[House Hearing, 116 Congress]
[From the U.S. Government Publishing Office]
HOLDING WELLS FARGO ACCOUNTABLE:.
CEO PERSPECTIVES ON NEXT STEPS FOR
THE BANK THAT BROKE AMERICA'S TRUST
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HEARING
BEFORE THE
COMMITTEE ON FINANCIAL SERVICES
U.S. HOUSE OF REPRESENTATIVES
ONE HUNDRED SIXTEENTH CONGRESS
SECOND SESSION
__________
MARCH 10, 2020
__________
Printed for the use of the Committee on Financial Services
Serial No. 116-91
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
__________
U.S. GOVERNMENT PUBLISHING OFFICE
42-866 PDF WASHINGTON : 2021
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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 ANN WAGNER, Missouri
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 STEVE STIVERS, Ohio
ED PERLMUTTER, Colorado ANDY BARR, Kentucky
JIM A. HIMES, Connecticut SCOTT TIPTON, Colorado
BILL FOSTER, Illinois ROGER WILLIAMS, Texas
JOYCE BEATTY, Ohio FRENCH HILL, Arkansas
DENNY HECK, Washington TOM EMMER, Minnesota
JUAN VARGAS, California LEE M. ZELDIN, New York
JOSH GOTTHEIMER, New Jersey BARRY LOUDERMILK, Georgia
VICENTE GONZALEZ, Texas ALEXANDER X. MOONEY, West Virginia
AL LAWSON, Florida WARREN DAVIDSON, Ohio
MICHAEL SAN NICOLAS, Guam TED BUDD, North Carolina
RASHIDA TLAIB, Michigan DAVID KUSTOFF, Tennessee
KATIE PORTER, California TREY HOLLINGSWORTH, Indiana
CINDY AXNE, Iowa ANTHONY GONZALEZ, Ohio
SEAN CASTEN, Illinois JOHN ROSE, Tennessee
AYANNA PRESSLEY, Massachusetts BRYAN STEIL, Wisconsin
BEN McADAMS, Utah LANCE GOODEN, Texas
ALEXANDRIA OCASIO-CORTEZ, New York DENVER RIGGLEMAN, Virginia
JENNIFER WEXTON, Virginia WILLIAM TIMMONS, South Carolina
STEPHEN F. LYNCH, Massachusetts VAN TAYLOR, Texas
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
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Page
Hearing held on:
March 10, 2020............................................... 1
Appendix:
March 10, 2020............................................... 71
WITNESSES
Tuesday, March 10, 2020
Scharf, Charles W., Chief Executive Officer and President, Wells
Fargo & Company................................................ 5
APPENDIX
Prepared statements:
Scharf, Charles W............................................ 72
HOLDING WELLS FARGO ACCOUNTABLE:
CEO PERSPECTIVES ON NEXT STEPS FOR
THE BANK THAT BROKE AMERICA'S TRUST
----------
Tuesday, March 10, 2020
U.S. House of Representatives,
Committee on Financial Services,
Washington, D.C.
The committee met, pursuant to notice, at 10:06 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, Vargas, Gottheimer, Lawson,
San Nicolas, Tlaib, Porter, Axne, Casten, Pressley, McAdams,
Wexton, Lynch, Adams, Dean, Garcia of Illinois, Garcia of
Texas, Phillips; McHenry, Wagner, Lucas, Posey, Luetkemeyer,
Huizenga, Barr, Tipton, Williams, Emmer, Zeldin, Loudermilk,
Mooney, Davidson, Budd, Kustoff, Hollingsworth, Gonzalez of
Ohio, Rose, Steil, Gooden, Timmons, and Taylor.
Chairwoman Waters. The Committee on Financial Services 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 Wells Fargo
Accountable: CEO Perspectives on Next Steps for the Bank that
Broke America's Trust.''
I now recognize myself for 4 minutes for an opening
statement.
Today, Wells Fargo CEO Charles Scharf will testify before
the committee about how he plans to end Wells Fargo's egregious
pattern of consumer abuses. He is now the third Wells Fargo CEO
to testify before this committee in less than 3\1/2\ years. I
will note that each time a Wells Fargo CEO has testified before
this committee, he has resigned soon thereafter.
Mr. Scharf, you have taken on a massive challenge. While I
certainly wish you luck, it is clear to this committee that the
bank you inherited is essentially a lawless organization that
has caused widespread harm to millions of consumers throughout
the nation.
Wells Fargo has opened 3.5 million fraudulent accounts in
their customers' names, which cost consumers over $6 million;
charged consumers for automobile insurance policies they did
not need, resulting in some consumers losing their automobiles;
engaged in illegal student loan servicing practices; charged
consumers inappropriate overdraft fees; overcharged veterans
for refinance loans; and fraudulently sold complex financial
products to retail investors.
Last week, the committee released a Majority staff report
on Wells Fargo's compliance with five consent orders issued by
various regulatory agencies, in response to the company's
widespread consumer abuses and compliance breakdowns. Among the
disturbing findings uncovered in the report is that the Office
of the Comptroller of the Currency (OCC) is aware of dozens of
cases at Wells Fargo where the number of consumers or customer
accounts requiring remediation for consumer abuse exceeds
50,000, or the amount of harm exceeds $10 million.
I am very concerned that the bank's pattern of harming its
consumers appears to persist. The Majority staff report also
uncovered notes from a May 2019 Federal Reserve meeting with
Wells Fargo which reflect that a senior Wells Fargo executive
stated, ``If you were CEO, you would not allow the addition of
any new customers to the company, since the firm is operating
in this environment.''
Based on the findings of the Majority staff report, I agree
with the sentiment that Wells Fargo is not ready to be
America's bank again, and this is the challenge before you, Mr.
Scharf. You must not only rebuild this institution, you must
also rebuild America's trust in it, and that begins with your
testimony today. When your predecessor testified before this
committee, he gave inaccurate and misleading testimony. I urge
you not to follow his example, but instead, to be transparent
and honest.
This hearing is the first of several the committee will be
convening to hold Wells Fargo accountable. As part of this
oversight, we will be looking at legislation to do just that.
While the Federal Reserve's asset cap was a good start, it
didn't seem to change the bank's behavior.
Accordingly, we will discuss a number of bills that would
compel further action by regulators and rein in abusive
megabanks like Wells Fargo to hold them, including their
management and boards, accountable for their actions.
Thank you.
The Chair now recognizes the ranking member of the
committee, the gentleman from North Carolina, Mr. McHenry, for
4 minutes for an opening statement.
Mr. McHenry. Thank you, Madam Chairwoman. My colleagues on
the other side of the aisle made up their minds about Wells
Fargo long ago. In fact, before we received a single document,
the now-Chair of the committee said in 2016 that she had,
``come to the conclusion that Wells Fargo should be broken up.
It is too big to manage.'' Again, that was before the committee
received a single document or reviewed even a shred of evidence
in the investigation of Wells Fargo's sales practices.
Now, after reviewing half-a-million documents that both the
Democrats and Republicans on this committee have access to, and
hundreds of pages of witness testimony, we know that breaking
up the bank is not the answer. Wells Fargo isn't too big to
manage. The findings of these documents show that it was
grossly mismanaged. The evidence shows the source of the
company's problem was its federated structure and the
leadership team who couldn't fix it.
Those are the issues that are unique to Wells Fargo, and
Wells Fargo is uniquely mismanaged. However, the evidence does
not tell us much about Wells Fargo's large bank peers. So, we
are going to spend all day hearing from Wells Fargo's brand new
CEO, who has been on the job for all of about 6 months, and who
has no connection to the period in question. And tomorrow, we
are going to drag up two former board members for the sole
purpose of embarrassing them, and there are documents that are
deeply embarrassing to those board members and to the then-
board of Wells Fargo. That is true. The chairwoman called on
them to resign and they did. In fact, the markets were calling
on them to resign. The system works.
I am not sure what we hope to accomplish tomorrow with
witnesses who are no longer in a position to fix the company,
moving forward. I would offer that we don't have the luxury of
three politically-motivated, ideological hearings on Wells
Fargo right now. There are serious things happening in the
world while we are having this hearing. Investors' fears over
the spread of coronavirus have had widespread consequences for
the financial services industry, the economy, and the markets.
Our constituents have real concerns and they expect us to put
aside politics and focus on the urgent matter at hand. But we
are going to spend the day asking Mr. Scharf over and over
again how he intends to fix the bank.
Here are the facts. Mr. Scharf and his team released a
plan, and it looks good on paper. We will hold him accountable
for executing that plan. In fact, his stockholders will hold
him accountable for that plan. And the regulators and the
Justice Department will hold him accountable for executing that
plan. In fact, the regulators and the Justice Department have
been extremely aggressive, during the Trump Administration, on
Wells Fargo. We will continue to hear from them about whether
or not Mr. Scharf's plans are working, and we expect them to
stay engaged.
I look forward to this hearing today, Mr. Scharf, but I
think at least some of our Members will want to know what you
are doing to prepare for your massive footprint of employees,
how you are going to protect their safety, how you are going to
protect the safety and soundness of your institution, given
what is happening in the marketplace and the fears we have in
reaction to this virus, and the impact that my constituents
will face with changes to credit cards, mortgages, and other
things in light of this crisis.
With that, Madam Chairwoman, I would like to introduce four
documents into the record. These are waivers to allow Mr.
Scharf to discuss certain confidential supervisory information
(CSI). These documents were issued by the CFPB, the OCC, and
the Federal Reserve. There are two important notes about these
waivers. First, they are not blanket waivers to discuss CSI.
Mr. Scharf was asked not to discuss OCC's CAMELS ratings, OCC's
risk assessments, and the Fed's supervisory ratings.
Second, he has been asked not to name supervisory staff. I
think it would be unfair to put him in a position to either
answer our question or violate regulatory directives.
Mr. Scharf, I appreciate you and your company requesting
these waivers so that you could be more forthright with this
committee, and with that, I ask unanimous consent to submit the
March 6th letter from the CFPB, the March 5th letter from the
OCC, and the 2 March 6th letters from the Federal Reserve
detailing what I have outlined.
Chairwoman Waters. Without objection, it is so ordered.
Mr. McHenry. Thank you.
Chairwoman Waters. I would also like to know if you have
permission to disclose the waivers. I understand the agency has
asked us not to do that?
Mr. McHenry. Well, I was not asked by the agencies to not
do that, and so therefore, I have just said in public what they
outlined. These are letters to you and Mr. Green, and I am cc'd
on them. Had they made that request, I would have liked to have
heard it before announcing it here to you today, and to
everyone on this committee.
Chairwoman Waters. Well, that is what I understand.
Mr. McHenry. But I think it is--
Chairwoman Waters. And we have already heard 5 hours of
testimony from then-CEO Stumpf, when I called for Wells Fargo
to be broken up, so I would like to clear the record on that.
Without objection, your information is inserted into the
record.
The Chair now recognizes the gentleman from Texas, Mr.
Green, who is also the Chair of our Subcommittee on Oversight
and Investigations, for one minute.
Mr. Green. Thank you, Madam Chairwoman. Madam Chairwoman,
my constituents would like to know how it is that Wells Fargo
can pay a $3 billion fine, commit fraud, open accounts without
the knowledge of customers, and not one person goes to jail. Of
all of the top banks, the so-called too-big-to-fail banks,
there has never been a CEO or a top officer of any of these
too-big-to-fail banks who has gone to jail. It seems that they
are not only too-big-to-fail; they are also too-big-to-jail.
This issue has to be resolved, and it cannot be resolved by
simply paying off the government. Wells Fargo has to do more to
atone for its transgressions, which will involve how it treats
its employees, what it will do to make sure that this never
happens again, but more importantly than all of these, Wells
Fargo has to understand that it cannot continue with what
appears to be a criminal enterprise.
I yield back the balance of my time.
Chairwoman Waters. The Chair now recognizes the
subcommittee ranking member, Mr. Barr, for one minute.
Mr. Barr. Thank you, Chairwoman Waters, and Ranking Member
McHenry. Mr. Scharf, welcome back to the committee for your
appearance in your new and current role. The scandals plaguing
Wells Fargo, and senior management's failure to address the
problems and their aftermath, represented a breach of public
trust and a significant shortfall in consumer protection. We
are not here to re-litigate the details of those practices,
which the committee covered in previous hearings and reports.
We are here to understand what the new management has done to
correct mistakes of the past, how they are complying with
regulators' directives, and their plans to ensure this doesn't
happen again.
Wells Fargo's individualized misconduct sparked unfair
anti-bank rhetoric that has been applied to all banks of all
sizes, much of which you will hear from my colleagues today.
But labeling all banks as the villains of capitalism makes it
easier for some on the far left to justify their quest to
impose socialism on our free market economy and politicize
access to capital. We are here to focus on only one isolated
bank and its path to rebuild trust.
