have done is we have reached 
out to each one of them, we sent them a $15,000 check, which is 
2 \1/2\ times the standard that was set in the mortgage 
servicing settlement, and then we are asking them to come to 
see us and if there was additional harm that was done to them, 
we will make it right.
    Ms. Tlaib. Mr. Sloan, the additional harm, and I can tell 
you this from my district, is to their credit scores, their 
consumer report. It is the access now to not only housing and 
loans, you know this, but to employment. I have young people 
who can't even get into the military--I mean, there are all of 
these things that are tied to it. Car insurance, everything is 
tied to consumer reports.
    How do you address that? Those are things that are really 
important and I just want to mention that. I have other 
questions that are really important.
    Mr. Sloan. So, if I could answer that question--
    Ms. Tlaib. Yes. Go ahead--
    Mr. Sloan. --because I think it is a very important one, 
and that is why we are working very closely in terms of 
remediating those customers. So we have sent those customers a 
check for $15,000, which is I mentioned is 2 \1/2\ times the 
standard that was set in the mortgage servicing center.
    Ms. Tlaib. I think the credit bureau needs to know it was 
your mistake, as well.
    Mr. Sloan. And then what we are also doing is ask them to 
come in and see us and tell us what additional harm, if any, we 
caused.
    Ms. Tlaib. But Mr. Sloan, they might not know what those 
additional harms are. I just want you to know.
    Mr. Sloan. We have centralized the team that is interacting 
with those customers, that has experience in dealing with the 
issues that you just described, because I agree, there could 
have been additional hardship that could have affected credit 
scores and we are making--
    Ms. Tlaib. No offense, I know this is an internal 
investigation that you did, but I doubt it is only 545.
    Now, Mr. Sloan, last week the Michigan attorney general, 
our attorney general, Dana Nessel, announced that debt 
collection was one of the top consumer complaints that her 
office received in 2018 so far. Neither half of the complaints 
were for credit reporting and debt collection. In that context, 
if Wells Fargo's debt collectors are required required to place 
375 calls per day, how can those consumers expect to receive a 
good experience, but also enough time to help solve their 
problem?
    Mr. Sloan. I can't confirm that we have a minimum standard 
of 375 a day--
    Ms. Tlaib. Yes, it is a quota. Okay. I would love to 
follow--if he can follow up and find out if that is accurate, 
that you have some sort of quota--
    Mr. Sloan. We have expectations for everybody at Wells 
Fargo.
    Ms. Tlaib. No, no, no--I think--is it within--Madam, 
Chairwoman, I know I am--
    Chairwoman Waters. You still have additional time.
    Ms. Tlaib. Yes. I know I am new here. But, Madam 
Chairwoman, if later on, I am pretty sure, Mr. Sloan, you will 
have a certain period of time to answer that question in 
writing, so go back, talk to your team, and I would love the 
answer to that.
    Really quickly, there have been a number of claims as a 
person who is a civil rights attorney in Detroit, I can tell 
you one of the things that claims of targeting black and Latino 
communities, and a number of lawsuits, not only in California, 
and Madam Chairwoman's State, as well as in Philadelphia and 
others, some of the things were really disturbing.
    A former Wells Fargo employee said that they were 
instructed to offer lender credits to borrowers in minority 
neighborhoods. Another Wells Fargo loan officer said they were 
likely to charge, and this was intentional, a higher rate to 
borrowers with Mexican names. Was that some sort of internal 
memo that was going around saying, if somebody is black or 
Latino, this is how you approach them, with higher rates and 
higher--
    Mr. Sloan. None of that is true.
    Ms. Tlaib. Okay.
    Mr. Sloan. And no institution in this country has done more 
for diverse communities than Wells Fargo.
    Ms. Tlaib. Yes.
    Mr. Sloan. We have a $185 billion commitment to Hispanic 
and--
    Ms. Tlaib. Yes, I saw that. And just--I know, Mr. Sloan, 
but the data is there. And I don't think these Wells Fargo 
employees are--but lastly, Madam Chairwoman, I would like--and 
I don't have time--to insert in the record this study that 
reveals the way racial discrimination is embedded within the 
structure of mortgage lending.
    Chairwoman Waters. Without objection, it is so ordered.
    Ms. Tlaib. Thank you so much, Madam Chairwoman.
    Chairwoman Waters. The gentleman from North Carolina, Mr. 
Budd, is recognized for 5 minutes.
    Mr. Budd. Thank you, Madam Chairwoman.
    And thank you, Mr. Sloan, for joining us, for your time 
here today. Look, I think you know better than anyone that 
mistakes were made and you have sought to remedy them. You have 
acknowledged that and you have owned up to that, and I commend 
you for that.
    You have also said that these mistakes require fundamental 
and structural changes at your bank. And I know that you have 
been committed to this in your tenure as a CEO. But in that 
vein, can you highlight for this committee the most--and this 
is really a question of priority--important changes, in your 
view, that have been made at Wells under your leadership?
    Maybe that is something you have not been able to highlight 
yet. But what changes have you made and how will those changes 
prevent these problems from recurring?
    Mr. Sloan. I think the fundamental change of centralizing 
our enterprise risk and control functions is probably the most 
important change that we have made from an enterprise 
standpoint because what it does, regardless of leadership, is 
create an appropriate check and balance in terms of ensuring 
that we are providing the right products and services to our 
customers and managing our risks in an appropriate way, check 
and balance between those frontline team members across the 
company who are making those decisions each day, and then 
having the oversight to make sure that they are following all 
of our policies and procedures.
    And then as part of that, the way that information and data 
is being shared today is completely different. We connect data 
in a different way to spot problems across the entire company. 
And that is fundamental to the changes that we have made since 
I became CEO.
    Mr. Budd. You addressed some of those problem-spotting 
advances that you have made with Mr. Davidson's questions. But 
I want to go back to some of the small business--as most folks 
know, you are one of the largest lenders for small businesses 
in the United States.
    Mr. Sloan. That is correct.
    Mr. Budd. The protection of growth of small businesses is 
one of our top priorities, as Republicans on this committee, 
and also for Ranking Member McHenry. Can you tell this 
committee what infrastructure and controls are in place to 
protect these small business clients?
    Mr. Sloan. Sure. The small business group and business 
banking group were moved out of our retail banking business and 
moved into our wholesale business. So there is a different team 
of folks who lead those businesses today.
    In addition, the oversight for those--or the check and 
balance in terms of enterprise control functions is outside of 
the business line. So that the changes that I talked about that 
are enterprise-wide also apply to a small business lending, 
both in terms of our obligations under following the SBA rules 
and regulations as well as non-SBA type of small business 
lending.
    Mr. Budd. So what additionally would you say in regards to 
small businesses? You addressed it a little bit, but to make 
sure they are being treated fairly. I mean, these people are 
coming out and they are operating no longer as an individual, 
but now as an entity in small businesses. So how are you making 
sure that they are treated fairly?
    Mr. Sloan. Well, we are making sure that we have the same 
checks and balances in place for those customers that we do for 
customers outside small business.
    Mr. Budd. Very good. I know it has been a tough day, and it 
is probably even tougher knowing that you are talking to an App 
State grad and that you went to Michigan, but I appreciate your 
time today.
    And Madam Chairwoman, I yield back.
    Chairwoman Waters. Thank you.
    The gentlewoman from California, Ms. Porter, is recognized 
for 5 minutes.
    Ms. Porter. Mr. Sloan, thank you for your patience during 
this hearing.
    In November 2016, you said, ``I am fully committed to 
taking the necessary steps to restore our customers' trust.'' 
You also said on a call in January 2017, ``We have already made 
progress in restoring customers' trust and we have remained 
committed to being transparent with investors.'' In your 2017 
proxy statement to investors, you said, ``Restoring your trust 
and the trust of all key stakeholders is our top priority.''
    Those statements, to me, are pretty vague. They sound like 
they might be obscure, empty promises. Do those statements 
really mean something to you, Mr. Sloan?
    Mr. Sloan. They do.
    Ms. Porter. Why should we have confidence in those 
promises, in those statements you have made?
    Mr. Sloan. Well, when you look at the changes that I have 
made since I have become CEO, you see that team members are 
much more excited about working at Wells Fargo. They like what 
they do. Team member voluntary turnover is down to its lowest 
level in 6 years. The feedback we get from our team in terms of 
the changes that we have made is positive.
    We still have more work to do, I don't mean to suggest that 
we are done. I don't think we should ever be done. Likewise, 
our customers are feeling the same way.
    Ms. Porter. Okay. So it is safe to say that the statements 
you have made mean something to you and that customers and 
investors can rely on those statements?
    Mr. Sloan. That is correct.
    Ms. Porter. Okay. Then why--Mr. Sloan, if you don't mind my 
asking--are your lawyers in Federal court arguing that those 
exact statements that I read are ``paradigmatic examples of 
non-actionable corporate puffery on which no reasonable 
investor could rely?''
    Mr. Sloan. I don't know why our lawyers are arguing that. 
You asked me a direct question in terms of, do I believe in the 
statements that I have made--
    Ms. Porter. Well, I understand that is convenient--
    Mr. Sloan. --and the answer was absolutely correct.
    Ms. Porter. Mr. Sloan, you are a personally named defendant 
in Purple Mountain Trust v. Wells Fargo and Timothy J. Sloan. 
Are you lying to a Federal judge or are you lying to me and 
this Congress right now about whether we can rely on those 
statements?
    Mr. Sloan. Neither.
    Ms Porter. It is convenient for your lawyers to deflect 
blame in court and say that your rebranding campaign can be 
ignored as hyperbolic marketing. But then, you come to 
Congress, and you want us to take you at your word. And I think 
that is the disconnect, that is why the American public is 
having trouble trusting Wells Fargo.
    Mr. Sloan, I also want to ask you about--when we met, you 
said that Wells Fargo is taking an ``expansive view of 
remediating its customers who have been harmed.'' Why then are 
you fighting tooth and nail in Federal court to avoid returning 
about $350 to each of 50 auto loan customers in Southern 
California? And the money I am talking about, to be clear, is 
loans these customers paid off early, meaning they are now 
entitled to a partial refund of their GAP insurance.
    Mr. Sloan. Because it is not our responsibility to ensure 
that customers receive those refunds from the dealers who 
receive that money. It never went through Wells Fargo.
    Ms. Porter. Your salespeople sold them that GAP insurance. 
It was part of the transaction when those customers took out 
the automobile loans.
    Mr. Sloan. That is incorrect. The transaction occurred 
between the auto dealer and the customer. Wells Fargo was not 
involved. We never sold GAP insurance.
    Ms. Porter. You never sold GAP insurance. Do you profit 
from the sale of GAP insurance?
    Mr. Sloan. No.
    Ms. Porter. Okay. Because the situation that I am 
understanding for these customers, is that they are being told 
that if they want a refund of their own money to which they are 
entitled because they paid off their loans early, they have to 
write a formal letter and mail it to American Heritage 
Insurance servicers. Why is this money just not being 
automatically refunded?