Mr. Scharf, I look forward to learning about the work you
have done to change the culture at the bank, and to working
with you to ensure that Wells Fargo upholds its promises.
I yield back.
Chairwoman Waters. I want to welcome to the committee
Charles W. Scharf, president and chief executive officer of
Wells Fargo & Company. Mr. Scharf has held this position with
Wells Fargo & Company since October 2019. Previously, Mr.
Scharf served as a senior official at a number of financial
institutions, including as chief executive officer at Visa
Incorporated, and as chief executive officer and chairman of
the board at Bank of New York Mellon.
Without objection, your written statement will be made a
part of the record, but before we begin, I would like to swear
the witness in. Mr. Scharf, please stand and raise your right
hand.
Thank you. Do you solemnly swear or affirm that the
testimony you will give before this committee in the matters
now under consideration will be the truth, the whole truth, and
nothing but the truth, so help you God?
[Witness sworn.]
Thank you. Let the record show that the witness answered in
the affirmative. You may take your seat.
Mr. Scharf, you will have 5 minutes to summarize your
testimony. When you have one 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' times.
Mr. Scharf, you are now recognized to present your oral
testimony.
TESTIMONY OF CHARLES W. SCHARF, CHIEF EXECUTIVE OFFICER AND
PRESIDENT, WELLS FARGO & COMPANY
Mr. Scharf. Chairwoman Waters, Ranking Member McHenry,
members of the committee, good morning. Thank you very much for
the opportunity to be here today. I joined Wells Fargo just
over 4 months ago, after serving as CEO of BNY Mellon, and
Visa, and while it is early days, I welcome the opportunity to
discuss the next steps for Wells Fargo.
The members of this committee are familiar with Wells
Fargo's history. Our failings have been detailed recently in
both the settlement with the DOJ and the SEC, as well as the
administrative actions taken by the OCC against former
employees. These matters describe deeply disturbing conduct
that is utterly unacceptable and has no place in our company.
In addition, the recently released reports from this
committee reinforced what I have said since I arrived, that we
have not done what is necessary to address our shortcomings.
Simply said, we had a flawed business model in how the company
was managed. Our structure and culture were problematic, and
the company's leadership failed its stakeholders.
But today, I would like to talk to you about our plan to
chart a better course. I took this job because I believe that
our country and our communities benefit from a strong Wells
Fargo. I am confident we can do what is necessary to move this
company in a significantly improved direction. While it will
take time, the transformation has begun, and I realize the path
forward will be difficult. And though I realize the path
forward will be difficult, I am optimistic of our future.
Here are some important steps we have taken so far. First,
I provided an honest assessment, both internally and
externally, of our significant shortcomings and our failure to
effectively address them.
Second, I made it clear, also internally and externally,
that we must prioritize the work outlined by our regulators
above all else. Completing that work is essential to ensuring
the company is run with the highest standards of both
operational excellence and integrity.
Third, I am making substantial changes to our leadership
team. I brought in three new leaders and expect to add two more
soon from outside the company to join our operating committee.
Almost 75 percent of that group will be new to the company
since 2018. Hiring experienced people with proven track records
in the issues we face is necessary to bring about the change
required.
Fourth, we reorganized the structure of our businesses to
ensure we have clear responsibility and accountability. We
created a new role, chief operating officer, who will ensure
that high-quality, consistent execution and operational
excellence become part of our culture, especially with regard
to our regulatory work. We announced a flatter organizational
structure with more direct representation on our operating
committee. This will give me clear line of sight and more
direct involvement across the company. It will also provide
greater transparency into how our businesses are working, what
kinds of risks they are taking on, how they are treating
customers, and whether they are operating at the highest
standards.
Fifth, we are introducing a new set of processes to
thoroughly review our progress against our regulatory work.
Sixth, we altered our evaluation and compensation practices
and have significantly greater accountability, and will
continue to make tough decisions around our leaders.
Seventh, we are redefining our culture, especially
regarding how we work together. We will have a strong
centralized control infrastructure. We will ensure we have the
right people in the right roles. We will move with a sense of
urgency, we will hold each other accountable for our
commitments, and we will judge ourselves based upon our
outcomes, not our words.
But most importantly, the guiding principle in how we make
business decisions must be that everything starts and ends with
our customers. We must put them first in our decision-making in
all we do.
As we move forward, I have no preconceived notions about
what size our bank should be, but I firmly believe that we must
be able to manage all of it. I also know that progress in our
plan will take time, and that ultimately our regulators will
decide when we have met our obligations under the consent
orders. My commitment to our regulators is that we will
approach this work with the greatest sense of urgency.
To my colleagues at Wells Fargo, you deserve more from the
bank's leadership, and the failings that occurred in the past
have made your jobs difficult. I am committed to doing better
as we seek to ensure that such things never occur again at
Wells Fargo.
And to the committee, I want to give you my personal
assurance that we will do the work necessary to put Wells Fargo
on a sound footing with our customers, employees, regulators,
shareholders, and communities.
Thank you, and I am happy to answer your questions.
[The prepared statement of Mr. Scharf can be found on page
72 of the appendix.]
Chairwoman Waters. Thank you very much. I would now like to
engage you with a few questions that I have about some of the
findings that were reported in the investigation that was done
by the Majority staff. According to the committee's Majority
staff report, there are currently dozens of consumer abuses
that each affect more than 50,000 customers or accounts, or
require more than $10 million in remediation.
Mr. Scharf, this was one of the most troubling findings of
the report, because after more than 3\1/2\ years under consent
orders, Wells Fargo may still be harming millions of consumers.
Exactly how many consumers were harmed by the bank as a
result of the dozens of abuses cited in the report?
Mr. Scharf. Chairwoman, I do not know the answer to that
question.
Chairwoman Waters. Will any consumer who has been harmed by
the bank and identified receive payment and have their credit
report fixed within the next 30 days?
Mr. Scharf. Chairwoman, taking care of our customers is the
most important thing for us. We are in the process of doing all
of the work that is required of us to remediate everything that
we possibly can. It will certainly take longer than that, but
the process has to be complete, it has to be thorough, and we
are committed to doing it.
Chairwoman Waters. How long will it take for these
consumers to receive payment and to have their credit reports
fixed? I asked about 30 days. You will not answer that
directly. About how long do you think it will take?
Mr. Scharf. Chairwoman, as of now, our plans take us into
2021 to ensure that all of the payments are made appropriately.
We are taking a fresh look at how we do remediation, to make
sure that we are being as thorough as we possibly can, and
remediate everyone we should, and to ask the question, are
there changes that we can make to our processes to get this
done more quickly?
Chairwoman Waters. My concern has only deepened in the past
week as I think about the millions of customers who will be
looking to Wells Fargo to support them through the economic
pain inflicted by the coronavirus. While Wells Fargo and its
foundation have offered about $11 million to support efforts to
combat the virus, megabanks like yours will be asked to
forebear payments on mortgages, credit cards, and other
consumer debts.
How can your customers, regulators, Congress, and the
public have any confidence in your institution's ability to
support your customers when you have dozens of ongoing
instances of consumer abuse?
Mr. Scharf. Chairwoman, I appreciate and understand the
question. All I can tell you is that we are approaching the
virus, I think in the way you would expect us to, which is, we
are thinking about it in terms of what it really means for
every American out there. That is certainly how I think about
it, and starting with those who are the most affected.
And so as we think about what we could be doing relative to
late fees, missed payments, and things like that, we want our
customers to believe that we are a source of strength for them,
and we are going to approach it that way.
Chairwoman Waters. I know that you understand we will be
looking for a lot more specificity than you have just
described.
Now, I know that you became CEO just 4 months ago, and that
you think that there are lots of changes needed at Wells Fargo.
However, I think that absent significant reductions in Wells
Fargo's footprint, you and the bank will never be able to rein
in the culture of consumer abuse.
What can you tell us about reducing the footprint?
Mr. Scharf. Chairwoman, what I can tell you is that we sold
off businesses over the last several years, and we continue to
look at what the makeup of the company is. My first priority
since I arrived at the company only 4 months ago, as you
mentioned, is to ask the questions around, what do we have to
do to get the regulatory work in far better shape than it is?
At the same time, we have launched a series of meetings
where we are looking across the company at what we do, to
answer the question, does everything belong under the roof at
Wells Fargo? And just given the priorities that I have, my
expectation is that it will take through the end of the year to
accomplish that work.
Chairwoman Waters. As you know, there is a cap on the
assets of the bank. Have you been trying to undo that since you
have been in, or have you left it alone? Do you think that it
is fair?
Mr. Scharf. I don't have any knowledge of us trying to do
anything other than abide by it, although we obviously are
trying to do the work necessary to satisfy our regulators. I
believe that given where we are, it is appropriate, and I am
focused on getting the work done that is required by the
Federal Reserve.
Chairwoman Waters. Thank you. I yield back the balance of
my time. The gentleman from North Carolina, Ranking Member
McHenry, is recognized for 5 minutes.
Mr. McHenry. Thank you for your testimony. We understand
your plan, as you outlined it. You have outlined this to the
markets. You have outlined it to committee members. You have
outlined briefly in your opening statement your intentions to
right this ship, to remedy customer harm as quickly as
possible, to comply with regulatory orders.
The failure of Wells Fargo is not a failure of some sort of
innovation. It was a lack of it, a lack of adapting to the new
marketplace, a lack of adhering to existing laws and regulatory
orders, and when regulators called out the institution on those
breaking orders, they refused to comply in a timely manner.
Therefore, your last CEO, your predecessor, was bounced as a
result of that.
Both Democrats and Republicans on this committee have
issued reports. Here is the Republican report. So in this
report, we outlined the consumer harm and the risk management
failures of your institution. Have you reviewed both of these
reports?
Mr. Scharf. Yes, I have.
Mr. McHenry. Okay. I know you may disagree with some
conclusions that we have, in terms of policy, for the
Republican side or the Democrat side, but as to the findings of
fact, do you have any disagreements with the Democrat report or
the Republican report?
Mr. Scharf. I do not, and the only thing I would add is my
reaction to what is in those reports is probably very similar
to yours.
Mr. McHenry. Which is what?
Mr. Scharf. Which is that the series of behavior that is
described should have never happened at the company. The
failures that are described are a direct result of us not
managing the company properly. I do believe that it is possible
to manage the company differently to fulfill the
responsibilities that we have. But it is clear, when you read
the report, and I said during my opening statement that it is
consistent with what I found since I arrived at the company,
that we have not done what needs to be done, but it is possible
to do it.
Mr. McHenry. Okay. I want to zero in on this federated
structure, as you outlined in your plan, that you intend to
create an enterprise-wide risk control system, similar to your
peers. Is that true?
Mr. Scharf. Yes, it is, Ranking Member McHenry.
Mr. McHenry. Why?
Mr. Scharf. Because there is no way that a company with
multiple businesses can ensure that it is doing the right thing
across the entire enterprise unless you are taking a consistent
view of that.
Mr. McHenry. So you need greater visibility into risk
across the enterprise?
Mr. Scharf. Yes, you need greater visibility, and you need
a group of folks who are independent of the businesses
concurring or not and making judgments.
Mr. McHenry. Okay. Along those lines, your experience in
your previous roles, CEO roles--you are trying to bring that
expertise in risk management to this enterprise?
Mr. Scharf. Absolutely, as well as the practices of other
large institutions that have done this.
Mr. McHenry. Okay. So in light of what has happened in the
marketplace, in the broader market over the last month, is this
institution well-capitalized?
Mr. Scharf. Ranking Member, I think we are extremely well-
capitalized. In fact, there is no question that the whole
banking system is far better capitalized than it was back at
the time of the financial crisis, whether it is the additional
$1 billion of capital that the banks have or the $3 trillion or
so in deposits, and the liquid securities that the institutions
have.
Mr. McHenry. And you have access to liquidity sufficient to
get through any crisis you would foresee?
Mr. Scharf. Yes, absolutely, we believe that.
Mr. McHenry. In terms of safety and soundness, you are
mitigating customer harm from the previous regime. That is
positive. In terms of safety and soundness and risk management,
you are cleaning up the ship. So our expectation is that we
should have no problems from you in terms of safety and
soundness. Is that fair?
Mr. Scharf. I think it is fair to say that once we finish
the work that I have laid out, absolutely, you should feel that
way.
Mr. McHenry. Okay. How many employees do you have at Wells
Fargo?
Mr. Scharf. I have approximately 265,000.
Mr. McHenry. And how many are customer-facing employees?
Mr. Scharf. I don't know the exact answer, but it has to be
easily 100,000.
Mr. McHenry. So do you have plans in order to respond to
the current threats because of COVID-19 and what is happening
across the country, especially in your footprint in California?
Mr. Scharf. Absolutely. We are, as I said--
Mr. McHenry. As well as Washington State and other prime
areas that are seeing an outbreak.