    Mr. Sloan. Because it would--in that circumstance, and I 
will take that circumstance as being correct, Wells Fargo did 
not receive that money. That is a transaction between the 
customer, the auto buyer, the dealer, and the GAP insurance 
company.
    Ms. Porter. So, the GAP insurer would be the one who should 
be doing these refunds in your view?
    Mr. Sloan. That is correct.
    Ms. Porter. Okay. My last question relates to what Ms. 
Tlaib, my colleague, was asking you about. As you know, I was 
very involved with the national mortgage settlement--I was the 
California monitor for the settlement. In your brochure, you 
said that attempts to contact the remaining affected customers 
are ongoing. This is the 870 people that you failed to give a 
modification to and the 545 that you wrongly foreclosed on. I 
think this means there are more problems there. Is that 
correct?
    Mr. Sloan. We don't believe so. What we have done in that 
circumstance is we have asked our audit team to review the 
internal review that the business and the independent risk 
function did. And we don't believe that is the case.
    Ms. Porter. Okay.
    Chairwoman Waters. The gentleman from Tennessee, Mr. 
Kustoff, is recognized for 5 minutes.
    Mr. Kustoff. Thank you, Madam Chairwoman. And I appreciate 
Chairwoman Waters scheduling this very important hearing today. 
Mr. Sloan, I appreciate you appearing today.
    You have answered a lot of questions, frankly, a lot of 
tough questions about the problems that have existed at Wells 
Fargo that have led to several cases, a number of cases being 
brought against the company by Federal regulators as well by 
affected customers.
    For the record, I want to state that I clearly believe it 
is critical to our entire financial system that Wells Fargo 
continue to do everything that it possibly can to identify the 
customers affected, to compensate them accordingly, and most 
importantly to make sure that this never happens again.
    I also think it is very important that Wells Fargo continue 
to cooperate with Federal regulators and with Federal 
authorities. And I think it is your testimony today that you 
are doing that.
    Given the number of scandals and admissions by Wells Fargo 
that there are customers who have been affected that you can't 
identify, what are you doing? What is Wells Fargo doing in 
order to try to identify these people who when their accounts 
when opened by your employees, they have been opened with 
incorrect and frankly fraudulent contact information?
    Mr. Sloan. So for example on the retail sales practices 
matter, when we contacted over 40 million customers through 264 
million different interactions, we sent them all their accounts 
and said, let us know if any one of those accounts was opened 
inappropriately. And if that is the case, then we will make it 
right by you.
    And we have had multiple interactions with those customers. 
And so, we have done our best to try to ensure that any 
customer who feels that an account was opened inappropriately, 
that we make it right by them.
    Mr. Kustoff. Some of these customers may find out on their 
credit reports obviously, that accounts have been opened 
without their authorization. Their credit history therefore 
would have been impacted.
    I have two simple questions that, frankly, require simple 
answers. Is Wells Fargo working with these customers to help 
repair their credit scores?
    Mr. Sloan. Oh, absolutely. What we found--and generally 
when we opened up a deposit account, we didn't run a credit 
check. The instances that we were most concerned about would be 
in a situation where there was a credit card that was opened up 
inappropriately.
    And in those circumstances, about--and 40 percent of the 
time when we did a credit pull there was no impact on the 
credit score, in the other--in roughly half, the credit score 
actually went up. What we are concerned about are the 
situations in which the credit score went down.
    Where it went down, it generally went down between four and 
nine points. That is a range that can have a bigger impact on 
some people because it generally impacted customers with higher 
credit scores more than customers with lower credit scores.
    But we are asking any of those customers to come in to see 
us so that if there was any impact, that we would make it right 
by them. In addition, those customers can also take part in the 
class action settlement.
    Mr. Kustoff. Right. Let me ask it another way, because as 
you know, dealing with credit bureaus is not easy for the 
consumer. Is Wells Fargo working with the credit bureaus to try 
to help those customers?
    Mr. Sloan. Oh, yes. In any situation in which we found that 
by our error, we provided inaccurate information to the credit 
bureaus, we are correcting that information.
    And again, we are asking our customers to contact us if 
they believe that is not correct. We believe that once we do 
that, it is correct. And to ensure that if there is any impact.
    Mr. Kustoff. On your website, on the frequently asked 
questions portion of your website, you acknowledge about the 
consent order being in effect, that you are aiming to meet the 
requirements of the consent order by 2019. We are now in March 
of 2019. Have you had conversations with the Fed or any other 
Federal regulator about lifting the consent order or consent 
orders?
    Mr. Sloan. We have a very constructive relationship with 
all of our regulators. And by the way, I don't think I have 
said enough today that the feedback that we have received from 
our regulators on all of these issues has been very helpful in 
terms of us making progress and improving risk operational 
oversight customer compliance across the board, every 
regulator, the Fed, the OCC, the CFPB and so on. But in terms 
of our--
    Chairwoman Waters. Time has expired--
    Mr. Kustoff. I yield back my time.
    Chairwoman Waters. The gentlelady from Iowa, Mrs. Axne, is 
recognized for 5 minutes.
    Mrs. Axne. Thank you, Madam Chairwoman. And thank you, Mr. 
Sloan, for being here, I appreciate it. I value the employers 
in my district. And as I know you are aware, Wells Fargo 
employs almost 15,000 Iowans in my district.
    But when The New York Times quotes Mark Willie, one of 
those Des Moines employees who graciously is here today, saying 
that there is an overwhelming sense of frustration, I will take 
notice.
    That article describes that in Des Moines, workers are 
expected to handle 33 calls an hour and recoup $40,000 per 
month. So, let me clarify that, that is 1.8 minutes per call. 
Can you confirm that you use these targets to evaluate your 
debt collection employees?
    Mr. Sloan. I am not familiar with those specific targets, 
Congresswoman.
    Mrs. Axne. Well, I am told you use a four point scale, and 
that completing a call every 1.8 minutes only gets you a three, 
so it doesn't even get you to the top of that scale. Can you 
confirm that Wells Fargo has terminated employees for not 
meeting these targets?
    Mr. Sloan. I am not aware of that, no.
    Mrs. Axne. Well, I spoke to an employee who said that 
people--
    Mr. Sloan. I am not saying that we didn't. I am just saying 
I am not aware of terminating any team members related to that 
incentive plan.
    Mrs. Axne. Thank you. I spoke to an employee who said that 
people have been fired for not reaching these goals, and I want 
to add that hitting these goals is far more based on random 
luck of who picks up the phone than anything that they can 
control.
    I actually spoke to one of your account retention 
specialists and he described a system where if he fell below 90 
percent of his target in any key performance indicator, then he 
would receive an informal warning. If he fell below an A, 
essentially, he would receive an informal warning. If that 
persisted for 3 more months, then he would get a formal warning 
and then be reviewed for termination.
    This sounds to me like those cash bonuses that were used 
for hitting targets previously, that caused all of these issues 
at Wells Fargo, are now being switched out for an incentive 
just to keep people's jobs, and I would argue that is even 
worse.
    My entire career has been focused on organizational 
development and helping people perform better so organizations 
reach their goals, and when I hear that people are afraid to 
use your ethics line because of fear of retaliation, I fail to 
see how you have changed your culture.
    Mr. Sloan. Congresswoman, retaliation has no place in Wells 
Fargo today. We have fundamentally reorganized our ethics line 
since I have become CEO. I brought in an independent third 
party to look at our ethics line in conjunction with our human 
resources and risk team. All of the calls that go to our ethics 
line go first to an outside third party.
    Mrs. Axne. I appreciate that, thank you. Reclaiming my 
time. I appreciate that. Certainly, we know that people have 
said they don't feel comfortable in doing that because they 
have actually seen the retaliation, but moving on.
    In September 2018, Wells Fargo announced it planned to 
reduce its workforce by laying off as many as 26,000 workers, 
and then in November of 2018, Wells announced it was laying off 
1,000 employees, and 400 of those were in Des Moines, is that 
correct?
    Mr. Sloan. We never announced that we were going to lay off 
up to 26,000 employees. What is said at a town hall where I--
    Mrs. Axne. Did you lay off 400 employees in Des Moines?
    Mr. Sloan. I was just referring to the first part of your 
question.
    Mrs. Axne. I appreciate that. But--
    Mr. Sloan. And that is not an accurate statement.
    Mrs. Axne. Okay.
    Mr. Sloan. Generally, what I said was that that over the 
next 3 years, we expect our total employment to reduce by 
between 5 and 10 percent.
    Mrs. Axne. Thank you.
    Mr. Sloan. And most of that is--
    Mrs. Axne. I appreciate that, but I am concerned about the 
people in my district. Were 400 of those people in Des Moines?
    Mr. Sloan. Four hundred folks were displaced in Des Moines. 
And--
    Mrs. Axne. And what was the reason for that layoff in Des 
Moines?
    Mr. Sloan. It depended upon their job. Some of those folks 
were displaced because of the fact that the amount of servicing 
demand that we had in the mortgage servicing business had 
declined. There were other reasons. Somewhere between--
    Mrs. Axne. I have a signed affidavit here saying that an 
employee in Des Moines was told her job was being moved to 
India, and that employees in that area have gone to India to 
train those replacements.
    And then, I have also heard from employees who are using 
your virtual classrooms for that same purpose, to train people 
in other countries. Are these most recent layoffs really just 
you moving jobs overseas?
    Mr. Sloan. No, that is incorrect.
    Mrs. Axne. Okay, well, you have added more than 10,000 
employees between India and the Philippines in the last 5 
years, and I know you are building a new facility in the 
Philippines for another 7,000 employees, I believe. Can we 
expect that more of your planned layoffs are just going to be 
jobs moved overseas?
    Mr. Sloan. No, I don't think that is going to be the case. 
We have 20,000 job openings in Wells Fargo today. Ninety 
percent of those are here in the U.S., probably more than that. 
We hire between 40,000 and 50,000--
    Mrs. Axne. I appreciate that. I fail to understand, though, 
how we are laying people off in this country and building jobs 
overseas. Thank you.
    Chairwoman Waters. Thank you. The gentleman from Wisconsin, 
Mr. Steil, is recognized for 5 minutes.
    Mr. Steil. Thank you. I want to start by thanking 
Chairwoman Waters for calling today's hearing. I think it is 
important that we understand what went wrong at Wells Fargo and 
ensure that the meaningful remedial actions have been taken.
    We have heard a lot of discussion today about the bank 
scandal and I think Members on both sides of the aisle are 
committed to holding Wells Fargo accountable and preventing 
future abuses. I also recognize that we are having a valuable 
discussion today about the role that big banks play in our 
financial system.
    Mr. Sloan, according to the figures your company has 
released over the past few years, a significant number of 
Wisconsinites have been harmed by Wells Fargo's practices. 
Almost 9,000 customers have been impacted by unauthorized 
accounts, 9,500 were harmed with the auto insurance scandal, 
and the bank's mortgage rate lock scheme affected over 900 
people.
    My concern is that the reputational damages that have 
occurred to Wells Fargo are bleeding over into other banks that 
are by and large acting and abiding in a legal and ethical 
manner.
    And so, I am looking at this reputational damage and I am 
nervous that we are going to walk away with a view that having 
a strong, healthy financial services in our country is 
important.
    And so, I hope that we can come away from this hearing with 
an understanding that in order to have a healthy, vibrant 
economy that provides opportunities for all Americans, we need 
to have a financial services sector that includes big and small 
institutions and operates with customers in mind.
    I would like to dig down--we have heard today a little bit 
about the size of the operation. Do you think the size of the 
bank caused the problems? Or was it an issue with the culture 
and incentives that were in place at Wells Fargo?
    Mr. Sloan. I think it was driven by our organizational 
structure, some of our incentive plans, and leadership.
    Mr. Steil. So, it's fair to say that you don't think it was 
too-big-to-manage?
    Mr. Sloan. No, I don't.
    Mr. Steil. I would like to jump over--you mentioned that 
you now have a starting wage at $15 an hour.
    Mr. Sloan. That is correct.
    Mr. Steil. Is that because you felt that you needed to 
bring in people of high quality, high talent, to come in and 
alter some of the problems that were existing before?
    Mr. Sloan. Well, I think our team before we changed our 
minimum wage was high quality and was doing a good job in 
meeting their customer needs. What I was concerned about is 
that the turnover at many of those entry level roles was too 
high, and so what that could create would be an inconsistent 
experience with our customers.
    So, while the expense of increasing our minimum wage was 
high initially, I thought it was the right long-term decision 
in terms of reducing our turnover, and that is exactly what we 
have seen.
    And that has created a better experience because our 
customer experience and loyalty scores in those areas that were 
most impacted by the increase in the minimum wage have actually 
gone up. So, I think it was the right decision to make.
    Mr. Steil. I am supportive of driving up those wages caused 
by market forces, that is how you are recruiting individuals to 
come into the bank, not by socialism or ``people-ism,'' but by 
a free market approach that is moving wages up and then 
ultimately improving the customer experience at Wells Fargo?
    Let me shift slightly and go over to the oversight role. 
Your Chief Enterprise Risk Officer is now a direct report to 
you?
    Mr. Sloan. That is correct, Mandy Norton.
    Mr. Steil. And that has been an effective way--that 
conversations continue ongoing between you and your Chief 
Compliance Officer?
    Mr. Sloan. Oh, absolutely, I interact with Mandy every day, 
and we talk about a variety of things. In fact, one of the 
changes that we have made since Mandy has joined the company is 
that we have a new Enterprise Risk and Control Oversight 
Committee that she and I both Chair.
    We hold that meeting on a monthly basis. Those meetings are 
ways--and we have that kind of structure in each one of our 
business lines, and enterprise control functions, that is where 
key risks in the company are determined and discussed. And 
those meetings have been very helpful. Anything that comes out 
of those meetings is then escalated to our Board and our Board 
risk committee.
    Mr. Steil. I appreciate that, thank you for your time. I 
yield back the balance of my time.
    Chairwoman Waters. Thank you. The gentleman from Illinois, 
Mr. Casten, is recognized for 5 minutes.
    Mr. Casten. Thank you, Madam Chairwoman. Thank you, Mr. 
Sloan, for coming here today.
    I have some math questions, and these are I think 
straightforward, but I am scratching my head. If I am following 
the math right, last year you had about $3.5 billion in fines.
    Mr. Sloan. I'm sorry, can you repeat that?
    Mr. Casten. You had about $3.5 billion in fines last year, 
if I add up the two point one, and the one, and some of the 
smaller ones just looking at the handouts we have here.
    Mr. Sloan. I think because that included the settlement of 
the RMBS matter from about a decade ago, that is correct.
    Mr. Casten. Okay. Now, the tax cut last year saved you 
about the same amount. If I look at the falling tax rate, from 
an after-tax earnings perspective, it was about a wash for you.
    Mr. Sloan. No, I wouldn't--I would say it is a bit less 
than that. But it was--but there is no question that Wells 
Fargo--
    Mr. Casten. Squint your eyes, it was pretty close.
    Mr. Sloan. On the reduction in the tax rate, that is 
correct.
    Mr. Casten. And certainly if I look at your share price, 
assuming constant earnings multiples, your share price today is 
about where it was in 2017, so the market seems to have said, 
plus one, minus another, you are about even. The first question 
is, given that a lot of your senior executives, your 
compensation is tied to share price in some fashion, is that 
about a wash for you personally, for the senior leadership 
team?
    Mr. Sloan. I'm sorry, I am not following in terms of wash--
    Mr. Casten. You are down $3.5 billion worth of fines, you 
are up $3.4 billion dollars in terms of avoided tax revenue, so 
your earnings are about constant. Your price earnings ratio 
looks to be about constant because your share price is about 
where it was in 2017.
    Mr. Sloan. That is correct, but I would say there were a 
number of other variables that had an impact in terms of our 
results.
    Mr. Casten. Okay, so here is where I start to answer my 
question. If this was a one-time event, you would say that 
market shouldn't factor it in. You know, in actual fact, 2018 
wasn't an anomaly, you had $1.4 billion in penalties in 2016, 
$3.4 billion in 2013, and if I assumed the market is 
discounting that back, that is like your 11 price earnings 
ratio where you are, 15, you have been at a high. That is like 
17 percent to 25 percent of your market cap that has taken a 
hit on these funds.
    And I am scratching my head at how your investors possibly 
tolerate that. When I got my--I was a CEO of an energy company 
for a long time and one of my Board members was fond of telling 
the three envelopes joke that you may have heard, that when you 
come in as a new CEO, the old CEO says, here are three 
envelopes, if you hit a problem, open them in order. First one 
says blame the last CEO, works great. Hits a second problem, 
opens the second envelope, blame the last CEO, works great. 
Hits a third problem, opens a third envelope, and it says 
prepare three envelopes.
    Mr. Sloan. I only got one when I became CEO. And that was 
to fix problems that existed at the company, and I think the 
changes that I have made since I have become CEO, some of which 
have been easy, some of which have been hard, are the changes 
that are needed to satisfy our shareholders.
    Mr. Casten. Okay.
    Mr. Sloan. Our shareholders are generally longer-term 
shareholders and they see the future of Wells Fargo.
    Mr. Casten. So one would hope, but here is the problem, in 
2016 you guys laid off 53,000 employees, that was supposed to 
address the prior change and it was structured for a lot of the 
reasons that you described today. A year later, you got a 
record-breaking fine.
    You have talked a lot about the compensation changes among 
tellers and among junior staff. If those changes in the past 
haven't made a difference, what are the incentives at the 
senior level, and particularly what if anything has been done 
to the basis of short-term cash compensation in the C-Suite, 
and in clearly, if your equity price is basically flat after 
all these fines, how much do you really care if you are getting 
a bunch of equity compensation, because it would seem to me 
that the markets are kind of writing this one off?
    Mr. Sloan. We care about it a lot because most of the 
compensation for senior leaders at Wells Fargo, including me, 
is in the form of long-term equity performance. That 
performance--the vesting of those shares is based upon our 
relative performance and our return on equity measure, the 
total shareholder return measure, which would address the issue 
that you just described, as well as the achievement of certain 
risk requirements that have been set by us. So there is a 
multitude of reasons in which we would--that equity would 
ultimately vest in the dollar amount--
    Mr. Casten. But you still have a one-way hedge, right? If I 
am sitting there and saying your share price is 25 percent 
lower--
    Mr. Sloan. No, because it could go down to zero.
    Mr. Casten. Your share price is 25 percent lower than it 
would be if your earnings were $3.5 billion higher.
    Mr. Sloan. No, because--I'm sorry, I don't mean to 
interrupt, but the way that the return on equity measure would 
work is if we don't achieve certain hurdles relative to our 
peers then the equity vesting actually can be less than what 
the original grant would be.
    Mr. Casten. But in another case, you are getting equity. If 
I was an owner of Wells Fargo stock, I would be much more 
scrupulous than it appears your owners have been. I yield back 
my time.
    Chairwoman Waters. Thank you. The gentleman from Texas, Mr. 
Gooden, is recognized for 5 minutes.
    Mr. Gooden. Thank you, Madam Chairwoman, and thank you, Mr. 
Sloan. Would you explain to me the forced collateral protection 
insurance issue, what happened, what that is, where it went 
wrong?
    Mr. Sloan. Yes. So, we had a business and have a business 
that makes auto loans. And frequently when we make an auto 
loan, we buy it from a dealer. When a customer takes out an 
auto loan they are responsible for having some level of 
insurance in place to protect the underlying collateral of the 
vehicle.
    There is nothing wrong with that, that is very standard 
anytime somebody buys a car and takes out an auto loan--where 
we made a mistake was our operational oversight of what would 
happen if, for whatever reason, that insurance would lapse, and 
the customer didn't have insurance, we had contracted with a 
vendor to provide that insurance to our customer, the borrower, 
and we didn't have the appropriate oversight in those 
situations to ensure that the information that the vendor was 
using was correct.
    And so in some circumstances, our vendor provided insurance 
to customers who already had insurance. We should have done a 
better job. When that issue was escalated to me when I was in 
my prior role as Chief Operating Officer of the company, I 
instructed our team, because we couldn't assure ourselves that 
we have proper oversight, that we should end that process and 
we did as of September 30, 2016.
    Mr. Gooden. Very helpful, and thank you. To that end, there 
was a settlement to many of the States to the tune, I believe, 
of about $385 million. Does that number sound correct, to pay 
these loan recipients back who didn't need that insurance?
    Mr. Sloan. No, they are--that is our estimation of what our 
remediation to customers is going to be for the collateral 
protection insurance. There was a separate settlement with 50 
State attorneys general as well as the District of Columbia 
related to CPI and other consumer matters that was $575 
million. And that went directly to the States.
    Mr. Gooden. Has all that been paid out so far?
    Mr. Sloan. I believe that all of it has been paid out to 
the States. We are in the midst of remediating customers. That 
is taking longer than I would like. We are about a third to 40 
percent through right now. We believe that we will have all of 
the customers remediated by the beginning of next year.
    Mr. Gooden. Okay. Do you know what the delay is for 
repayment? I understand about 10 percent of the customers who 
are awaiting payment are in Texas. And I would just like some 
kind of estimation on when we can expect that.
    Mr. Sloan. Well, I think that is an example of where the 
relationship with our regulators has been very helpful, in 
particular with the OCC, where we have had a lot of give-and-
take in terms of how extensive the remediation should be. We 
have taken a lot of really good feedback from them.
    We now have the remediation plan in place. It has taken 
longer than I would have liked, and I apologize for that, but 
we want to make sure that it is done right. But the pace of 
that remediation has increased and, again, we will have 
everyone remediated by the beginning of next year.
    Mr. Gooden. Thank you.
    I yield back.
    Chairwoman Waters. The gentlewoman from Massachusetts, Ms. 
Pressley, is recognized for 5 minutes.