Mr. Scharf. Our approach on COVID-19 is that we should do
anything that we can to ensure the safety of our employees as
well as be helpful for our customers. We have an open line with
them. Wherever there is any concern, we encourage folks to work
from home. I believe yesterday, we had 62,000 people logged in
working from home, and to the extent that there are issues
within the institution, we are going to do everything we can to
protect everyone else.
Mr. McHenry. Thank you.
Chairwoman Waters. Let the record show that during this
investigation, all of the information was shared with the
Republicans, and they tried to rush a report out before we got
ours out. The ranking member would like to have it both ways.
Mr. McHenry. Madam Chairwoman?
Chairwoman Waters. The gentlewoman from New York--
Mr. McHenry. Point of personal privilege, Madam Chairwoman.
Chairwoman Waters. Point of personal privilege.
Mr. McHenry. We both issued reports, both the Majority and
the Minority, as I outlined in my statement. I was not
impugning your report. I was impugning the conclusions of your
report.
Chairwoman Waters. Whatever you were doing, Mr. McHenry,
you are trying to have it both ways. You are saying that--
Mr. McHenry. We can have this debate in front of everyone
or we can get on with the hearing.
Chairwoman Waters. Yes, we can. And as the Chair of the
committee, if you want to have this debate, we will have this
debate.
Mr. McHenry. But you issued a report--
Chairwoman Waters. The gentlewoman from New York--
Mr. McHenry. --with similar findings--
Chairwoman Waters. --Mrs. Maloney, is now recognized for 5
minutes.
Mr. McHenry. Don't take shots at me without giving me the
opportunity to respond.
Chairwoman Waters. You have responded. The gentlewoman from
New York is now recognized.
Mrs. Maloney. I thank the chairwoman for yielding. Mr.
Scharf, you were brought in to clean things up and to change
the culture at Wells Fargo, and I certainly hope you do. I
would like to talk about one area where I believe you do need
to change direction. When your predecessor, Tim Sloan,
testified last year, I asked him about Wells Fargo's policies
on financing the gun industry, policies which are absolutely
egregious. Your bank has been financing gun manufacturers that
are making weapons that are literally killing our children and
our neighbors.
Mr. Sloan said that he didn't think Wells Fargo should,
``go above and beyond what the law requires on guns,'' even
though the bank explicitly states that it goes above and beyond
the law in many areas, including human rights. So, he refused
to revise Wells Fargo's policies on financing the gun industry.
Many of your competitors, such as Citibank and Bank of
America, already have sensible policies to ensure responsible
lending to 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 prohibit the selling of firearms to
teenagers. These, I believe, are common-sense policies that
will increase public safety and save lives.
So I want to ask you, will you commit to changing Wells
Fargo's policy on financing the gun industry?
Mr. Scharf. Congresswoman, first of all, I do want to say I
share your concerns about the impact of guns. Sitting here
today, I don't personally believe that I know enough to make
that commitment, but I know that is something that we need to
be far more thoughtful about. I know that we have created some
financing for some nonpartisan research, and as part of that we
need to go back and to make sure that we are thinking about
what the right thing to do is, in a series of sensitive
industries. And I am not making a judgment one way or the
other. It is just not something that I have spent enough time
on yet, but I recognize your concerns.
Mrs. Maloney. Thank you, and after you have reviewed this
policy and made your decision, will you get back to the
committee in writing about your decision and the reasons for
making that decision, respectfully?
Mr. Scharf. Yes, Congresswoman.
Mrs. Maloney. Thank you. In the committee staff report
there is an email, and I want to compliment the committee on
this excellent report that has gotten really a lot of positive
feedback. But in it there is this email from your chief risk
officer, Michael Loughlin, where he said, ``If any of the $200
million in proposed customer remediation is left over, we
promise to give it to charity, only after the CFPB and the OCC
let us out of the consent order. If they do not, no donation.
Put the onus back on them.''
So essentially, your chief risk officer was trying to play
hardball with the regulators over compensating the victims of
the fake accounts scandal and over a charitable donation. Mr.
Scharf, this committee really expects you to do the right thing
by your customers that your bank has defrauded, and we expect
you to work with your regulators to compensate them for the
scandals and the misuse of their funds and other frauds.
So I want to ask you, since you took over as CEO in October
of 2019, what specific actions have you taken to address the
OCC's concerns about how the bank remediates harm to consumers?
Mr. Scharf. Thank you, Congresswoman. First of all, the
gentleman you referred to is no longer the chief risk officer
of the company, and certainly, when I read those comments, they
are inexcusable and not something that should ever be thought
by someone inside of our company.
To your question about what we are doing, first of all we
put in someone new to run our remediation process. That person
reports to our new chief operating officer whom we brought in
from the outside, who has experience in dealing with customer
remediations. And the mandate I have given them is to rethink
what it is and how we do it. Don't stop the work that is
ongoing, but going through piece by piece and asking the
question, what can we do to ensure that we are doing everything
we can for all of our customers as quickly as we possibly can?
Mrs. Maloney. Thank you. Earlier, you were asked how many
people were defrauded. Do you know now? At that time, you did
not know.
Chairwoman Waters. The gentlelady's time has expired.
Mrs. Maloney. Could you please respond in writing?
Chairwoman Waters. The gentlewoman from Missouri, Mrs.
Wagner, is recognized for 5 minutes.
Mrs. Wagner. Thank you, Madam Chairwoman. Mr. Scharf, thank
you for joining us today to update this committee on your
progress as the brand new CEO of Wells Fargo.
Placing one's money and wealth in the custody of an
organization like Wells Fargo is one of the biggest displays of
trust, and for many years consumers were betrayed and taken
advantage of in order to meet sales performance goals, and
ultimately to improve earnings and share prices. That was
categorically wrong. Not only did Wells Fargo and its employees
fail these customers, some of whom are my constituents in
Missouri's Second Congressional District, but our regulators
failed as well. They neither identified nor prevented this
malpractice from occurring in the first place.
It was not the Obama Administration's OCC and CFPB that
first uncovered this problem. It was, in fact, the L.A. Times,
the media, that first brought your company's practices to
light.
Mr. Scharf, your predecessors appeared before this
committee and assured members that Wells Fargo was on track to
complying with financial regulators' consent orders. The
evidence outlined in the third report, produced by committee
Republicans regarding Wells Fargo, says otherwise. Your
predecessor was overly optimistic about the bank's progress
towards complying with the CFPB and OCC consent orders, and the
Federal Reserve Board's asset cap. His public statements
assuring the bank's progress towards achieving compliance did
not match up with what was taking place behind the scenes.
Mr. Scharf, I am cautiously optimistic that you are the
right man for the job, to bring the bank into compliance and
put these scandals to rest. What makes you different from your
predecessors, to adequately address and resolve these deep-
seated issues within Wells Fargo?
Mr. Scharf. Thank you, Congresswoman. First of all, I have
been lucky enough, through my career, to have a series of
experiences at companies that have been both well-run and
troubled, and coming out of those experiences, I believe that
there are a series of things that I have learned that could be
very applicable here.
The things that I have done since I have come to Wells
Fargo I think are in stark contrast to how we have approached
some of these issues in the past. I think if you are inside the
company, you feel like we are approaching these issues very,
very differently. I have been very, very open and honest about
our lack of progress, not pointing out the positives but both
being realistic but also focusing on the negatives, because
that is where we can have an impact.
I believe the sense of urgency that people are working with
inside the company is very different today than it was 4 months
ago. I personally am spending the majority of my time on these
issues, easily 75 to 80 percent of my time, not focused on
growth, new businesses, or anything like that.
Mrs. Wagner. Excuse me, Mr. Scharf, I am not hearing any
specifics here. What other changes are you going to implement?
Wells Fargo's fragmented structure proved to be one of the root
causes, I think, of the bank's ongoing compliance challenges.
Can we expect to see additional changes to address major
outstanding issues? Some specifics, please.
Mr. Scharf. Absolutely. We are going to have a much
stronger centralized core in everything that relates to risk
and control. We are going to run the company as if it is one
company, with a consistent set of standards, a consistent set
of policies. Everyone understands that, and we are going to
have people in place who believe that is the best way to run
the company.
Mrs. Wagner. The committee's report found that Wells Fargo
routinely requests extensions to deadlines for submitting
remediation and reform plans. Regulators typically grant those
requests but the bank's plans remain insufficient, even with
the extra time.
Mr. Scharf, what steps are you taking to ensure that Wells
Fargo can submit these plans on time without deadline
extensions, and are you still using these consultant
contractors to draft plans to the CFPB and the OCC, under the
consent orders?
Mr. Scharf. In addition to the things I just mentioned,
Congresswoman, we are putting a substantially different group
of people in charge of these issues. I personally, and the
operating committee, are getting deeply involved in all of
this. It is going to take time, because as you know there are a
series of orders that are outstanding, but we are trying to be
as methodical as we can, going through piece by piece, and
managing it in a very different way, in a very tight way, just
like you would manage any significant project in an institution
like Wells Fargo.
Mrs. Wagner. I yield back.
Chairwoman Waters. Thank you. The gentlewoman from New
York, Ms. Velazquez, is recognized for 5 minutes.
Ms. Velazquez. Thank you, Madam Chairwoman. Mr. Scharf, I
don't like being misled, and I don't really like being lied to.
Last year, I asked your predecessor about the status of Wells
Fargo compliance with the Federal Reserve's 2018 consent order.
He responded to me by stating that Wells Fargo had made the
board governance and oversight improvements required by the
Fed. We now know that is not true.
As the new CEO, let me ask you, when do you expect Wells
Fargo to be in compliance with the Fed's 2018 consent order?
Mr. Scharf. Congresswoman, I can't give you an answer to
that sitting here today. Ultimately, when they believe we are
in compliance is what is important, not when we believe we are
in compliance. What I can tell you is we have an enormous
amount of resources working on this. We are highly focused on
it, as am I. But I cannot sit here today and give a time frame.
Ms. Velazquez. Mr. Scharf, according to correspondence
between Wells Fargo officials and the Fed, Wells Fargo will
resubmit plans to address governance and risk management by
April 30, 2020. Do you still expect to resubmit a plan by April
2020?
Mr. Scharf. Congresswoman, I can't answer that question
today. We are focused on doing the work that is necessary, as
we review it. If we feel that it is in the condition that they
would expect--
Ms. Velazquez. So, your answer is no. Wells Fargo has
already submitted two plans that have been rejected by the Fed
and have been granted numerous extensions. Why will Wells Fargo
not meet this deadline? Do you think we have a right to know?
Mr. Scharf. Congresswoman--
Ms. Velazquez. This is your deadline, by the way, sir. This
is Wells Fargo's deadline.
Mr. Scharf. Congresswoman, I understand exactly why you
feel the way you do. What I can tell you is what I have
discovered since I have gotten to the company, and my
obligation is to make sure we are doing all the work that is
necessary and being as honest as we can about what we can get
done in what period of time.
Ms. Velazquez. So, sir, as we have been discussing, and you
are the third CEO to come before this committee, Wells Fargo's
failure to comply with the Fed's 2018 consent order derives
from a culture that is focused on profits instead of risk
management. As the new CEO, how will you emphasize operational
risk management over profits at Wells Fargo?
Mr. Scharf. Congresswoman, I think it is both in our words
and our actions. I have said publicly, including on my first
investor call, that this work will come ahead of everything
else, and our financial results might be harmed because of
that.
Ms. Velazquez. That is exactly what this committee expects
from you. You set a deadline of April 2020. That is the type of
action that we need. A few consumers were misled and charged
excessive fees for accounts that they didn't sign up for. So
yes, I agree with the ranking member that we should be
concerned about coronavirus, and your workers, and for that
fact and for that matter, workers across America. But you are
responsible for the fact that too many consumers were
overcharged for products that they didn't sign up for. And you
are the third CEO.
My question is if there is anything else that might be
coming to light in terms of wrongdoing?
Mr. Scharf. Congresswoman, not that I am aware of, and I
share the concerns that you have and agree that we have to do
far better than we have done.
Ms. Velazquez. Madam Chairwoman, I yield back, and thank
you for holding this hearing, fulfilling our responsibility of
oversight.
I yield back.
Chairwoman Waters. Thank you. Mr. Scharf, I would like you
to be as specific as you can possibly be about what you are
doing to correct what was done to the consumers and how they
are going to be repaid for it, in the questions that will come
back to you time and time again today.
The gentleman from Kentucky, Mr. Barr, is recognized for 5
minutes.
Mr. Barr. Welcome back to the committee, Mr. Scharf. You
are new to Wells Fargo but you are not new to the job of
running a global systemically important bank (G-SIB). You
recently left the position of chief executive officer of BNY
Mellon, another G-SIB. And given your past experience running a
large and sophisticated global institution, do you believe that
Wells Fargo is too big to manage, as some of my colleagues are
suggesting?