    Ms. Pressley. Thank you, Madam Chairwoman.
    Mr. Sloan, I wanted to follow up on a few questions that my 
colleagues had touched on earlier related to the corporate 
culture at Wells Fargo. In your testimony, you specifically 
referenced Wells Fargo's commitment to address some of the 
country's most pressing social and economic issues.
    Picking up on some of what my colleague, Representative 
Porter, was getting at, I am encouraged by this pledge, but 
skeptical. Last year, Bloomberg News reported on the long 
relationship between Wells Fargo and the National Rifle 
Association. Since 2012, Wells Fargo issued approximately $431 
million in loans to some of the largest firearms and ammunition 
companies.
    Additionally, according to financial filings last year, 
Wells provided $40 million worth of lines of credit to Sturm, 
Ruger & Company. As I am sure you are aware, Mr. Sloan, Sturm, 
Ruger is one of the largest firearm manufacturers in the 
country and their products have been used in the last nine mass 
shootings. This company has also donated significantly to the 
NRA.
    I bring this up because gun violence is an issue that is 
particularly rampant in the Massachusetts 7th Congressional 
District. There have been nearly 2,200 gun violence incidents 
in my district over the last 5 years alone.
    So given your pledge and your commitment to help address 
some of the county's most pressing social and economic issues, 
yes or no, because I only have 5 minutes, do you think that 
stemming the epidemic of gun violence is a pressing social and 
economic issue?
    Mr. Sloan. I do.
    Ms. Pressley. Okay. So could you tell me why, when Bank of 
America has stopped lending to Sturm, Ruger and other companies 
who make assault style rifles, Citigroup announced it would cut 
ties, and JPMorgan announced that they are significantly 
cutting exposure to the gun industry--so, Mr. Sloan, what is 
Wells Fargo waiting on?
    Mr. Sloan. We are not waiting on anything. We want to 
continue to bank industries across this country that follow the 
laws and regulations on a local, State, and national basis, and 
we will continue to do that.
    In addition, what we are doing is we are going to be 
partnering with a number of nonprofits to donate $10 million 
for nonpartisan research in terms of how we can reduce--
    Ms. Pressley. Sorry, reclaiming my time, I only have 5 
minutes here.
    Your website specifically states that you are committed to 
the highest standards of integrity, transparency, and 
principles performance and that you do the right thing in the 
right way and hold yourselves accountable. And yet, you are 
providing millions of dollars to an industry lobby that is 
determined to manufacture firearms of ever-increasing 
lethality, firearms that have been used to murder tens of 
thousands of Americans each year.
    So my question was actually a rhetorical question, because 
I already know why you have not divested from the NRA. 
According to IRS filings, the NRA paid nearly $10 million in 
banking fees between 2015 and 2016 alone to Wells Fargo. They 
also held up to $13.2 million in cash and cash equivalents in 
Wells Fargo accounts.
    According to recent SEC filings, the Political Victory 
Fund, NRA's PAC, paid Wells Fargo nearly $71,000 in various 
banking fees over the last 3 years. Does this sound right, Mr. 
Sloan?
    Mr. Sloan. That is old data--
    Ms. Pressley. Well, it is not right, but does it sound like 
what you are doing?
    Mr. Sloan. It is not what we are doing, because we do not--
the only banking relationship that we currently have with the 
NRA is that we have a loan which is amortizing on their 
building. They have moved their banking relationship outside of 
Wells Fargo.
    Ms. Pressley. Mr. Sloan, one of our first hearings on the 
Financial Services Committee was focused on the ways in which 
one's credit score can either make or break a consumer's 
ability to get ahead in life. For the consumers who were harmed 
as a result of Wells Fargo's egregious breach of trust, many 
are still suffering consequences from the systemic fraud that 
took place at your bank through hits on their credit scores.
    In October 2017, you testified before the Senate Banking 
Committee that of the 3.5 million potentially unauthorized 
accounts, about 190,000 incurred $6 million in fees and 
charges, and that Wells Fargo was working on refunding every 
nickel. But in your testimony today, you did not provide much 
detail on your progress in making these harmed consumers whole. 
Could you elaborate?
    Mr. Sloan. Sure. So in addition to the outreach that I 
described in my testimony, what we have been able to do is 
continue to remediate customers. That has totaled now, as 
relates to retail banking sales practices, about $31 million. 
We are not seeing any additional customers are coming in to 
indicate that we haven't made things right. They can still, 
obviously, do that.
    We are also working with the class action to make sure that 
they have all the data that we have, we have all the data that 
they have--
    Ms. Pressley. Excuse me. Are you removing harmful or 
erroneous data from peoples' credit files?
    Mr. Sloan. Oh, we have done that. To the extent that there 
has been anything reported that has been incorrect, we have 
corrected it. And to the extent that there has been an impact 
on them, we have asked them to let us know what it is. We have 
worked with them and we have remediated them.
    Chairwoman Waters. The gentleman from Indiana, Mr. 
Hollingsworth, is recognized for 5 minutes.
    Mr. Hollingsworth. Good afternoon.
    Mr. Sloan. Good afternoon.
    Mr. Hollingsworth. I want to transition some of the 
conversation away from the dialogue about Wells Fargo, 
specifically, and I just want to talk a little bit more about 
the architecture of the financial system, especially post-
crisis.
    You obviously have worked in the field for very long time, 
and have a great deal of experience in the field. And I am 
curious, as an observer, about what has happened over the last 
10 years; I am curious as to some of your observations. There 
are a couple of things I wanted to set the stage with, though.
    It seems to an outsider that we have an arms race going on, 
an arms race between regulators and banks. Banks are getting 
larger and more concentrated on account of some of the 
regulatory efforts that have been undertaken, especially during 
the crisis. Some statistics, pre-crisis, about 36 percent of 
deposits were in institutions that have greater than $250 
billion in assets; now it is 49 percent, correct? There used to 
be six of these institutions, and now there are nine of these 
institutions.
    On the same side, regulators have grown dramatically. The 
Federal Reserve operating budget is double what it was, the 
FDIC is quadruple what it was, the OCC is quadruple what it 
was. The CFPB, obviously, didn't exist beforehand, and has a 
$300 million operating budget, at least prior to Mick Mulvaney 
being over there.
    What we haven't seen are a lot of new bank entrants. Prior 
to the crisis, over the last 20 years 137 new banks were 
started every single year. Since the crisis, there have been 
1.5 banks, on average, that have started every year.
    So, what my friends across the new aisle continue to talk 
about is consumer empowerment, but what they really mean is 
regulator empowerment, in the hopes that that will help the 
consumer.
    But to Hoosiers back home who are seeing their banking 
choices decline dramatically, who feel like they can't get a 
mortgage in their local community, that they can't reach out to 
a financial institution, that they don't have control of their 
financial future, they are saying, ``Where is the empowerment, 
where is the real help?''
    So, I wondered if you might be able to talk a little bit 
about how the regulatory environment has constrained new 
entrants into the banking industry and what that might mean for 
the significant portion of the population, around 6.5 percent, 
who are totally unbanked in this country.
    Mr. Sloan. Well, I don't think the regulatory environment 
post-crisis has fundamentally impacted our ability to serve any 
of our customers, with a few exceptions.
    I think that, in fact, there is a place for every size of 
bank in this country--small, medium, and large--and I think 
what you are seeing today is that larger banks have the ability 
to use the economies of scale and technology to invest in 
different products and services that customers really like.
    Likewise, I think you are seeing new entrants, non-banks, 
Fintechs, as they are sometimes described, come up with new 
products and services that are very interesting. Sometimes, 
they are offering those products and services directly to 
consumers, and sometimes, they partner with firms like Wells 
Fargo or others.
    Mr. Hollingsworth. Yes, so to break apart your first point, 
the economies of scale, one of the things we have seen is that 
regulators have ramped up the number of regulations that are 
being promulgated and the cost of doing business has gone up.
    Banks, just like every other industry, have to respond to 
that and they have gotten larger, because they have to amortize 
those fixed costs over more and more people, more and more 
loans, more and more accounts, et cetera. And we have seen the 
number of community banks, the number of small banks in the 
country, fall precipitously over the last 10 years. Is that 
something that you would agree with generally?
    Mr. Sloan. I think generally, but I would also support--and 
there has been legislation that has been passed recently that 
there should be different standards. I think as a large bank in 
this country, that has a bigger impact on this country, we 
should be held to a higher standard, and clearly, we are.
    Mr. Hollingsworth. Right.
    Mr. Sloan. I think that in terms of medium-sized banks and 
smaller banks, it should be graduated down so it doesn't have 
as much impact on their ability to serve their customers.
    Mr. Hollingsworth. I think that is exactly right. I think 
ensuring that we have a runway, we want to watch larger 
institutions more carefully, they are more integral to the 
global financial system, but we need to empower small 
institutions, as well. And I, like you, firmly and 
fundamentally believe that big does not necessarily equal bad 
and that there is a place for every institution in the 
ecosystem.
    But I am firmly worried that the regulatory policies that 
are being pushed, enacted, and now called for, might 
meaningfully ensure that only big institutions can survive, and 
for my rural district, those institutions aren't frequently 
serving Salem, Indiana, aren't frequently serving 
Jeffersonville, Indiana, and aren't frequently serving Bedford, 
Indiana.
    And I wondered if you might talk in the last 30 seconds 
about some products that you are pushing that might help 
reached those unbanked people? How can we further the reach of 
the banking system to empower Americans?
    Mr. Sloan. Well, we are not pushing products anymore.
    Mr. Hollingsworth. Poorly worded, my fault.
    Mr. Sloan. Yes, I can understand. But one would be a new 
account that we are piloting right now in seven States called 
``Greenhouse,'' which is a new checking relationship that is 
focused on the underbanked and students.
    Mr. Hollingsworth. Great.
    Mr. Sloan. And the focus there is to provide a product that 
can be completely mobile so you don't need a local branch to go 
into, that doesn't allow overdrafts, that has a debit card, 
that also has a budgeting system set up--
    Mr. Hollingsworth. I love that.
    Mr. Sloan. --to help with financial education.
    Mr. Hollingsworth. Well, I appreciate that work. Hoosiers 
back home will appreciate that. Thank you.
    Mr. Sloan. Thank you.
    Chairwoman Waters. The gentlewoman from New York, Ms. 
Ocasio-Cortez, is recognized for 5 minutes.
    Ms. Ocasio-Cortez. Thank you, Madam Chairwoman. Mr. Sloan, 
earlier today you said that Wells Fargo does not put profits 
over people, correct?
    Mr. Sloan. That is correct.
    Ms. Ocasio-Cortez. I am interested in the human rights 
abuses and environmental disasters that some say are financed 
by your bank, Wells Fargo. In a recent Guardian article by 
Krystal Two Bulls and Matt Remle, they stated, ``Wells Fargo 
has pursued profits without principles by investing in private 
prisons, for-profit immigration detention centers, loan shark-
like payday lending, and holding much of the bond debt 
strangling Puerto Rico's efforts to lift itself out of its 
financial crisis.'' Is it true that Wells Fargo has invested or 
financed in some of these industries?
    Mr. Sloan. We made a decision 2 years ago to exit the two 
relationships that we had with two public private--or public 
prisons--private prisons firms. One has been exited, and then 
when the credit agreement with the other one amortizes and 
matures, we will no longer have that relationship.
    Ms. Ocasio-Cortez. Are those two companies GEO Group and 
CoreCivic?
    Mr. Sloan. Correct.
    Ms. Ocasio-Cortez. And which one has been exited, GEO Group 
or CoreCivic?
    Mr. Sloan. I can't recall exactly which one.
    Ms. Ocasio-Cortez. Okay. And, Madam Chairwoman, I would 
like to seek unanimous consent to submit three reports 
highlighting the bank's role in debt financing these groups, 
the for-profit prison companies running ICE detention 
facilities.
    Chairwoman Waters. Without objection, it is so ordered.
    Ms. Ocasio-Cortez. Mr. Sloan, why was the bank involved in 
the caging of children and financing the caging of children to 
begin with?
    Mr. Sloan. I don't know how to answer that question, 
because we weren't.
    Ms. Ocasio-Cortez. You were financing and involved in debt 
financing of CoreCivic and GEO Group, correct?
    Mr. Sloan. For a period of time, we were involved in 
financing one of the firms. We are not anymore, and the other--
I am not familiar with the specific assertion that you are 
making, but we weren't directly involved in that.
    Ms. Ocasio-Cortez. Okay, so these companies run private 
detention facilities run by ICE, which is involved in caging 
children, but I will move on.
    Mr. Sloan, Wells Fargo was also an investor, a major 
investor in the Dakota Access pipeline and the Keystone XL 
pipelines. They were prime investors and lenders to companies 
building these pipelines in defiance of Standing Rock Sioux's 
treaty rights to protect its water and sacred lands.
    The Lakota Sioux warned early on that the pipeline was 
unstable and bound to leak. Despite that, it was built anyway, 
and it has leaked at least 5 times. And the Keystone XL in 
particular had one leak that leaked 210,000 gallons across 
South Dakota.
    Since Wells Fargo financed the building of this pipeline in 
an environmentally unstable way, why shouldn't the bank be held 
responsible for financing the clean-up of the disasters from 
these projects?
    Mr. Sloan. Which pipeline are you referring to?
    Ms. Ocasio-Cortez. Either. We know--
    Mr. Sloan. We were not involved in the financing of the XL 
Pipeline. We were one of the 17 or 19 banks that was involved 
in the financing of the Dakota Access Pipeline.
    Ms. Ocasio-Cortez. Okay. So Wells Fargo hasn't financed any 
company associated with the Keystone XL pipeline?
    Mr. Sloan. No, I didn't say that.
    Ms. Ocasio-Cortez. Okay.
    Mr. Sloan. I said we are not involved in financing that 
pipeline specifically.
    Ms. Ocasio-Cortez. Okay. So let's focus on the Dakota 
Access Pipeline. Should Wells Fargo be held responsible for the 
damages incurred by climate change due to the financing of 
fossil fuels and these projects?
    Mr. Sloan. I don't know how you would calculate that, 
Congresswoman.
    Ms. Ocasio-Cortez. Say from spills or when we have to 
reinvest in infrastructure, building seawalls from the erosion 
of infrastructure, or cleanups, wildfires, et cetera?
    Mr. Sloan. Related to that pipeline? I am not aware that 
there has been any of what you described that has occurred 
related to that pipeline.
    Ms. Ocasio-Cortez. How about the cleanups from the leaks of 
the Dakota Access Pipeline?
    Mr. Sloan. I am not aware of the leaks associated with the 
Dakota Access Pipeline that you are describing.
    Ms. Ocasio-Cortez. So, hypothetically, if there was a leak 
from the Dakota Access Pipeline, why shouldn't Wells Fargo pay 
for the clean-up of it, since it paid for the construction of 
the pipeline itself?
    Mr. Sloan. Because we don't operate the pipeline. We 
provide financing to the company that is operating the 
pipeline. Our responsibility is to ensure that at the time we 
make that loan, that that customer--and we have a group of 
people in Wells Fargo, including an environmental oversight 
group headed by my colleagues who used to be at the EPA to 
ensure that our--
    Ms. Ocasio-Cortez. One question: Why did Wells Fargo 
finance this pipeline, when it was widely seen to be 
environmentally unstable?
    Mr. Sloan. Again, the reason that we were one of the 17 or 
19 banks that financed that is because our team reviewed the 
environmental impact and we concluded that it was a risk that 
we were willing to take.
    Ms. Ocasio-Cortez. Thank you.
    Chairwoman Waters. The gentleman from Ohio, Mr. Gonzalez, 
is recognized for 5 minutes.
    Mr. Gonzalez of Ohio. Thank you, Madam Chairwoman.
    Thank you, Mr. Sloan, for being here. From the questions 
and answers that we have heard so far today, it does seem clear 
that there is still a significant amount of concern regarding 
the steps Wells Fargo has taken since 2016, regarding some of 
the misconduct.
    I think it is important for us to remember that these 
actions hit real families. They hit them in Ohio, my home 
State. Misconduct resulted in more than 1,500 Ohioans having 
unauthorized accounts, 3,200 being improperly charged for 
collateral protection insurance, and nearly 1,500 impacted by 
being improperly charged a rate lock extension fee. Our 
constituents rightfully have to ask themselves what should they 
do as a result.
    For my first question, I want to go back to what Mr. 
McHenry was talking about earlier. He mentioned that in the 
last few months, there have been reports of ongoing 
investigations into excessive fees in the wealth management 
division, deficiencies in the bank's anti-money laundering 
compliance program, an underwriting software issue, and just 
last month, violations related to the sale of add-on products 
and the freezing or closing of accounts.
    I know that is a lot that we just talked about. But from 
your perspective, can you give the committee a sense of which 
issues you are tracking right now and give us a sense of 
whether we are out of the woods? Because candidly, it does feel 
like there is a lot still up in the air here.
    Mr. Sloan. Well, there is, and I am tracking all of those 
issues, not just one of them. All of those issues occurred 
prior to my stepping into this role as CEO, but now that I am 
CEO, I take responsibility for resolving them.
    I think the changes that I have implemented since I have 
become CEO are addressing those issues. And one of the promises 
I made to all of our stakeholders when I stepped into this role 
is that we would look far and wide within the company to make 
sure that there were no other issues.
    That is why some new issues have occurred. They are not 
necessarily new errors that we have made. It is just that we 
have encouraged the team to look very hard so that we can get 
through this very challenging part of our history and make sure 
that any customers who were impacted, that we treat them 
appropriately.
    Mr. Gonzalez of Ohio. Got it. So if I am understanding this 
correctly, what you are basically saying is we did have a lot 
of issues. That is obvious.
    Mr. Sloan. There is no question about that.
    Mr. Gonzalez of Ohio. Nobody is denying that. But since you 
took over as CEO, you feel like you have kind of put a stop to 
that. You are still investigating the things that went on prior 
to your arrival. And that going forward, since your time as 
CEO, you feel very comfortable with how the bank has performed 
on these issues?
    Mr. Sloan. Well, I can't promise you perfection.
    Mr. Gonzalez of Ohio. Right, but--
    Mr. Sloan. But what I can promise you is I believe that the 
organization we have put in place, the investment in thousands 
more risk professionals, as well as technology, as well as 
investment in risk, is putting us in a place where the chance 
of these types of issues occurring again is much, much less.
    Mr. Gonzalez of Ohio. Okay, great.
    My next question shifts to the culture. I know The New York 
Times just wrote an article suggesting maybe the cultural 
changes haven't been as effective. Can you talk about 
specifically what you are doing at the executive level, at your 
level, to make sure that the culture does in fact turn over? It 
is a big organization; it is hard to turn around a culture in 
just a few short years, so--
    Mr. Sloan. Yes. So one of the key changes that we made is 
encouraging team members that if they see something that they 
are concerned about, or if they have a good idea, that they 
should raise their hand and let us know.
    Mr. Gonzalez of Ohio. Has that resulted in proactive 
communication?
    Mr. Sloan. Oh, absolutely, yes. And the way that we track 
that kind of information is much different. We have also 
encouraged our team to the extent that they are uncomfortable, 
raising something to their manager or human resources group, to 
call our ethics line. And calls into the ethics line now go 
outside the company and they are dispositioned in a much more 
independent way to ensure that there is no retaliation in the 
company.
    Mr. Gonzalez of Ohio. Great. And then for my final 
question, some of my colleagues on the other side of the aisle 
are what I would call attacking Wells Fargo for conducting 
business that is perfectly legal with customers. So the groups 
that were just mentioned, were any one of them breaking Federal 
law when you were banking them?
    Mr. Sloan. Not that I am aware of. And one of the standards 
that we set in banking any sort of industry that has various 
reputational issues is to make sure that there is a double-
check beyond just a normal credit underwriting that we would do 
for on a reputational basis, so that we don't run into those 
kinds of issues.
    Mr. Gonzalez of Ohio. Thank you.
    And I yield back.
    Chairwoman Waters. The gentleman from Utah, Mr. McAdams, is 
recognized for 5 minutes.
    Mr. McAdams. Thank you, Madam Chairwoman.
    Mr. Sloan, I think without question, Wells Fargo and its 
various actions have caused harm to hundreds of thousands and 
possibly millions of customers. Your violations have stretched 
from egregious sales practices, whereby the company opened 
millions of accounts in customers' names without their consent 
or knowledge, to violations of the Servicemembers Civil Relief 
Act.
    And just in November of this past year, it was reported 
that you foreclosed on 545 customers based on a computer error: 
545 families kicked out of their homes when they shouldn't have 
been, 545 families with their stability uprooted. All the 
consent orders and fines in the world can't repair that damage.
    In your written testimony, you discussed the transformation 
of the company and I believe that you do want to improve the 
company. And we want to improve the company because we also 
want these practices to cease. Wells has over 3,000 employees 
in my State, and I know these employees, and I want them to be 
proud of where they work and not have a workplace that pushes 
them to act unethically or illegally.
    So, Mr. Sloan, I wanted to go back to your comments about 
The New York Times article. And I am paraphrasing, but I think 
in a previous question that was asked, you basically said that 
you disagreed with the content of that story. But if these 
employees feel this way, then that, I think, is a concern for 
us. You can disagree with the article, but those employees 
matter and their concerns matter.
    And the article says, ``In a survey of more than 27,000 
employees in the bank's information technology department late 
last year, top concerns included their ability to raise 
grievances with managers and whether Wells Fargo conducts its 
business activities with honesty and integrity.''
    The article goes on to report that the workers at Wells 
Fargo recently flooded the bank's internal logs with hundreds 
of angry comments about Wells Fargo's sales incentives and pay 
and ethics leaders' doublespeak. So if employees feel like they 
can't raise grievances with managers, whether or not you 
believe that to be the case, then that is a concern and it 
raises questions about the culture at Wells Fargo.