Mr. Scharf. No, I don't, Congressman.
Mr. Barr. What do you believe contributed more to Wells
Fargo's past failures? Do you believe it was more of the
culture and the management structure that was in place in the
past, or do you believe it was the size of the institution?
Mr. Scharf. Congressman, there is no question in my mind
that it was the culture and the management structure of the
company.
Mr. Barr. Because my friend from New York brought it up, I
have to ask, do you believe that Wells Fargo's policy on
financing firearms had anything whatsoever to do with the
aggressive sales practices and the opening of unauthorized
accounts?
Mr. Scharf. Not at all, to my knowledge.
Mr. Barr. I will say, just as an editorial comment, I
believe that if your bank allows politics to impact lending
decisions, it runs the risk of only distracting your bank from
actually doing the things that you need to do to--
Mrs. Maloney. Will the gentleman yield?
Mr. Barr. --no, I will not--take on the task at hand, which
is to reform the culture at the bank and to reform the
management structure that you have identified as the problem.
So please, I urge you to resist the temptation to politicize
lending and focus on the actual issues at the institution.
Let me ask you, in the past Wells Fargo maintained a
federated model in which core functions such as risk management
were decentralized within business lines with little visibility
from or accountability to Wells Fargo company leadership. This
was a key management breakdown identified in the Republican
report published last week.
I understand that the company has moved to build out an
enterprise-wide risk program like many of your peers. I think
you have identified this as a flatter organizational structure.
Is that correct?
Mr. Scharf. Yes.
Mr. Barr. How will this flatter organizational structure
correct the mistakes of the past?
Mr. Scharf. Congressman, I think it is a combination of
both of the things that you referred to. I think there is no
question that we need an independent control infrastructure
that is not accountable to any individual line of business, and
in the case of risk and the other functions like that, are
accountable directly to our board of directors.
That group is independent, makes independent judgments, and
in combination with the management team around my table, where
we have more direct exposure into the issues, because you have
people at the table talking about them, allows us to be much,
much more engaged with the independent control infrastructure
at the same table, hearing the same thing, and having the
ability to influence things before they become a problem.
Mr. Barr. Mr. Scharf, under your predecessor, Wells Fargo's
responses to regulators' consent orders left something to be
desired. They were late, incomplete, and totally insufficient.
I think you have testified that you agree to that. Further, the
teams managing the consent order deliverables were frequently
shifted around the organizational chart at Wells Fargo and
subordinated within teams, suggesting a low relative importance
in the overall pecking order. You have committed to maintaining
a more hands-on oversight of the consent order process and to
working with regulators to ensure sufficient, timely compliance
with your directors.
I think your testimony was that you are going to take this
up on an urgent basis--``Urgent'' was your word. Would you
please describe the changes you have made to the teams managing
Wells Fargo's response to these various consent orders?
Mr. Scharf. We have centralized the management of all of
these consent orders under our new chief operating officer, who
came in from the outside, and who has extensive experience in
his prior role of dealing with similar issues. Under him, we
have an organization that is organized around the work that has
to get done for the consent orders. That structure is very
different than what we have had in the past.
Mr. Barr. Thank you. My time has almost expired. I agree
with you when you say, ``I believe that our country and
communities would benefit from a strong Wells Fargo.'' I wish
you all the best as you make these very important changes to
correct these failures in the past, and I yield back.
Chairwoman Waters. The gentleman from California, Mr.
Sherman, who is also the Chair of our Subcommittee on Investor
Protection, Entrepreneurship, and Capital Markets, is now
recognized for 5 minutes.
Mr. Sherman. The ranking member attacks the work of this
committee, while at the same time saying it is great that these
two directors were forced to resign because there were highly
embarrassing disclosures. So, these highly embarrassing
disclosures, Madam Chairwoman, did they arrive out of thin air?
Were they presented to us by a demigod? No. These disclosures
arose because of the work of our Chair, Maxine Waters, the
Chair of the subcommittee, Al Green, and the Democratic staff.
And had we continued the hear-no-evil, see-no-evil approach
that this committee had the prior Congress, these embarrassing
disclosures would never have come out, and these embarrassing
board members would still be on your board.
But we can't allow the outrages of the past to blind us to
the crisis of the present. We have a coronavirus. People are
afraid. The economic system could get better, or it could get
worse. Not only do we have a coronavirus, we have a sudden
decline in oil prices that is shaking up the markets, and the
fact that we have two problems doesn't immunize us from a third
or a fourth thing happening. In fact, your bank has done stress
tests to look at other things that could hit our economy.
You have a plan that was put in place 6 or 7 months ago, to
send $31.4 billion out of your capital and to your
shareholders. You don't know, and I don't know, what this
coronavirus is going to do with the world economy. You may not
be too-big-to-manage. You may be, but you are certainly too-
big-to-fail.
Mr. Scharf, can you commit to this committee that you will
suspend dividends and stock buybacks until we know what this
coronavirus is going to do to the world's economy and to the
solvency of your bank?
Mr. Scharf. Congressman, we do a stress test, as you are
aware, which puts all of the bank's--
Mr. Sherman. I am aware of that, but that stress test was
for some other stress happening, which could happen, and you
have two stresses already. So you have done a stress test, but
you haven't done a stress test where the other calamity occurs
in the middle of a coronavirus that is infecting the entire
world. So, we already have the stress. You haven't done a
double stress test.
You are too-big-to-fail. You have injured the economy by
the practices that we are here to discuss in this committee. Do
you want to do something good for the country and commit to
ending stock buybacks and dividends until we know what the
coronavirus is going to do to your bank's solvency?
Mr. Scharf. Congressman, we are committed to--
Mr. Sherman. Yes or no? I have limited time. Yes or no?
Mr. Scharf. Congressman, we are going to run the bank the
way we think is prudent with our regulators.
Mr. Sherman. In other words, having dealt harshly with
consumers in the past, you are going to do nothing to insulate
our economy and our society from the possible meltdown of the
bank.
You ripped off consumers. Carolyn Maloney has her Overdraft
Protection Act, which would protect consumers. You have
substantial lobbying power, brilliant lobbyists who have
represented you. Will you commit that they will be lobbying,
starting tomorrow, for Carolyn Maloney's Overdraft Protection
Act? Do you want to be on the right side of history? And this
is not a trick question. I asked your predecessor's predecessor
this exact question, almost a year ago today, and we told your
people this was coming.
Mr. Scharf. Congressman, we announced two new accounts
recently, one that has no overdraft protection--
Mr. Sherman. I didn't ask that. You are repeating exactly
what your resigned predecessor said. Will you commit the
lobbying power of your bank to work for the Overdraft
Protection Act? Yes or no?
Mr. Scharf. Congressman, I will commit that we will support
the types of accounts that we just announced.
Mr. Sherman. But that does not mean that you will work for
legislation pending design to protect consumers from
unreasonable overdraft protection or the phony ordering of the
checks that clear on a particular day to disadvantage the
consumer.
Finally, will you enforce the arbitration provisions in
your contracts, even as to the phony accounts where the
consumer never signed for that account?
Mr. Scharf. Congressman, we were able to settle our sales
practice matter--
Mr. Sherman. Settled, mostly. What about the ones that are
still pending?
Mr. Scharf. Where there is arbitration, we will continue to
pursue it, but it is something that we certainly will continue
to look at.
Mr. Sherman. But you will bar people from Corda. Thank you.
Chairwoman Waters. The gentleman from Missouri, Mr.
Luetkemeyer, is recognized for 5 minutes.
Mr. Luetkemeyer. Thank you, Madam Chairwoman. I think I
want to spend some time with regards to the interim report that
the Republicans have put together and try and go back and get
some give-and-take and back-and-forth on this, Mr. Scharf. You
know, this is the third report that we have done, our side has
done since 2016, and in fact, half of the documents in here
were obtained by Republicans now, as a result of the fact that
the Obama Administration wouldn't turn them over. Now that the
Trump Administration is in charge, we actually can get
documents from the CFPB and the other regulators that actually
have a better picture of what is going on here.
One of the things that kind of concerns me is that as a
former regulator--this is the first of three more hearings, and
we have already had several prior to this on Wells, and yet we
have not had a single hearing on the regulators who were asleep
at the switch during this whole episode.
In fact, in our report it says that in December 2013, the
Los Angeles Times reported that the employees failed to meet
their quotas and were going through all this sort of stuff, and
that the CFPB supervisory staff was embedded in early 2014, and
yet Wells Fargo had to notify the CFPB that the Los Angeles
County city attorney was going to file a civil suit on the
company's sales practices. And this was on May the 4th, and
then finally on May the 8th, 6 months after the fact, the CFPB
came rolling in on their white horse to save the day.
Director Cordray was asleep at the wheel again, and it is
very unfortunate because this is a situation--when your
predecessor, Mr. Stumpf, was in front of us, I asked the
question, because as a former regulator, I am aware that the
regulators live in your bank.
I asked him the question, how many regulators are in your
bank today, and at that point he told me 75 were there full
time. Do you know off the top of your head how many regulators
are in your bank full time today, sir?
Mr. Scharf. No, I don't. But it is significant.
Mr. Luetkemeyer. Yes. Would you say more than that or less
than that, just as a--
Mr. Scharf. I would guess more. But we can certainly get
back to you on that.
Mr. Luetkemeyer. Okay. Thank you.
Well, it is very frustrating to see that the CFPB had
regulators sitting in your facilities knowing this practice was
going on, were told about it by the--the Los Angeles Times
broke a story and, yet, 6 months later, they finally took
action. Because of that, the situation continued to grow and
went out of control, and now we are, after the fact, trying to
find a way to stop the nonsense.
One of the other questions I asked of your predecessor, Mr.
Stumpf, when he was here, because at that time there was a
situation where, even according to our own report here it
verifies that there were a thousand people a year, roughly, for
5 years, who were being fired for their actions and their
involvement in this sales scheme situation.
And I asked him at the time--I said, I recall there was a
third year that this had happened, and I asked him, what is
wrong with your culture in that here we have a situation where
you fired people. Not a thousand people the first year.
Okay, I understand you recognize your problem. The second
year, another thousand. I said, you are not fixing your
culture. You are still firing people. Your culture is not
fixed. How are you going to fix it?
So, finally, we have a new individual take over and now we
have you in his place. So I guess my question is, how are you
going to change the culture that your predecessors never
addressed, quite frankly?
What are you doing differently? How do you see yourself,
going forward, with your teams of people?
Mr. Scharf. I think, certainly, we have to be clear on how
a series of things come together to form a culture and then we
as a senior leadership team need to make sure that we are
behaving that way.
That includes changing compensation, the way we evaluate
people, the things that we look at to include risk and customer
experience as part of that evaluation. Any time that we see any
harm, we have to be the ones to deal with it as quickly as we
can.
If there is wrongdoing inside the company, don't just look
at an individual and say that they did something wrong. Ask the
question, do we have something in our structure that is wrong?
And I think all of those things come together with
accountability probably being the most important thing.
Mr. Luetkemeyer. I just want to follow up, in my remaining
seconds here, on something my colleague from Kentucky, Mr.
Barr, talked about, and that is basically allowing the
government to come in and change your business model.
I am very concerned about the attempts, especially on the
other side of the aisle, to intimidate you and your board into
changing your business model by doing or not doing business
with certain industries.
To me, these are decisions that your board, and you, as a
leader of that company, need to make. Don't allow the
socialization of your business model by the government to take
control of it.
With that, I yield back the balance of my time.
Chairwoman Waters. Thank you. It is not intimidation. It is
called standing up for the consumers of this country.
Mr. Luetkemeyer. Madam Chairwoman, would you like to
discuss this? I would be happy to discuss this from at least
the standpoint that Operation Choke Point was the very same
thing that we are talking about here today. If you want to deny
that, you can. But that is the truth.
Chairwoman Waters. The committee will come to order.
The gentleman from New York, Mr. Meeks, who is also the
Chair of our Subcommittee on Consumer Protection and Financial
Institutions, is recognized for 5 minutes.
Mr. Meeks. Thank you, Madam Chairwoman.
First, I want to thank the chairwoman, Maxine Waters, and
the chairman of the Oversight Subcommittee, Mr. Green, for
doing the work and the research that revealed a continuing
pattern that has taken place at Wells Fargo over this period of
time.
And I think that, to Mr. Scharf, this is something that
should be an opportunity, because if you look at the
investigatory work that took place, admittedly most of it or
all of it before your 4 months, it should give you further
ideas of what needs to be done to fix Wells Fargo, to move
forward. So I think that it would be an opportunity for you to
look at it and to take it very seriously.
For me, coming in, anybody who was on the board or had
anything to do--the way that you first show that you want to
clean things up is you clean everybody out, because anybody who
is there, who was part of the decision-making process while
these procedures were going on, does not have clean hands. They
are dirty hands. And then continues to be there. So the only
way you fix an organization in that regard, as far as I am
concerned, is you clean house.