    What do you think are the root causes of these employees' 
concerns? And do you believe these employees when they say that 
they feel this is a problem?
    Mr. Sloan. I don't mean to question how any of our team 
members feel. And there is no question that improving culture 
is a journey. I don't mean to sit here and suggest today to you 
that we solved the culture issue, because it requires 
leadership and managers and communication and an open 
relationship with our team members.
    One way I deal with it, and I will just give you my 
example, is that I hold town halls every other month. In those 
town halls, I provide an update for about half-an-hour for our 
team members. There are generally 500 to 2,000 team members in 
attendance. The town halls are broadcast to the entire company 
live, and then we take unscripted questions from team members 
in whatever they would want.
    And at the end of every one of those town halls, I say the 
following, ``If there is any concern that you feel about this 
company, that you feel hasn't been raised, call me or send me 
an e-mail.'' I get communications from our team all the time, 
and I make sure that we follow-up.
    Congressman, I can't promise you that every one of our 
260,000 team members jumps out of bed, runs into work at Wells 
Fargo, and it is the happiest place on Earth, right?
    But what I can promise you is when we survey our team 
members across the entire company, that is not the results we 
get. That doesn't mean that everybody feels the way I would 
like them to, and that is why this changing culture is a 
journey and we are not done yet.
    Mr. McAdams. I just want to make the point that I don't 
think it is about morale or how people feel about the 
workplace, but it is, do people feel comfortable they can 
report concerns or grievances up the food chain without 
retribution? Do you think it is alarming? And so, the reports 
are that many employees still feel this way, that they feel 
that the culture is not one where they can raise red flags up 
the food chain without consequences.
    Mr. Sloan. I think it is disappointing, based upon the 
progress that we have made and the changes that we made that 
any of our team members feel that way. And to the extent that 
that is how our team members feel, we will redouble our efforts 
to make sure that we have communicated to them all the changes 
that we have made and that there is no place for retaliation in 
Wells Fargo.
    Mr. McAdams. It is alarming to me that employees are still 
feeling this way because if employees don't believe you when 
you say that the culture has changed, then I don't know that we 
can conclude that the culture has changed.
    Mr. Sloan. Well, again, Congressman, we have 260,000 team 
members and most of them when we survey, an overwhelming 
percentage of them feel that the changes we have made are 
making a difference. And again, that is not to say we are done 
yet. I am not going to be satisfied until every one of them--I 
don't know if we will ever reach that, but that is my goal.
    Mr. McAdams. Thank you, Mr. Sloan.
    And I yield back.
    Chairwoman Waters. The gentleman from Georgia, Mr. 
Loudermilk, is recognized for 5 minutes.
    Mr. Loudermilk. Thank you, Madam Chairwoman.
    Mr. Sloan, it has been a long day. I know it has been a 
long day for you. And quite frankly, some of the actions by 
Wells Fargo have been very egregious and it is probably 
worthwhile for you to be here. I have a couple of questions 
before I--the core question I want to ask you is going to deal 
with the OCC's consent order and beneficial ownership, just so 
you know where I am eventually going to go with this.
    Mr. Sloan. Okay.
    Mr. Loudermilk. But I want to address a couple of things 
that I think are maybe overlooked or is unfortunate in the 
direction some of my colleagues have taken today's hearing. 
What was your customer base prior to the investigation or 
scandal from the consumer standpoint? How many customers did 
you have?
    Mr. Sloan. Approximately 70 million.
    Mr. Loudermilk. How many do you have today?
    Mr. Sloan. A little bit more than that.
    Mr. Loudermilk. So you experienced some loss, I would 
imagine, during that time?
    Mr. Sloan. Well, actually no. What we experienced is, I 
mean, we are always gaining and losing customers every day--
    Mr. Loudermilk. Right.
    Mr. Sloan. People move and so on and so forth. We compete 
for business with other banks and we win and lose it every day. 
But overall, since the fourth quarter of 2016, what we have 
seen is our customer base grow. It is not growing as much as I 
would like, but it is going in the right direction now.
    Mr. Loudermilk. So I would take it then that your customers 
are pretty satisfied with the service you are giving, some of 
the corrective actions you are making?
    Mr. Sloan. That is the feedback that we get from them. We 
survey our customers--in addition to on a specific basis in our 
retail business where we survey customer experience and loyalty 
scores, we also separately have a survey that we do monthly. 
And we are going in the right direction. Again, we have more 
work to do, but your statement is correct.
    Mr. Loudermilk. Okay. One other issue I want to address is, 
do you make auto loans?
    Mr. Sloan. We do.
    Mr. Loudermilk. Are you going to continue to make auto 
loans?
    Mr. Sloan. We are.
    Mr. Loudermilk. The reason I am asking you this is because, 
according to the CDC, more people were killed by auto accidents 
than by guns in the past several years. Using the logic of some 
of my colleagues, I am not going to sit here and ask you to 
quit making auto loans.
    Mr. Sloan. Thank you.
    Mr. Loudermilk. I am one of the few on this committee who 
has been a victim of both gun violence, and of what should have 
been a fatal auto accident. You very well may have made the 
loan to the rental car company to buy that car in which I was a 
victim of a triple flip-over accident on an interstate. My wife 
and I were fortunate to survive. On two occasions, I have been 
shot at: once on the baseball field; and once back at home.
    I don't want you--I am not expecting to use your business 
as a tool to shape culture, or do a cultural experiment or make 
it a lab to do something that wouldn't be done otherwise. And I 
think that it is unfair to put you in that position. Both of 
those are legal in the United States and those businesses that 
operate--whether they sell automobiles or manufacture 
automobiles, or sell guns--that is something that shouldn't be 
laid at your table. I just wanted to address that.
    Now, onto the core question I have. The Office of the 
Comptroller of the Currency, as has been mentioned already, has 
given you a consent order regarding beneficial ownership. And 
during your second quarter 2018 10-Q filing, you stated that 
some Federal agencies have been making inquiries into the bank 
regarding potentially inappropriate conduct related to the 
collection of beneficial ownership information.
    Mr. Sloan, what is the potentially inappropriate conduct 
that took place?
    Mr. Sloan. The consent order that we have in place with the 
OCC actually covers our BSA/AML program and our wholesale 
banking business. I will be quick.
    And what the focus there is, is not that we are not 
following BSA/AML laws, but that we were not doing a good 
enough job of documenting how we make decisions. By the way, 
the OCC is completely correct, and we are reforming and 
improving our capabilities.
    One of the requirements that was introduced about a year 
ago is a beneficial ownership forms. And what we found, because 
of a call to the ethics line that we put into place after I 
became CEO, was that some of our team members were not 
following our policies and procedures in completing those 
beneficial ownership forms, and that is unacceptable.
    Mr. Loudermilk. So you are complying with the consent order 
at this point?
    Mr. Sloan. We are. We have more work to do because the 
consent order hasn't been lifted, and we take our 
responsibilities to the OCC seriously, but we are making 
progress.
    Mr. Loudermilk. I know there is a lot of confusion with the 
FinCEN customer due diligence rule regarding this, and so I 
applaud your efforts. What has taken place is egregious. I 
don't think anybody on this committee would depart from that. 
But I do appreciate the effort you are making to move forward.
    Mr. Sloan. Thank you.
    Mr. Loudermilk. I yield back.
    Chairwoman Waters. The gentlewoman from Virginia, Ms. 
Wexton, is recognized for 5 minutes.
    Ms. Wexton. Thank you, Madam Chairwoman, and thank you, Mr. 
Sloan, for joining us here today. As I was going through the 
materials to prepare for today's hearing, I was just so struck 
by really the scope and the breadth and the depth of fraudulent 
activities throughout basically every one of Wells Fargo's 
subsidiary businesses.
    And I know we have been through these before and time is 
short, but I do think it is important to tick off some of them: 
in consumer banking, with the opening of fraudulent accounts; 
opening credit cards without customers' consent; debit cards on 
auto loans. I know that you dispute the actual selling of the 
force-placed insurance, but you did repossess a number of cars 
that you shouldn't have as a result of that.
    On Wells Fargo wealth advisers, on the wealth management 
side, there was some churning of investments that were supposed 
to be long-term investments, and selling those to receive 
commissions and fees.
    On the mortgage side, there were inappropriate fees charged 
for interest rate locks even when the delay was due to Wells 
Fargo's own actions, and the violations of the Servicemembers 
Civil Relief Act are pretty egregious, including repossessing 
cars from servicemembers who were deployed abroad. Wells Fargo 
is now subject to, I think you said, 14 separate consent 
decrees, is that correct?
    Mr. Sloan. Correct, yes.
    Ms. Wexton. And so, you would agree with Chair Yellen's 
assessment that there was pervasive and persistent misconduct 
at Wells Fargo?
    Mr. Sloan. I think we made a significant number of mistakes 
that we shouldn't have made. We have taken responsibility for 
those errors and since I have become CEO, we have made 
fundamental changes in the company to address those 
shortcomings.
    Ms. Wexton. Now, you had said that one of the causes or 
what you perceived to be a potential cause of all of these 
offenses was that you had a decentralized sort of management 
system at Wells Fargo, is that correct?
    Mr. Sloan. That is correct.
    Ms. Wexton. In other words, each subsidiary was kind of 
going rogue on their own, is that correct?
    Mr. Sloan. Well, I didn't say they were going rogue on 
their own, but I think that the way that they were organized 
is, they had the enterprise risk and control functions within 
the business line that didn't create enough--the check and 
balance that we have today.
    Ms. Wexton. Okay. But I just find it so interesting that 
each one of these businesses was engaging in the same kind of 
pattern of fraudulent misconduct, even though they were each 
operating in their own little spheres. So now you say that 
management and everything is centralized and that is going to 
solve this problem, or at least help ensure that it is not 
going to happen again. Is that correct?
    Mr. Sloan. I think that is one of the fundamental changes 
that we have made since I have become CEO to address it, but it 
is not the only one.
    Ms. Wexton. Okay. I can't wrap my head around why and how 
every single subsidiary of Wells Fargo was engaging in some 
sort of fraudulent activity if it wasn't coming from the top. 
Would it be your position that all banks do this sort of thing 
and Wells Fargo is just the one that got caught?
    Mr. Sloan. No, of course not. But I wouldn't agree with the 
statement that every one of our operations was engaging in 
inappropriate activity. There is no question that it happened.
    Ms. Wexton. Well, just the ones that I listed, the auto, 
mortgage, and consumer deposit accounts, all of those were, 
right?
    Mr. Sloan. There is no question we made errors in those 
businesses.
    Ms. Wexton. You have been employed at Wells Fargo for about 
30 years or thereabouts?
    Mr. Sloan. 31\1/2\.
    Ms. Wexton. Okay. And most recently as Chief Operating 
Officer before you became CEO, right?
    Mr. Sloan. Yes, I was Chief Operating Officer for about 10 
months.