Now I will, in full disclosure, let you know that I have
had the ability and the time to work with you in your previous
capacity at Bank of New York Mellon.
For the life of me, I don't know why you took this job,
because anybody who is there has to be held accountable and
look to see what are you going to do to improve all of the
horrendous--and I have taken Mr. Sloan and others to task in a
very, very strict way and I do intend on taking, whether they
resigned or not, these members of the board of directors who
were there, who were a part of the policies--I am going to
really take them to task tomorrow.
But I do think that you should take this report very
seriously and to heart, and make the changes that are
necessary.
Now, I have been talking to you about some issues that have
been very important to me and the subcommittee which I sit on,
two issues. One is with Minority Depository Institutions (MDIs)
and there have been a series of hearings because MDIs, in my
estimation, can come in to communities where maybe the big
banks shouldn't be because they don't want to be there.
But as far as giving out mortgages and then making sure
that they are able to provide services to communities or local
communities where banking deserts are now appearing, we have
been trying to make sure in these communities where they are
underbanked and underserved, that financial institutions get
capital from some of the big banks, and we have had that
discussion. I know you told me that you were going to go and
discuss it and come back.
So my first question to you is, have you had that
discussion, and what, if anything, is Wells Fargo looking to
do? Because I want all the big banks, because I am going to be
asking every one of them, to figure out how we can put capital
into some of these small community MDIs.
Mr. Scharf. Congressman, we are going to do something about
it, and I completely agree about the importance of the Minority
Depository Institutions. And as you said, they reach
neighborhoods that we can't necessarily reach and we have been
focused historically on connections expertise. But it is more
about capital, as we have learned.
So we are going to commit to invest up to $50 million of
capital directly into these institutions as either Tier 1 or
total regulatory capital, still keep them at a position where
they are still minority-owned but provide the opportunity for
those institutions--
Mr. Meeks. I don't want to cut you off, but I am just sort
of down on time, and I want to go through that with you on a
continuous basis, because we have been talking about how we
don't want the big banks to just give money to small churches;
we want big major investments. So, I want to have a further
dialogue and conversation with you in regards to that.
The other piece is--I only have 20 seconds--I want to know
about the CRA modernization where Comptroller Otting said he is
discounting 75 percent on CRA credit for mortgage loans that
are sold off.
To me, that is going to stop people from giving out
mortgages. It doesn't encourage it. But I would like to get an
answer from you in writing later as to whether or not you think
that is the appropriate thing and the way that the Comptroller
is looking to do with CRA modernization.
Thank you.
Chairwoman Waters. Thank you.
The gentleman from Michigan, Mr. Huizenga, is recognized
for 5 minutes.
Mr. Huizenga. Thank you, Madam Chairwoman, and I guess let
me start out with a tone of unity, and I will agree with my
colleague and friend from New York, Mr. Meeks, when he said,
``I am not sure why you would take this job.''
I would agree. In all seriousness, this is a significant
undertaking. I am glad you are doing it, however, because we
know that the United States, to remain competitive on the world
stage, needs to have financial institutions than can handle
these large international and national accounts and those kinds
of things. But there are problems in the past.
So, Mr. Scharf, I am interested in what changes to the
consent order plan-writing process have you made since you have
taken over as CEO? It is my understanding that none of the
consent orders have received a non-objection. I think that is
what the regulators specifically call it instead of approval.
They have objected to each of the consent orders, is my
understanding, even those issued in 2016. So, I am curious.
Walk me through that process of how you are dealing with that
now and maybe an update on that.
Mr. Scharf. Congressman, we have changed our entire
management approach to the consent orders. First of all, I
personally am deeply involved in all of our Comptroller-related
work, including all of the consent orders.
Our new chief operating officer that we brought in from the
outside, who has experience in dealing with issues like this at
another bank that was going through a series of issues, is on
board now and those responsibilities sit directly under him.
He is probably spending 90 percent of his time on these
issues. Under him, there is a group of people dedicated to
managing each of these individual consent orders alongside all
of the people across the company to ensure that the work is
getting done appropriately.
Mr. Huizenga. Can you identify what the biggest barriers
are to achieving those acceptable submissions under the consent
orders? Or what you believe the regulators may not have
identified?
Mr. Scharf. I think the biggest issue for us is just making
sure that everyone across the company, including those on the
front lines, understand that risk management, especially
operational risk management, is everyone's job, and we need to
educate them on what that means and how that fits into a
seamless structure inside the company with the independence at
the second line.
Mr. Huizenga. Has that been really the barrier for you to
receive those non-objections from the regulators or is there
more to it?
Mr. Scharf. I can't speak to what happened before,
although, based upon the actions that I have taken, I think, as
I said, there is a different sense of urgency.
There is a different focus. We have different people with
different disciplines with different review processes in place.
So, we are fundamentally managing these differently. We have
made clear that these are the priorities of the company above
all else.
Mr. Huizenga. And you are updating those consent orders or
working with the regulators to get those in order?
Mr. Scharf. We regularly talk to our regulators about them,
yes.
Mr. Huizenga. Okay. Let me move on a little bit. You had
touched on sort of everybody on the front lines needs to know
what the new culture is.
Could you describe how sales employees are incentivized and
does the company still use sales goals and those kinds of
things?
Mr. Scharf. We have changed all of the practices that led
to the bad sales behavior, including those sales goals that led
to that bad behavior.
Today, our front-line bankers are paid based upon a series
of criteria, none of which are sales goals. It is things such
as customer experience. It is balances in the overall account
and things like that. So, we do not have goals like that in
place.
Mr. Huizenga. How do you measure the customer satisfaction?
Mr. Scharf. Historically, we have used a third party to
provide those where they come in and do mystery shopping in the
branches and then provide the feedback directly to the branch.
Going forward, we are going to be moving towards a net
promoter score where we actually do direct surveys of our own
clients and get their--
Mr. Huizenga. I have about 45 seconds and I want to hit a
couple of quick things. Could you talk about the board makeup?
That was one of the questions from my colleague from New York,
about cleaning house. What does cleaning house on your board
look like so far?
Mr. Scharf. I don't have the numbers in front of me but I
believe something like 70 percent of the board is new to the
board since 2017. But I can get that for you.
Mr. Huizenga. What I heard was 14 out of the 16, but if you
could confirm that, it would be helpful. I see people behind
you taking notes. That is good.
And then at the end of the day, can you describe what
cultural change really fundamentally needs to happen there?
Mr. Scharf. Absolutely.
Mr. Huizenga. Well, my time has expired. But I wanted to
know what fundamental cultural changes you felt are necessary,
and maybe we can follow up in writing, unless the Chair is
willing to give you 30 seconds.
Chairwoman Waters. The gentleman's time has expired.
The gentleman from Missouri, Mr. Clay, who is also the
Chair of our Subcommittee on Housing, Community Development,
and Insurance, is recognized for 5 minutes.
Mr. Clay. Thank you, Madam Chairwoman, and thank you for
your testimony today, Mr. Scharf.
Recently, the Student Borrower Protection Center (SBPC), an
organization founded by former CFPB Student Loan Ombudsman Seth
Frotman, released a report called, ``Educational Redlining.''
The report found that borrowers taking out private student
loans to attend community college may pay more than similarly-
situated borrowers seeking loans to attend a 4-year
institution.
SBPC applied for student loan products with Wells Fargo,
and found that Wells will charge a student applying for a
$10,000 loan to attend a community college $1,134 more than a
similarly-situated borrower seeking the same loan to attend a
4-year college. Do you think that is fair?
Mr. Scharf. Congressman, there is no room for
discrimination in any of our lending businesses.
Mr. Clay. Do you intend on changing the culture?
Mr. Scharf. Congressman, I will go back and look at the
specifics around this, because I am not aware of it. But if we
had done something wrong, we will go back and make it right,
and we will make sure that nothing like this is happening,
going forward, anywhere.
Mr. Clay. And also, under your consent decrees, you have a
policy that steers people who would otherwise qualify for prime
mortgages into subprime mortgages and, apparently, that is part
of one of the consent orders. Are you aware of that?
Mr. Scharf. No, I am not, Congressman. But we will
certainly go back and look at it.
Mr. Clay. And then, how would you make those people whole,
who applied through your bank and were then steered into
higher-cost loans? What can you do to correct that?
Mr. Scharf. Congressman, if we have done something wrong,
then it is our obligation to take the appropriate remediation,
and specifically that is something that I have to look at to
understand what the right thing to do is. So, I can get back to
you on that .
Mr. Clay. Okay. Would you assist or help those borrowers by
reimbursing them or resetting the loans at a more reasonable
interest rate?
Mr. Scharf. Congressman, of course, we would look at all of
the circumstances around it and figure out what the right thing
to do is for those customers.
Mr. Clay. Yes, and I think your customers as well as most
of us on this committee are looking for fairness for the people
who come to your bank looking for help. Do you agree?
Mr. Scharf. I completely agree. If we have harmed people or
if we have not treated people properly, we should take the
appropriate remediation.
Mr. Clay. Getting into another area, do you know Wells
Fargo's lending volume in the State of Missouri and in southern
Illinois, a region that I represent? Do you know the volume for
minority- and women-owned businesses?
Mr. Scharf. No, I am sorry, Congressman. I don't.
Mr. Clay. Well, could you get me that information and share
it with the committee?
Mr. Scharf. We will certainly get back to you on that, yes.
Mr. Clay. And what kind of incentive programs are in place
for Wells Fargo employees in your retail and private banking,
and are the programs linked to pay for bonuses? I am talking
about an incident that I recently read about with your bank.
Mr. Scharf. I'm sorry. I don't understand the question.
Mr. Clay. Well, the typical retail branch employees at
Wells tends to be on the lower end of the pay scale compared
with corporate and investment banking. But you do incentivize
them for bringing in high-dollar customers.
Mr. Scharf. I'm sorry. Yes, Congressman, we have actually
changed the compensation plans of the people in our branches--
our bankers--so that they are no longer paid on sales goals or
anything like that. They are paid on customer experience and
balance growth as well as some other factors that I don't
recall right now. But it is nothing related to sales goals.
Mr. Clay. How do we better address the culture of the bank
so that you treat all customers with some respect and dignity?
Mr. Scharf. Well, we are moving our--the customer
experience goal--method of rewarding people to based upon what
customer feedback directly is.
Mr. Clay. I see. Thank you, and I yield back.
Chairwoman Waters. The gentleman from Colorado, Mr. Tipton,
is recognized for 5 minutes.
Mr. Tipton. Thank you, Madam Chairwoman.
Mr. Scharf, thank you for taking the time to be here.
Just a little follow-up in terms of some of the sales
goals. A lot of the reason that Mr. Sloan was here and now you
are here was from the sales goals and some of the initiatives
that were put in place with the false accounts that were open.
Can you maybe expand on that a little more so I can
understand how customer experience and expanding some of those
balances, how that is going to be rewarded and how to be able
to offset any further abuse?
Mr. Scharf. Yes, Congressman.
We have changed the entire compensation plan. But even
beyond the compensation plan, we have changed the management
structure and the reporting so that anything related to those
sales goals, what drove that kind of behavior, and the
management processes that went along with it are no longer
there.
So the people who work in our branches, regardless of
level, have a series of things that they use to judge their
performance, the most important, which I think if you were to
go around and ask the folks in our branch they would say it is
customer experience, and today it is mystery shops that take
place inside the branch.
We are going to be moving towards direct customer feedback,
which will be a part of that, because we do believe that if the
customer is not happy inside of our institution, then that is,
obviously, very bad for us.
Mr. Tipton. And are you pretty confident that you have a
reporting structure through the chain of command to make sure
that is going to be implemented properly?
Mr. Scharf. Yes, I am, Congressman.
Mr. Tipton. Okay. Great.
On your first earnings call, you had mentioned that you
would be introducing a new set of disciplines on how the
overall company is going to be run.
Could you outline what that new set of disciplines might
look like and how they are different from the previous occupant
in your seat?
Mr. Scharf. Yes, Congressman.
We now have an operating committee that meets regularly
every single week for 2 hours. We meet once a month for a full
month. Everyone is expected to talk about what is going on in
their businesses, how they are doing with any of the control
issues that we are aware of or if there is anything new that we
should be aware of.
The CFO and I hold monthly business reviews that were not
held in the past where we meet with every business along with
their senior folks and we review their financial results, their
risk controls, progress they are making on people including the
diversity component of that on a going-forward basis.
Added to that is a fulsome budget process which is far more
robust than anything that we have had in the past, which
becomes a mechanism for us to proactively discuss things and
make decisions that prior to that, were made in the individual
businesses.