    Ms. Wexton. Okay. And so to the consumers who were wronged 
by Wells Fargo during this long pattern of misconduct, how do 
we assure them that you are the best person to change the 
culture when you have been a part of the culture for the last 3 
decades?
    Mr. Sloan. Because having knowledge of the company allows 
me to make the difficult decisions to reorganize the company 
more quickly, and that is what I have done. This company is 
going through fundamental change. It is more fundamental change 
than it has ever gone through in its history.
    Ms. Wexton. Is that because of your leadership or because 
of the oversight of the various Federal agencies who have 
consent decrees with--
    Mr. Sloan. I have made all the decisions, so I take 
responsibility for those decisions and whether they work or 
they don't.
    Ms. Wexton. Thank you. I see my time is up. Madam 
Chairwoman, I yield back.
    Chairwoman Waters. Thank you. They have called the votes on 
the Floor, and we are going to try and avoid having to return 
so that we don't have to keep Mr. Sloan here. So, Mr. Lynch, 
you are recognized for 5 minutes, and I am going to be very 
strict on the number of minutes so we can all get to vote.
    Mr. Lynch. Thank you, Madam Chairwoman. I will try to be 
quick. Mr. Sloan, I have to say, I am amazed. I have been here 
for a while, I was here during the financial crisis, and I am 
amazed at the willful and disgraceful conduct of Wells Fargo. I 
really am.
    I mean, AIG made mistakes, they mispriced some products, 
and there were mistakes, real mistakes made there. But in your 
case, you robbed your customers. You robbed your customers.
    We deal a lot on this committee with the Financial Crimes 
Enforcement Network and a lot of those cases are people hacking 
or cyber criminals stealing funds from strangers.
    But in your case, you robbed your customers, the people who 
came to you and trusted you. So when you say, ``We made a 
mistake,'' robbing your customers is not a mistake. There is 
something deeper going wrong there. You said that, ``We had 
errors in those businesses.'' Robbing your customers is not an 
error in business in the deepest sense. There is something more 
sinister in that.
    When people come to you, they deposit money into your bank 
and you rob them, 3.5 million-- 3.5 million--fake accounts and 
fake credit cards. And I am just stunned--I don't know if I am 
madder at Wells Fargo or madder at our regulators that they did 
not just step in, remove Mr. Stumpf, and appoint a receiver for 
Wells Fargo and break you up.
    You are still like the 12th biggest bank in the world, with 
$2 trillion in assets. And I think your conduct over the past 
decade has proven that you are way too big to even manage what 
you have going on right now. You say that, ``We are going to 
make a difference now because everything is centralized.'' The 
robbing of your customers was centralized, 3.5 million. This 
was not an outlier. You fired 5,300 employees, and they were 
fired for following company policy.
    Make no mistake, 5,300 people don't go rogue together. 
These were employees who were following company policy. It is 
disgraceful.
    You know, the FDIC, one of your regulators, has grounds for 
removal and taking over the back and breaking it up. One of the 
standards is if there was a willful violation and concealment 
of the institution's books, papers, records or assets--opening 
up fake accounts, taking the information that you got, Social 
Security numbers, all of that stuff that your customers gave 
you, and filling out fake credit cards and charging them for 
that, opening up fake accounts with people's names on them that 
they gave to you as a fiduciary, that would seem to qualify.
    If there was a violation of law or regulation of any 
unsound practice or condition that weakens the bank's 
condition, that is you. That is you all over in terms of your 
bank. If the bank was found guilty of any Federal criminal 
money-laundering offense, so you got a violation of the Bank 
Secrecy Act and then you have one of your employees doing deals 
with the Sinaloa cartel, allowing them to buy an aircraft. You 
funded it through Wells Fargo.
    So, you basically qualify with all of the things that would 
lead the FDIC and the regulators to remove the CEO and take 
over that bank. And I don't know why they haven't. They are 
going to be up before this committee eventually, in a couple of 
weeks, and I am going to ask them the same question.
    But if I were you, and you really wanted to do the right 
thing, put this bank on the right path, then break it up. 
Decide how you would dismantle it so we don't lose all the 
jobs, but you are way too big. Your conduct has been 
disgraceful. And I think you would serve your customers and you 
would serve the financial system and our country much better if 
you agreed to just break up the bank in functioning pieces that 
are able to be accountable to their customers and to the 
general public.
    Madam Chairwoman, I yield back.
    Chairwoman Waters. Thank you very much. The gentlewoman 
from Pennsylvania, Ms. Dean, is recognized for 5 minutes. They 
are holding the Floor open for the vote. We are going to see--
    Ms. Dean. Okay, I am going to talk really fast.
    Chairwoman Waters. --if we can make it. Thank you.
    Ms. Dean. Thank you. Thank you, Madam Chairwoman.
    Thank you, Mr. Sloan, for being here. I wanted to say to 
you that I was eager to read your testimony before coming to 
this hearing today. And I will preface it by saying that I am a 
Wells Fargo customer, I have an account or two at Wells Fargo 
in addition to other places. My local branch couldn't be nicer.
    Mr. Sloan. Thank you.
    Ms. Dean. But that is neither here nor there. I was eager 
to read your testimony. I come from a background of teaching 
writing at a university for 10 years, and I have always taught 
my students avoid euphemism, because euphemism just fogs over 
the real meaning of what is going on.
    I was gravely disappointed at the testimony that I read, 
and here is why. In your first paragraph, you said that you are 
looking forward to the opportunity to discuss the 
transformation at Wells Fargo over the past 2 years under your 
leadership. You were determined to address the retail sales 
practice issues that occurred in community banks. You pledged 
to look back years.
    ``We discovered issues that we need to address, every one 
of which was a disappointment to me. I want to be accountable 
and transparent.'' These are your words; I am taking them in 
pieces, of course. ``And we have,'' that is what you said. ``We 
have been accountable and transparent. We have gone above and 
beyond what is required in disclosing these issues.''
    If you can hear the theme here, I was struck by the lack of 
transparency. I was struck by language that didn't at all 
reveal the grave fraudulent things going on at Wells Fargo, not 
just in the past 2 years, but maybe as far back as 2002.
    So what struck me was that the first step in solving a 
problem is recognizing there is one. And I have seen here in 
the last 4 hours an absence of a recognition of the real 
problem and the real grievous harm you caused people. There is 
a draining of humanity in this whole conversation that I can't 
believe.
    I was a State representative before I came here. I sat with 
people trying to go through the tangled web of mortgage 
modifications. And when we take a look at your mortgage 
modifications, and what you revealed, that 870 customers were 
incorrectly denied loan modifications because of a computer 
glitch--again, there is no humanity in that, some computer ran 
for 5 or 6 years and denied people modifications, and 545 of 
those customers lost their homes.
    What did you do? How did you calculate the exact harm to 
each and every single one of those 545, not to mention the 325 
who were wrongly denied?
    Mr. Sloan. So what we are doing--
    Ms. Dean. And I want an exact calculation. Give me an 
example of one human being.
    Mr. Sloan. Well, for some of the customers that we 
foreclosed inappropriately on, because they didn't receive a 
modification, we have sent them a $15,000 check, and they have 
been satisfied with that remediation.
    Ms. Dean. I have to stop you there. I went on your website 
and I looked at different places where a customer like me could 
go in, and the things you have said today--you sent $15,000, 
and because you didn't hear back from them, you consider them 
satisfied.
    Mr. Sloan. No, not at all.
    Ms. Dean. Imagine losing your home.
    Mr. Sloan. No. No.
    Ms. Dean. You don't know what equity they might have lost 
in that, the stresses, the human toll. Have you seen families 
sit and go through what they think is a shameful experience? 
``I can't keep a home over my children's heads.'' It is a 
shameful feeling, a horrible feeling. Not to mention the 
uncertainty of it. And you thought a $15,000 check satisfies 
it? Shouldn't there be an exact calculation of harm per 
individual, yes or no? Yes or no? Should you calculate per 
individual?
    Mr. Sloan. And that is what we are doing--
    Ms. Dean. No, you put the burden back on the borrower.
    Mr. Sloan. I want to take this specific situation you 
described--to the extent that there was a foreclosure and there 
was any equity in the home, that was returned to the customer 
already. Okay? We have said to those customers, if $15,000, 
which is 2.5 times the amount, please--
    Ms. Dean. I am going to stop you there.
    Mr. Sloan. Please.
    Ms. Dean. We have heard you say the $15,000 fee, 2\1/2\ 
times. Here is what is dissatisfying to me. As the commander, 
as the captain of this ship, what I think you should have 
instructed your subordinates to do was to say, don't offer them 
$15,000 and see if that will satisfy them. Find out the exact 
harm that we caused--
    Mr. Sloan. And that is what we have done.
    Ms. Dean. Just like a recall of a bad drug.
    Mr. Sloan. No, no, no. That is what we have done.
    Ms. Dean. Find out the exact--no, you have put it back on 
the customer, just like the customers who might have had too 
much of a fee taken from them for holding on to an interest 
lock. You put it back on the customer. Get back to us if you 
think you were wrongly charged. How are they to know they are 
wrongly charged?
    I am going to end with this, Madam Chairwoman, because I 
know I am out of time. I would ask you to--
    Mr. Sloan. I would love to be able to answer your question.
    Ms. Dean. I would ask you to take a look at your overall 
language, because your language reveals that you don't get it, 
that you are fogging over the problem. In this beautifully 
printed book, ``Our Culture'', chapter 3, listen to this and 
tell me what in God's name it means. ``After extensive internal 
research--
    Chairwoman Waters. The gentleman from Illinois, Mr. Garcia, 
is recognized for 5 minutes.
    Mr. Garcia of Illinois. Thank you, Madam President--or 
Madam Chairwoman.
    [laughter]
    Chairwoman Waters. I like that.
    Mr. Garcia of Illinois. Mr. Sloan, with respect to the 
review of the scandals that Wells Fargo has been involved in 
over the past several years, including the fraudulent customer 
accounts that were probably the greatest of scandals, the 
illegal student loan servicing practices, the checking account 
overdraft fees, the mortgage lending abuses, the auto lending 
abuses, that we have learned about in this hearing and prior to 
the hearing, is it fair to characterize these scandals as the 
largest scandal that has occurred among the big four banks in 
this country in modern history?
    Mr. Sloan. I am not familiar with the impact on other 
banks, so I can't answer your question. There is no question 
that--
    Mr. Garcia of Illinois. But you are familiar with banking 
in this country--
    Mr. Sloan. I am.
    Mr. Garcia of Illinois. And the scale that has occurred and 
the penalties that have been imposed. Does that make it the 
largest scandal in terms of consumer abuse?
    Mr. Sloan. Based on the penalties that have been imposed, 
the answer--
    Mr. Garcia of Illinois. Based on everything, the scale, the 
number of fraudulent accounts, and the other enumeration of 
incidents that have been documented and litigated, et cetera, 
do you believe it is the largest scandal in U.S. banking 
history?