Mr. Tipton. Thank you for that. I come from a rural area
and we had a lot of conversation in this committee in regards
to urban impacts that are going on. Could you maybe highlight
for us the importance of--Wells Fargo, I think, has a number of
branches in my district, in rural communities. Does that play a
pretty important role in regards to CRA in terms of credit
access for small businesses?
Mr. Scharf. I think it is extremely important. I think it
is not just important for numbers but it does go--when we think
about some of the things that Wells has done well and not done
well, helping in underserved communities is something which has
been a core of the company.
So the branches that we have in the communities where we
have been for a long time are very important to us. The
investments that we do in affordable housing, the lending that
we do in low- to moderate-income (LMI) neighborhoods is
something which is core to who the company is and, certainly,
will be going forward.
Mr. Tipton. And we would like to be able to give you the
opportunity--you had a question earlier on some of the stress
tests and whether or not in regards to the coronavirus and
other challenges that may come up, known or unknown, to our
financial institutions in terms to be able to maybe expand a
little bit on whether or not you feel you are well-capitalized
and able to take that into consideration.
Mr. Scharf. Right. The point that I was going to make is
that when you look at the stress tests that we went through, I
believe it takes unemployment going to something like 10
percent, GDP going down 8 percent, real estate values dropping
by a quarter, commercial real estate values dropping by a
third--very, very significant.
And so as part of the Comprehensive Capital Analysis and
Review (CCAR) process, we have to be able to continue to
maintain the ratios that were required in that event with the
suggested capital actions. And then as an institution, we do
our own stress scenarios, which lead us to make decisions in
terms of how we want to run the company.
We have always done that prudently, again, with all of the
issues that Wells has done. We have been very well-capitalized
and we will continue to be well-capitalized.
Mr. Tipton. Thank you. I yield back.
Chairwoman Waters. The gentleman from Georgia, Mr. Scott,
is recognized for 5 minutes.
Mr. Scott. Thank you, Madam Chairwoman.
Mr. Scharf, how are you?
Mr. Scharf. Fine, thank you, Congressman.
Mr. Scott. Our banking system is the heart and the soul of
our financial system, and this hearing this morning, at its
core, is about trust. It is about consumer trust. It is about
Wells Fargo customers' trust. And what I want to ask you is
this: Can the consumers, can the people in this country, trust
Wells Fargo now?
Mr. Scharf. People can trust Wells Fargo to do the right
thing, yes.
Mr. Scott. Then, why is it that you have had consent orders
from the Office of the Comptroller of the Currency, you have
had consent orders from the Consumer Financial Protection
Bureau, and you have even had consent orders from the Federal
Reserve.
And to my information, you have not adequately answered
those. Am I correct?
Mr. Scharf. You are correct.
Mr. Scott. And may I ask you to explain why you have not
responded?
Mr. Scharf. Congressman, I joined the company 4 months ago.
I am not in a position to explain what was done right and what
was done wrong because I wasn't there. But I can tell you of
the changes that we are making, which I think are different
than existed prior to my arrival.
Mr. Scott. It is important for you to really understand
that you have a myriad of customers out there, one of whom is
me. I am a customer of your bank and have had great experiences
with it.
You have been a leader in my community with helping to get
some of the hardest hit funding to help folks out there who are
suffering from their mortgages. This committee worked hard to
get that done. We all didn't agree and didn't vote for the
first bailout.
President Obama got a little peeved with many of us. But we
said, ``Mr. President, we love you. We want you to do good. But
you can't just throw all this money up to the banks and not do
something about the struggling homeowners who were the
victims.''
And he said, ``Go back and do something about it.'' We did,
and we came up with about $2.8 billion, and we called the
hardest hit--in Georgia, it is called HomeSafe.
So there are some good things that you all have done. But
my issue with you is that you are on this in a new position.
But it is important. Once you get in a bad situation, in order
to get out of that bad situation into a new situation, you have
to know how you got into the bad situation in the first place.
So for you not to respond to these consent orders is
unacceptable, and I just want to urge you to do so.
Now, I think that will be a good idea because to have your
new chief accountability officer--I think you appointed one
recently, didn't you? Wells Fargo, according to media reports,
created a new role of chief accountability officer for the
branch banking business. Are you aware of that? I would think
you are, being the chief executive officer.
Mr. Scharf. Yes, I am, Congressman.
Mr. Scott. Okay. Why is it that you can't assign him to
respond to this? See, if you don't respond to these consent
orders that are being asked of you by the banking regulators,
then that trust factor that I mentioned at the very beginning
gets weakened.
Will you move to respond to those consent orders after this
hearing?
Mr. Scharf. Congressman, all of my energy and my management
team's energy is, again, responding to them in a way that is
acceptable to them, yes.
Mr. Scott. Okay. Thank you.
Chairwoman Waters. The gentleman from Texas, Mr. Williams,
is recognized for 5 minutes.
Mr. Williams. Thank you, Madam Chairwoman.
When John Stumpf came here before this committee in 2016,
not long after the first Wells Fargo scandal broke, it seemed
like the only answer he had to our questions was simply, ``I
don't know.''
I called on him to resign immediately for such lack of
knowledge into his own company's practices. This was a slap in
the face to all members of this committee but, more
importantly, to the consumers that were taken advantage of
because of his gross mismanagement.
Mr. Stumpf's answers were simply unacceptable. Fast forward
to 2019 when the next CEO, Tim Sloan, came before us to
testify. I was somewhat optimistic that he would be able to fix
the root causes of the issues that allowed so many scandals to
occur.
He made it seem like there was great progress in
institutional changes being made to ensure that these actions
would never be able to go unnoticed again. This might be even
more offensive than his predecessor was--I don't know the
answers--since he was not taking the company's transgressions
seriously when such damage was done to customers.
Now, all that being said, on a more positive note, I am
glad to see Wells Fargo bring you in as an outsider of the
company to try to fix the mess that has been surrounding the
bank over the past few years. It will not be an easy process.
You have talked about that, regaining this committee's or your
customers' or the regulators' trust. But I hope that you will
be able to get the bank moving back in the right direction.
Mr. Scharf, I know that you have prior experience at BNY
Mellon, JPMorgan, and many other financial institutions. So my
first question would be, how do the management structures
differ between Wells Fargo and other firms where you have
worked? And can you go into detail about some changes you will
institute at Wells Fargo, moving forward?
Mr. Scharf. I think what we have today is more similar to
what some of the other large well-managed institutions have
versus what we had in the past. What we had in the past was--it
was a federated model but there was not enough representation
at the senior management table of all the different businesses.
So, the discussions that were able to occur in terms of how the
company was run, decisions that were getting made, the
structure didn't encourage that to happen.
Things today are very, very different than that. There is a
clear understanding that we are going to run the company as
one. We have business leaders in charge of the significant
business that report directly to me, where we have the
opportunity to question everything that goes on.
There is an independent infrastructure around all of the
risk and control work that needs to happen. People understand
that is independent and the level of responsibility and
accountability that they have.
Now having said that, it is still early on, and so I do not
think we are as well run as other firms yet. We have just
implemented this. But everyone understands why it is better for
the company and is supportive of it.
Mr. Williams. I think the fact that you question is
important. So, I am glad to hear that.
The other side of the aisle has reiterated that they
believe Wells Fargo is too big to manage and should be broken
up. Now, I completely disagree, considering that other banks of
similar sizes have been able to successfully cooperate when
they have appropriate risk management structures in place.
I asked this same question of Mr. Sloan, and I am curious
to get your perspective on the issue. When former President
Obama was questioned about breaking up big banks in a New York
Times interview he said, ``One of the things that I have
consistently tried to remind myself of during the course of my
Presidency is that the economy is not an abstraction. It is not
something that you can just redesign and break up and put back
together again without consequences.''
That is what President Obama said. Do you agree with the
sentiment from the former President that breaking up the
biggest banks is unrealistic?
Mr. Scharf. I believe that the country benefits from the
large banks and that they can be run properly and they should
be run properly.
Mr. Williams. Okay. Now, I am a Main Street guy. I have
been a car dealer in Texas for 50 years, and I know how
important access to capital is for the company looking to grow
and expand operations, and how important risk and reward is.
So one of my questions to you would be, are you a
capitalist or a socialist?
Mr. Scharf. I am a capitalist.
Mr. Williams. Thank you. And since Wells Fargo is one of
the largest small-business leaders in the country, I would like
to know, quickly, what controls are in place to ensure that
your small-business clients like me are being treated fairly
and not subjected to abusive sales goals or incentive programs?
Mr. Scharf. Our small-business franchise has the same
controls over it today that the consumer franchises and our
corporate franchises have. We have first-line risk management--
first-line meaning it is part of the business--which is far
more robust than it was at the time of the sales practices
problems, and we have an independent risk function, which is
separate from them, which has an independent reporting line up
to the Chair of the risk committee of our board.
Mr. Williams. Okay. Thank you. I yield back.
Chairwoman Waters. The gentleman from Texas, Mr. Green, who
is also the Chair of our Subcommittee on Oversight and
Investigations, is recognized for 5 minutes.
Mr. Green. Thank you, Madam Chairwoman.
Madam Chairwoman, please allow me to thank the persons who
have worked so hard to pull this report together, the staff.
They literally had to fight to get the many thousands of
records that they have received. It was not easy, and the
Republicans played no role in securing those records. They are
simply playing catch-up and they are not doing a very good job.
Mr. Scharf, we cannot allow the punishment for this level
of fraud to simply become the cost of doing business. No one
has gone to jail. It is true that the CEOs of the too-big-to-
fail banks have thus far been too-big-to-jail.
We must do more than simply pay the government a fine. Most
of the front-line workers in these banks live paycheck-to-
paycheck while the banks have made profits in excess of $150
billion a year. A hundred and fifty billion dollars a year
since the recession.
In 2018, a bank CEO made 776 times the salary of a minimum
wage worker. That CEO made approximately $24.2 million. I shall
not mention his name, but I am prepared to, if I have to.
I have visited with you. Thus far, you have been straight
with me and I do believe that out of adversity, there is
opportunity. The greater the adversity, the greater the
opportunity.
You now have an opportunity to help us change not only the
culture at your bank but to change the culture across banking.
Workers need a living wage. All workers in banks should have a
living wage. Workers need stronger whistleblower protection.
This is a part of the solution. Not nondisclosure
agreements that silence workers. If we had had stronger
whistleblower protections, I do believe someone would have
reported this circumstance and we wouldn't be sitting here
today.
We need to improve your mentor-protege standing. Black
banks are going out of business. We have approximately 18 or 19
now, depending on who is counting and how you count.
We need help. You are in a position to change this. You can
change the course of destiny for Minority Depository
Institutions (MDIs). The lowest-paid workers in banks are women
and people of color. The highest-paid disproportionately, in
both cases, are white men. White men are doing well. People of
color and women are not doing as well. We can change this.
These are the kinds of issues that we refuse to confront
because there is a danger associated with it. There is a
culture that has developed that will punish you if you try to
develop equity and equality. It will silence you.
You can speak with a very loud voice. You were not a part
of the transgressions that took place but you can be a part,
and I believe you really want to be a part, of a solution that
can change not only the culture at Wells but the culture across
banking.
We need a bill of rights for the workers within the banks.
We ought to have something that is posted, that is clear,
concise, and conspicuous, unambiguous, that says to workers,
you mean something not only to this institution but to this
country. Here are your rights. You have the right to report
without fear of being somehow punished for your doing the right
thing.
So I am going to ask that we meet again. Will you assure me
that you will meet with me again, sir?
Mr. Scharf. Absolutely, Congressman.
Mr. Green. And will you assure me that you will work with
me to develop this bill of rights for workers? Will you assure
me, sir?
Mr. Scharf. I will absolutely work on a bill of rights that
makes sense in Wells Fargo.
Mr. Green. I thank you, and I yield back the balance of my
time.
Chairwoman Waters. The gentleman from Georgia, Mr.
Loudermilk, is recognized for 5 minutes.
Mr. Loudermilk. Thank you, Madam Chairwoman.
Mr. Scharf, thank you for being here. Thank you for the
time that we have spent discussing your short time at Wells
Fargo and your vision of how to correct these problems and move
forward to make Wells Fargo an organization in compliance and
focused upon its customers.
Before I get into my questions, though, I would like to
remind my colleagues of something I heard earlier, that the
Republicans took a hear-no-evil, see-no-evil stance on this.
I want to remind everyone that it was the Republicans in
2016, the first year I was on this committee, who began the
investigation into Wells Fargo, and we obtained several
thousand pages of documents.
And this report that was submitted today is not the first,
it is not the second, but it is the third report that was
issued that was based on those document and the thousands more
that the Trump Administration has released voluntarily in the
last year.
So, this isn't something new. This isn't just something
that has popped out of the woodwork. This is something that has
been going on, that we have given our utmost attention to. And
through all of that, it has been somewhat frustrating.
I have been frustrated and concerned over the,
specifically, lack of progress that we saw over that time,
especially when it came to complying with the consent orders by
the regulators.
Now, from our meeting and from other information that I
have received I am encouraged that the OCC has indicated that
under your short tenure, the bank has made progress toward
complying with these consent orders.
With this large of a committee, and your short tenure--
everyone knows the past--you are going to get the same
questions repeated over and over again so everybody can get
their sound bites.
So, some of mine may be questions that have been asked
before, but I really want to kind of hone in on some of the
details. Could you briefly describe specific actions you and
your staff are taking from a risk management perspective to
come into compliance with the 14 outstanding consent orders
that the regulators have imposed?
Mr. Scharf. For specifically the issues in risk management
related to operational risk and compliance, we have
significantly increased the staffing. But, more importantly
than just the people is putting the right framework in place so
that everyone across the company understands how we are going
to run risk and understands what their role is in ensuring that
risk management is done properly in the organization.
That framework makes it clear what everyone within a
business has to do with their level of responsibility is, how
we are going to do that review work in the second line of
defense independent of the business itself. That is the
independent risk management function.
And then, we have our third line which plays an extremely
important role, internal audit, which takes a third independent
look at everything that is done. All of that , and those levels
of independence, are extraordinarily important.
But, most importantly, the robustness of what we have in
place--not just the people who exist but the processes and the
documents that we are building create a very, very different
control environment than existed historically at Wells.
Mr. Loudermilk. Good. Thank you.
And you have stated this before, but I would like to ask it
again, and as Mr. Scott, my colleague from Georgia stated, I am
also a Wells Fargo customer and I have always had a good
customer experience.
Under your leadership, is meeting regulators' expectations
and requirements as well as the needs of the customers the top
priority?
Mr. Scharf. There is no question that that has to be the
top priority. But I take it a step further inside the company,
which is what I explain to people, that we are not doing this
just because the regulators want it. We are doing it because it
is the right way to run a company.
So we need to do this because we believe it is right, and
when we run the company that way, then the regulators will be
fine with it.
Mr. Loudermilk. Probably my final question, based on time,
is you have talked about restructuring it from a more
federalist type organization to a more streamlined centralized
organization.
How did that decentralized organization contribute to this
problem and, thus, how does centralizing--how is that going to
resolve it?
Mr. Scharf. Congressman, that structure didn't have the
appropriate checks and balances that we have today. Business
leaders controlled their own staff functions. They controlled
their own risk functions and everything else that went along
with it.
So, there wasn't a consistent set of policies. There wasn't
a consistent set of application of policies and there wasn't
the independent functions to come in and look and to say, we
like and agree with what they are doing or we don't and
therefore you need to change it. That is what we have today,
and that overrules what individual businesses want.
Mr. Loudermilk. Thank you. I yield back.
Chairwoman Waters. The gentleman from Missouri, Mr.
Cleaver, who is also the Chair of our Subcommittee on National
Security, International Development and Monetary Policy, is
recognized for 5 minutes.
Mr. Cleaver. Thank you, Madam Chairwoman.
Yesterday, two of your board members resigned. Your two
predecessors testified before this committee and, shortly
thereafter, resigned. Here you are, less than 6 months on the
job, and you are sitting in that chair. Why in the world would
you take this job?
Mr. Scharf. I appreciate the question, Congressman. You are
the third person who has said that since we started. So, I am
glad to be able to answer it.
I genuinely believe that Wells Fargo is an important
institution for this country. I really do, and just because the
company has not been well run in the past, doesn't mean it
can't be well run now.
When I talk to customers of all sizes, from consumers to
small businesses to middle-market companies, when I look at
some of the things we have done in communities, when I talk to
our own people--I was in a branch yesterday and we asked
someone why she came to work every day, and I swear to God, she
said, ``Because I love this company. I love the opportunity
that they have given me.'' And that, clearly, wasn't the entire
culture of Wells Fargo, but it is an important part of what the
culture is.
And so in the context of doing what is right for our
employees, doing what is right for all the people we do
business with in their communities, I believe that if we run
the company properly, we have the opportunity to benefit more
than if we didn't do this well.
Mr. Cleaver. Thank you.
For you to walk in there, you have to have something that
most folks don't. But let me turn to an extremely difficult
part of this hearing for me. I have the Minority report from
Senator Sherrod Brown, from March 2020, which I would like to
enter into the record, Madam Chairwoman.
Chairwoman Waters. Without objection, it is so ordered.
Mr. Cleaver. Here is what is troublesome. It is about one
of the log posts of one of the employees who said, ``Hate
crimes hoaxes are about 3 times as prevalent as actual hate
crimes, and I hate that I actually dignify their existence by
quoting a statistic that recognizes them.''
And then, ``Fine. Let us say that they called him the `N'
word. Would that make them racist or just ------ holes, looking
for the most convenient way to get under his skin?'' This is a
guy who worked at the CFPB, in an appointed position at the
CFPB, which, for somebody like me, with my skin color, that is
insulting and also disheartening.
I am using this because there is a report that suggests
that there is a back channel of communication between Wells
Fargo and the CFPB. Is there this back channel, and is it still
in existence today, to your knowledge?
Mr. Scharf. I am not aware of a back channel of
communication, no.
Mr. Cleaver. So, that is the first time you heard about
this alleged back channel communication going on?
Mr. Scharf. I read the report, Congressman. All of the
conversations that we have with the CFPB, to my knowledge, are
open, on-the-record conversations directly with the regulator
that everyone is supposed to be aware of who should be aware of
it.
Mr. Cleaver. Okay. That is the answer that I am looking
for, because the person who made these statements is no longer
there. But I am very concerned, very much concerned.
I was here when we--I guess the chairwoman and I are maybe
the only two Members who were here when the CFPB was created,
and whether the people who were not here choose to accept it or
not, there were great, great pains taken to make sure that the
CFPB was not politicized, all the way down to keeping Congress
from getting involved in the funding of that department.
You have already read the report. But I would advise
everybody to read this report. It is chilling when they start
quoting some of the people who were actually at the CFPB making
decisions.
Madam Chairwoman, I yield back the balance of my time.
Chairwoman Waters. Thank you.
The gentleman from Ohio, Mr. Davidson, is recognized for 5
minutes.
Mr. Davidson. I thank the chairwoman.
Mr. Scharf, thanks for being here. It has been a long
tradition, an unfortunate tradition, for the CEO of Wells Fargo
to spend a disproportionate amount of time here in the nation's
capital, and, frankly, the Federal Government spends a lot of
energy running all sorts of businesses that they probably have
no business running.
But Wells Fargo kind of proves that even with all sorts of
regulations, all sorts of oversight, layer upon layer of
redundancy, it feeds this narrative that we just need more
regulation.
And in spite of all the regulation, in spite of all the
Dodd-Frank reforms and the State regulators and the Federal
regulators and the OCC and the FDIC and the Federal Reserve and
all kinds of laws that make it illegal to do the things that
Wells Fargo's employees did, these bad things happened anyway.
There are human beings in all sorts of other companies, but
we don't believe these bad things have happened on the scale
that these bad things have happened at Wells Fargo. So what
makes Wells Fargo so special? Now that you have been there, why
could all this happen at Wells Fargo?
Mr. Scharf. Congressman, I think your point is very fair.
We did not have the appropriate controls in place. We didn't
have the appropriate culture. We didn't have the right people
in these jobs.
Mr. Davidson. So, the humans there just needed the other
controls that other places had? What drove these people to do
it? Was it just passive, you didn't have the controls there, or
was there an affirmative push to do bad things?
Mr. Scharf. No, I think, certainly, the controls should
have caught it after the fact, but the initial problem was that
the structure of the company was decentralized. The culture
promoted these types of activities and the culture was not one
of accountability.
Mr. Davidson. So for that reason, there has been a lot of
culpability, at least financially, for Wells Fargo. How many
fines in total has Wells Fargo paid as a consequence of these
bad actions?
Mr. Scharf. Congressman, I don't have that number right
here.
Mr. Davidson. Is it a couple hundred bucks like a speeding
ticket? Is it a couple hundred million bucks? Or is it a few
billion?
Mr. Scharf. It is billions.
Mr. Davidson. Billions of dollars. And I think it is fair
to say that if these culpabilities resulted in billions of
dollars of fines, some people lost their jobs?
Mr. Scharf. Congressman, yes, many people have lost their
jobs.
Mr. Davidson. At the very top? CEOs--you are now the third.
Board members, bank managers, managers of departments, people
who were supposed to manage risk. Lots of people have been held
accountable in the sense that they lost jobs. Has anyone gone
to jail?
Mr. Scharf. Not that I am aware of.
Mr. Davidson. Does any of this rise to the level of a
crime?
Mr. Scharf. Congressman, when we settled with the
Department of Justice, we stated a series of facts, which
included that individuals at the bank committed crimes.
Mr. Davidson. So do you believe it is up to the Department
of Justice to follow through and actually hold someone
accountable?
Mr. Scharf. Congressman, I think it is up to the Department
of Justice to determine what they think is right and
appropriate.
Mr. Davidson. Well, all of America is looking for the
Department of Justice to hold people accountable and, frankly,
it is not just in banks.
We are all wondering, when is somebody going to jail,
because there has been all sorts of abuse of trust in our
country and, frankly, the government has violated a lot of it
themselves.
You have taken some actions that are encouraging in a short
time as CEO, and I think, when you look around by reputation,
you come across as somebody who seems to have the potential to
really come in and change a very, very large organization.
One thing you created was a sales practice oversight
management function. Could you describe what you envision for
this new role and what policies you think need to be put in
place at Wells Fargo to ensure employees are actually held
accountable for their actions?
Mr. Scharf. Yes, Congressman. Since our sales practice
scandal, we have looked across the company at the different
sales practices to ensure that we don't have the kind of
behavior that existed in the company prior.
One of the things that we wanted to ensure on a going-
forward basis was as we continue to evolve as a company that
that continued. So to centralize the responsibilities of sales
practice oversight in one place under our chief operating
officer where they set the standards, they monitor what is
necessary on a consistent basis across the company to ensure
that even though something might not exist today, that we don't
wake up and find out something exists in the future.
Mr. Davidson. Thank you. I yield back.
Chairwoman Waters. The committee will stand in recess for 5
minutes.
[recess]
Chairwoman Waters. The committee will come to order. The
gentleman from Illinois, Mr. Foster, is recognized for 5
minutes.
Mr. Foster. Thank you, Madam Chairwoman. Mr. Scharf, I echo
the concerns of my colleagues on this committee about the
extensive shortcomings of Wells Fargo over a number of years
past, and I do hope that you are as committed and as successful
in turning your ship around as you have stated in your
testimony.
Now, I would like to bring up the issue of dreamers. This
is an issue that hits close to home. Last summer, Eduardo Pena,
a dreamer, a DACA recipient from Illinois, filed suit because
he was wrongly denied an auto loan by Wells Fargo because of
his DACA status. I was glad to see some of the changes that
Wells Fargo has decided to implement recently, including its
plan to provide DACA recipients with access to credit products,
including auto loans, education loans, and mortgages. I cannot
emphasize enough how important this commitment is, and I hope
that you work diligently to implement this new policy.
But because a press release is one thing, at the end of the
day a new policy that does not achieve results in the form of
actual loans to actual DACA recipients can mean it has been a
failure. So can we have your assurance that you will track
progress on this issue and that you will periodically report
back to us on progress on providing credit to dreamers?
Mr. Scharf. We will absolutely track the progress and we
can certainly talk to you about how we should report back to
you.
Mr. Foster. Thank you. I appreciate that. This is an
important issue to my constituents.
Now as you are no doubt aware, the bank's Community
Reinvestment Act (CRA) exam ratings and findings are disclosed
to the public, after, I believe, a delay of a couple of years.
One measure that we are contemplating would be to require banks
to disclose their consumer compliance rating and findings in
the same way. Would you agree that this would be an effective
method to limit consumer abuses?
Mr. Scharf. Congressman, we certainly agree on
accountability and ensuring that the regulators understand and
have access to all of the information they need to draw those
conclusions.
Mr. Foster. No, I am referring to the public. The public
also has a need to understand which banks deal properly with
their consumers and which have a different record.
Mr. Scharf. Congressman, respectfully, I think that is a
decision, a discussion between you and the regulators.
Mr. Foster. Okay. So you don't have an opinion on whether
or not this might be a good idea, and so you would not be
opposed to it?
Mr. Scharf. Congressman, I don't--honestly, I think, given
the condition that we are in and the work that we have to do,
it is really not up to me to--that I am not the best person to
give advice. I am focused on doing the work.
Mr. Foster. Well, you are also in the process of repairing
an organization where some of the incentives were wrong and
some of the results were wrong. So, you must have an opinion on
whether this sort of thing, a little bit of public visibility
towards findings that have shown abuse of the consumer, might
be an incentive that might have improved behavior in the past,
and might improve behavior going forward?