    Mr. Sloan. Congressman, I am not trying to be difficult. It 
may be; I just don't know the impact of--
    Mr. Garcia of Illinois. Okay. I will take your answer, ``It 
may be.'' Two, in the interest of time, Wells Fargo has engaged 
the immigrant community, profited from the immigrant community 
as customers, as a market share. And last January, you released 
a video message urging Congress to adopt a legislative solution 
for the young people known as the DACA class of immigrants who 
are seeking a pathway to citizenship.
    And you said, ``What happens with DREAMers is important to 
Wells Fargo because it affects our customers and their 
families. It also affects our own team since some DREAMers 
already work for Wells Fargo.'' And that is fine. That is to be 
applauded.
    But Wells Fargo has a dubious record when it comes to its 
treatment of immigrants and Latino customers. Because in April 
of 2017, per a New York Times report which said that Wells 
Fargo employees were ``instructed to round up immigrants, 
corral them into a branch office, and cajole them into opening 
bank accounts.''
    Wells Fargo employees allege in sworn statements that they 
were ordered to target undocumented workers at construction 
sites, factories, and 7-Elevens. You have called these 
allegations nonsensical because you ``can't do business with 
undocumented immigrants by Federal law.'' If these charges were 
false, why were employees willing to sign sworn statements that 
Wells Fargo's aggressive practices targeted undocumented 
immigrants?
    Mr. Sloan. Congressman, I saw the same report that you did. 
We investigated that and we found no incidence of that.
    Mr. Garcia of Illinois. But there is a pending Federal 
lawsuit pertaining to the DACA class of immigrants, pending in 
San Francisco, correct?
    Mr. Sloan. That is correct. But again, we have investigated 
that, and we haven't found any incidents.
    Mr. Garcia of Illinois. But a Federal judge has found that 
it has standing and it remains an active lawsuit, correct?
    Mr. Sloan. That is my understanding.
    Mr. Garcia of Illinois. Yes, okay. With respect to--and 
this is my final question, Madam Chairwoman. Your head of 
consumer banking is quoted in a Times article describing how 
the firm's entire system of how you pay, coach, and develop 
team members is designed to focus on customer experience and 
customer outcomes. And you testified this morning that your 
performance evaluation system prioritizes customers.
    Yet, according to a report released this morning by the 
Committee for Better Banks, the maximum quarterly bonus for 
employees under the ``customer experience,'' metric dropped 
from $1,425 in 2017 to $875 for 2019. If you are truly 
prioritizing the customer experience under your new performance 
evaluation, why have these bonuses under the metric declined?
    Mr. Sloan. I have asked our team, I saw that same report 
that came out yesterday, and I asked our team to take a look at 
it yesterday. And other than spelling Wells Fargo correctly and 
acknowledging that our--
    Chairwoman Waters. The gentlelady from New York, Ms. 
Velazquez, is recognized for 5 minutes.
    Mr. Sloan. We have raised our $15 minimum wage, and we 
disagree with everything in that report.
    Chairwoman Waters. Your time has expired.
    Mr. Garcia of Illinois. Thank you.
    Thank you, Madam Chairwoman.
    Chairwoman Waters. Please, Ms. Velazquez.
    Ms. Velazquez. Thank you, Madam Chairwoman.
    Chairwoman Waters. Four votes are holding on the Floor.
    Ms. Velazquez. Sure.
    Chairwoman Waters. Please.
    Ms. Velazquez. Mr. Sloan, I have to repeat what you have 
heard before. Since 2016, Wells Fargo has been cited and fined 
for fraudulently opening millions of deposit and credit card 
accounts, abuses involving servicemembers violation with its 
mortgage and auto lending businesses, and security fraud 
charges associated with the sale of complex financial products 
to retail investors.
    Your bank also continues to be the subject of a number of 
ongoing investigations. Mr. Sloan, you cannot sit there with a 
straight face and claim to not be responsible for all of these 
abuses that have been committed against consumers. So my 
question to you is, do you believe that consumer abuses as well 
as fraudulent and deceptive actions practiced by large 
financial institutions could pose a threat to financial 
stability?
    Mr. Sloan. I think that banks and banks like ours should 
follow the rules and regulations that are set forth in this 
country. I completely agree with that, Congresswoman. We have a 
duty to provide products and services to our customers in an 
appropriate way. And if we don't provide that, that there is 
both financial and reputational harm that is done to the 
institution, and that could have an impact on the economy.
    Ms. Velazquez. So can you tell me why the Fed didn't remove 
the asset cap?
    Mr. Sloan. As part of the consent order with the Fed, they 
want us to improve the Board governance and oversight, which we 
have done.
    Ms. Velazquez. Isn't the answer because you focus on growth 
and profits not risk management? Is that the transformation 
that is happening at your institution?
    Mr. Sloan. We are significantly improving our compliance 
and operational risk management, which is paragraph three of 
the consent order with the Fed.
    Ms. Velazquez. Well, the Fed does not agree with you and 
that is exactly why they didn't remove the cap. And you know 
it. Sir, all Americans deserve honesty, integrity, and trust 
when it comes to placing their money in the banking system. A 
culture of deception and deceit erodes that trust and leads 
depositors to lose faith in our financial institutions. And to 
me, I believe that represents a threat to financial stability.
    I yield back.
    Chairwoman Waters. Thank you. The gentlewoman from North 
Carolina, Ms. Adams, is recognized for 5 minutes.
    Ms. Adams. Thank you, Madam Chairwoman, for convening 
today's hearing, and thank you, Mr. Sloan, for coming before us 
today with your testimony. The last time we spoke, you assured 
me that Wells Fargo was making a number of changes, including 
changing the competitive and toxic sales culture, increasing 
Board diversity, and developing an inclusive culture, among 
other things.
    Now, my colleagues have covered a lot of ground today, so 
let me just shift gears a minute and ask a question or two 
about diversity. As you know, the financial industry continues 
to be plagued by lack of diversity and complaints about 
harassment and discrimination.
    I believe that if employers are serious about diversity 
that they will link their end-of- year bonuses to their 
diversity goals. So my question to you is, does Wells Fargo 
currently link its diversity goals to corporate bonuses?
    Mr. Sloan. Yes. In the incentive compensation for our 
senior leadership team, one of the measures of the management 
portion of that calculation is based upon not only their 
commitment, but also their progress in meeting our policies and 
procedures related to diversity and inclusion.
    Ms. Adams. So do you believe that Wells Fargo, under your 
leadership, has done everything that it can do to make the 
company truly reflective--
    Mr. Sloan. I think--
    Ms. Adams. --of America's diversity?
    Mr. Sloan. I think we have done a lot but we have more work 
to do. Congresswoman, one example I would give you is that when 
I stepped in the role of the Chief Operating Officer, I 
instituted the Wells Fargo equivalent of the Rooney Rule, which 
means that whenever we have a senior leadership role that is 
open in the company, we need to ensure that we have a diverse 
slate of candidates for that role and a diverse panel of 
interviewers.
    Ms. Adams. Okay. Let me move on.
    Mr. Sloan. And that has made progress both in terms in the 
number of women and diverse leaders in the company.
    Ms. Adams. All right. We want to make sure we have some 
African Americans in there, as well. You know, when we talk 
about diversity, sometimes we forget that, because you can also 
say minorities are women, as well, and I mean, I support that, 
being an African-American woman.
    Mr. Sloan. I don't mean to interrupt you, but to that 
point, Michelle Lee, who runs half of our retail banking 
business, who lives in Charlotte, is African American.
    Ms. Adams. Okay. Let me move on to an issue that we are 
having in Charlotte, as I am sure you aware of, and that is 
affordable housing. According to your business standard report, 
Wells Fargo home lending is the largest home mortgage lender 
and servicer in the U.S., funding one of every nine loans and 
servicing one of every seven loans. First of all, do you 
believe that America is in the midst of an affordable housing 
crisis?
    Mr. Sloan. I absolutely do.
    Ms. Adams. Okay. And given the dominance in the housing 
sector by Wells Fargo, what are you doing to tackle and combat 
the housing affordability predicament that many of our 
communities are facing, particularly in the City of Charlotte?
    Mr. Sloan. We are doing a number of things. I will give you 
two quick examples. One is our neighborhood lift program, where 
we are providing down payments in the form of grants to low- to 
moderate-income folks.
    For example, I was just at our neighborhood lift program in 
Los Angeles and I was there when we provided the down payment 
for the Ramirez Valenzuela family to afford their first home in 
Palmdale, California.
    In addition, we provided enough grants so 20,000 low- to 
moderate-income homeowners, mostly diverse, have been able to 
afford a home in the last 6 years, and that program has 
distributed about $449 million and we are continuing on that 
program.
    Ms. Adams. Okay. You spoke earlier about the $15 minimum 
wage or more. How did raising that wage to $15--how much did it 
really cost Wells Fargo to do that?
    Mr. Sloan. On an annual basis, it cost us about $200 
million.
    Ms. Adams. And what was the median annual salary that the 
bank paid in 2018?
    Mr. Sloan. It is about $60,000.
    Ms. Adams. Okay. Are you going to increase it more? I mean, 
$15 is good, but it is still very difficult, and we have a lot 
of poverty in our community and communities all over this 
country. So I am just curious about that. Will you have plans 
for doing more?
    Mr. Sloan. I want everybody who makes $15 an hour--
    Ms. Adams. But are you all going to do more?
    Mr. Sloan. We look at compensation every year in Wells 
Fargo to make sure that we are paying competitively. I think we 
have been a leader in the industry in terms of how we pay our 
entry-level team members. That is how I started in banking, 
working my way through college as a teller.
    Ms. Adams. Okay. Thank you very much. Thank you very much, 
Madam Chairwoman. I yield back.
    Chairwoman Waters. Thank you. I would like to thank our 
witness for his testimony today.
    The Chair notes that some Members may have additional 
questions for this witness, which they may wish to submit in 
writing. Without objection, the hearing record will remain open 
for 5 legislative days for Members to submit written questions 
to this witness and to place his responses in the record. Also, 
without objection, Members will have 5 legislative days to 
submit extraneous materials to the Chair for inclusion in the 
record.
    I ask our witness to please respond as promptly as you are 
able.
    This hearing has revealed that Wells Fargo has failed to 
clean up its act, that it is too-big-to-manage, and that the 
steps regulators have taken to date are wholly inadequate. As 
was discussed today, The Wall Street Journal reported yesterday 
that the Office of the Comptroller of the Currency (OCC), Wells 
Fargo's chief regulator, is considering forcing out several 
executives and Board directors.
    I think the OCC should take this important step, and the 
regulators should also consider it with you, Mr. Sloan. It is 
also time for Congress to take bold action to protect our 
constituents.
    I intend to reintroduce the Megabank Accountability and 
Consequences Act, a bill I first introduced in 2017, to address 
rampant violations of consumer protection laws by megabanks, 
and to hold them and their executives fully accountable for 
their actions.
    With that, this hearing is now adjourned.
    [Whereupon, at 2:15 p.m., the hearing was adjourned.]

                            A P P E N D I X


                             March 12, 2019
                             
                             
                             
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