Mr. Scharf. Congressman, I just think, like any other
issue, there are plusses and minuses on this, and I think that
it is really appropriate for you and the regulators to talk
about what those are and come to a decision.
Mr. Foster. Okay. So, we will handle this without your
input, I guess.
The compensated incentives are really, to my mind, at the
heart of getting corporate behavior right, and I was encouraged
to hear that you have made some changes there. One of the
pieces of legislation that is being considered in this hearing,
H.R. 3885, does a number of things, one of which is to put the
executive bonus pool in a first-loss position for any
regulatory fines or penalties. And while I have lots of
questions about the details and the mechanisms and the formulas
involved in this piece of legislation, I was wondering if you
have a reaction to how effective this might be in preventing
future--in getting attention by top management towards consumer
abuses?
Mr. Scharf. Congressman, I think what we have to do, and
what will drive accountability inside the organization, is to
ensure that when we judge people, we make sure that there is
accountability in what we pay people, and that is what we are
doing today.
Mr. Foster. Okay. So that is, I guess, my next question,
which I will be giving you to answer in writing for the record,
because there will be some detailed numbers.
Could you answer, for the record, how the financial burden
for regulatory fines--just go over the top 20 fines that
happened over the last decade, and describe the economic pain
for those fines was distributed among the shareholders and top
executives and everyone else who might have absorbed the pain,
both as they occurred in the last decade and how they would
occur with the current system that you now have in place?
Mr. Scharf. Congressman, I can tell you that the fines that
we have incurred over the past year, when I was at the company,
have impacted people's compensation directly.
Mr. Foster. Right. So I would like to see a table of
numbers and percentages, to see what fraction of the burden
lands on the shareholders, what lands on top management, on
line management, and so on, down there. And I think I am now
out of time, so I yield back. We will be giving you a question
for the record on that.
Chairwoman Waters. The gentleman from Tennessee, Mr.
Kustoff, is recognized for 5 minutes.
Mr. Kustoff. Thank you, Madam Chairwoman. And thank you,
Mr. Scharf, for appearing today. I have heard a number of
people ask you today why you would take the job that you have
taken, and I appreciate you stepping into that role.
With that said, how would you characterize the reputation
and the brand of Wells Fargo, today, as we sit here?
Mr. Scharf. I think as we sit here today, we have not yet
re-earned the trust that we would like the Wells Fargo name to
represent.
Mr. Kustoff. In your opinion, is the brand and the
reputation of Wells Fargo irreparably damaged?
Mr. Scharf. Congressman, I do think that the brand and
reputation is extraordinarily important in this business and
something that we have to work to earn, and we, in fact, can do
that.
Mr. Kustoff. You can restore it, or Wells Fargo can restore
its brand and reputation?
Mr. Scharf. Congressman, I absolutely believe that we can
restore the brand and reputation of Wells Fargo by taking the
kinds of actions that we have started to take in the short time
I have been at the company.
Mr. Kustoff. In my district, you have a number of retail
institutions. You have a number of branches in my district. If
the customer is an hourly wage employee, if it is a small
businessperson, a professional, and they come in and they want
to do business with Wells Fargo, in layman's terms, how would
you instruct your bank officer, customer service
representative, or whomever is trying to get that business or
maintain the business, what would you tell your employee to
relate to this hourly wage employee, to the small business
owner, or somebody trying to take out a mortgage? Why should
they want to do business with Wells Fargo?
Mr. Scharf. Congressman, I think we should treat our
customers and our employees the way we would want to be
treated. And so to the extent that we are thinking about their
needs and what is right for them, and how the things that we
can do can be there to serve them, that is the way we want all
of the people who work for Wells Fargo to be thinking about how
to deal with their customers who walk in the door.
If we are not doing that, I genuinely believe we are not
going to be successful. We clearly haven't done that
historically, at all times, and we have seen the results of
that. And so, that is something which has to be built into the
culture of the company, the compensation of the company, the
management of the company, in a very different way than it has
been in the past.
Mr. Kustoff. Well, let me ask it in a different way. What
would that bank officer tell that customer that they are trying
to either maintain or obtain, what would they tell them about
Wells Fargo and why they should want to do business with Wells
Fargo, considering everything that customer or potential
customer has seen and read about in the media?
Mr. Scharf. Congressman, I think that we want our customers
to know that we are committed to doing the right thing for
them, and all the actions that were taken since I have been at
the company are directed towards that. Ultimately, that is what
is going to earn back the trust of the people who stand in
judgment of us, and that is not just our customers. It is the
communities we serve and regulators and shareholders and
legislators.
And so, if we are not doing the right thing for our
customers every single day, then we are going to fall short of
who we should be.
Mr. Kustoff. Okay. Say, I am a bank customer and I am
thinking about cutting off my relations with Wells Fargo
because of everything that I have heard about, and I have read
about, that has been going on for several years. Mr. Wells
Fargo and Ms. Wells Fargo, why do I stay as your customer? In
layman's terms, what would that person say to--
Mr. Scharf. Well, the number one reason why they would stay
is they love the people that they do business with, who work at
Wells Fargo. The personal relationships that they have
developed are extraordinary. I was in a branch yesterday in
Washington, and we asked that very question, ``Why do your
customers come in?'' And it is because of that personal
connection, and then because they believe that what we do is
great for them--our products, our services, our convenience,
our technology, but ultimately it has to have this wrapper of,
we are going to do what is right by them.
Mr. Kustoff. Thank you, Mr. Scharf. My time is expiring. I
yield back.
Chairwoman Waters. Thank you. The gentlewoman from
Massachusetts, Ms. Pressley, is recognized for 5 minutes.
Ms. Pressley. Thank you, Madam Chairwoman, and Chairman
Green, for your steadfast oversight. I also want to recognize
the diligent and good work of this committee's Oversight and
Investigations staff.
In 2018, large banks posted record profits that were only
topped by their profits in 2019. But a decade ago these same
banks were rescued by trillions in bailout loans. It does seem
that in the case of banking, your profits are private, while
your losses are socialized. Over the years, you have helped
lead CitiGroup, JPMorgan Chase, BNY Mellon, and now Wells
Fargo, four of the nine recipients of the initial round of
Troubled Asset Relief Progrqm (TARP) rescue funds.
Mr. Scharf, this is your second time appearing before the
committee in less than a year. Given that this report shows the
limits of traditional confidential bank supervision in
effectively curbing Wells Fargo's egregious behavior, do you
agree that the public has a right to hear from you directly
through annual testimony and reporting?
Mr. Scharf. Congresswoman, when I took this job, I
understood that this was part of what the job is. What the
appropriate frequency is, I will leave it to you to make that
determination.
Ms. Pressley. It is a reasonable ask for other large,
systemically important U.S. banks. Yes or no, just for the
record?
Mr. Scharf. Congresswoman, I am not the right person to ask
that question. I am focused on Wells Fargo right now.
Ms. Pressley. And so yes or no, do you agree that it is
fair that you should come annually and report?
Mr. Scharf. Congresswoman, I do believe that it is
appropriate for me to come when asked to come by the committee.
Ms. Pressley. Congress established your national charter,
Congress created the deposit insurance your bank enjoys,
Congress stood up the Federal Reserve to be a lender of last
resort, and Congress developed the legal framework that governs
your bank. So, an annual check-in not too much to ask, and that
is exactly why, with the support of the AFL-CIO and the
Communications Workers of America, I introduced the Greater
Supervision in Banking Act, requiring annual public testimony
of G-SIB CEOs, like yourself, and reporting about bank size,
diversity, any regulatory enforcement or fines, and notably,
the workforce's treatment at all levels.
Your contract with Wells specifically states you will not
be required to relocate, allowing you to work remotely.
However, while at BNY Mellon, you pushed to restrict employees'
ability to telecommute.
So yes or no, just in the interest of time here, have you
instituted similarly restrictive policies at Wells?
Mr. Scharf. Congresswoman, first of all, I do not
telecommute. That is a very important distinction. We are a
national company that has people all across the country,
including our operating committee, and I am in a location with
a series of our operating committee members.
Ms. Pressley. Mr. Scharf, I just want to get back to the
employees here. Have you instituted any restrictive policies at
Wells?
Mr. Scharf. Congresswoman, I have not implemented any
restrictive policies at Wells.
Ms. Pressley. In the midst of this global pandemic, will
you commit to allowing all employees who can perform their
duties remotely to do so? Yes or no?
Mr. Scharf. Yes.
Ms. Pressley. Do you commit to providing all workers, down
to custodial staff, call center employees, and third-party
contractors with necessary sick days as well as paid leave? Yes
or no?
Mr. Scharf. I need to think about that whole list of
people, but for our employees, we absolutely will do that.
Ms. Pressley. All employees, down to custodial staff,
third-party service workers, our most vulnerable workforce.
Mr. Scharf. I did not say third-party workers. I said
employees.
Ms. Pressley. No, I did.
Mr. Scharf. Right. I said employees, Congresswoman, and I
said we certainly would be willing to look at the rest. It is
not something I have thought of sitting here.
Ms. Pressley. Okay. Well, I hope you will give it deep
thought, because they do represent our most vulnerable
workforce.
I want to be clear. Being a nationally chartered bank and
one of the largest at that is a privilege. It is not a right.
It is a privilege that comes with accountability to this
Congress, your employees, and the American public. When all
Americans, not just those who are Wells customers, serve as a
backstop to your bank, again, the least you can do is show up
once a year to answer these questions thoughtfully.
Thank you, and I yield back.
Chairwoman Waters. The gentleman from Ohio, Mr. Gonzalez,
is recognized for 5 minutes.
Mr. Gonzalez of Ohio. Thank you, Madam Chairwoman. And
thank you, Mr. Scharf, for your testimony.
When I read through the reports, I kind of bucket the
issues in three places: (1) ops/compliance; (2) reporting; and
(3) board of directors (BOD) issues. I want to kind of hit on
each of these quickly.
On the ops/compliance side, you have talked about how you
have flattened the organization, and are no longer in the
federated structure. Part of the federated structure was that
risk management was embedded in the individual business units,
I believe. Specifically, has that practice ended? Have we
elevated risk management and sort of pulled it away to monitor
more broadly?
Mr. Scharf. Congressman, we have to have independent risk
management, and we have completed that at the company, and we
are continuing to build out all of the appropriate first-line
functions as well as we work to make that second-line function
as effective as it needs to be.
Mr. Gonzalez of Ohio. And then another issue that was
mentioned was this enterprise-wide risk management component. I
realize that probably looks different at each bank. How are we
progressing on that, specifically?
Mr. Scharf. We are continuing to work to make sure that
everyone in the company understands what their responsibility
is. The only way we can have an effective risk management
infrastructure across the company is that there is consistency
of application, a consistent level of understanding and
implementation. And that takes some time and that is working
through.
Mr. Gonzalez of Ohio. Great. And then on the reporting
side, again it was clear that the board felt--the board had all
kinds of faults, obviously, but they felt at times that they
weren't getting the right information or that they were being
misled. Obviously, they don't prepare reports. They consume
reports, reports that management provides them.
How confident are you that the reporting issues, the
accuracy, the frequency, et cetera, have been taken care of
going forward?
Mr. Scharf. I certainly think, Congressman, that the
quality of the reports we give them has continued to improve. I
think that is an ongoing task that we have to make sure we are
doing our very best at. Board members generally--it can be very
often as good as the quality of the materials we give them. And
so, that is an ongoing effort. That is underway, and we have to
continue to improve it.
Mr. Gonzalez of Ohio. Thank you. And then with respect to
the board, I want to ask a general question, because we are
going to have two former members of your board here tomorrow,
and I think that sets a very interesting precedent that I hope
doesn't become routine, where we are hauling in board members
of companies. Your situation is unique, so I hope that this is,
in fact, unique.
What is the role of a board of directors in a public
company?
Mr. Scharf. The board's responsibility is to oversee
management, to approve strategy, and certainly, in our case, to
have confidence in the regulatory work that is ongoing.
Mr. Gonzalez of Ohio. Not to run the bank.
Mr. Scharf. Congressman, no. I believe the management team
is tasked with running the bank, overseen by the board.
Mr. Gonzalez of Ohio. Thank you. And then, how important is
it for you to be able to have proprietary conversations with
your board?
Mr. Scharf. Congressman, I think it is extremely important.
I personally believe that the best way to help the board
members do their job and for the company to get what it can out
of every single board member is to be as open and honest as you
possibly can, think very, very early on about having
conversations with them so they can be brought in very early,
and doing that in a confidential way, I think is critical.
Mr. Gonzalez of Ohio. Yes, and I think I am sort of caught
in two minds here. I think if I were a shareholder of Wells, I
would be happy with the outcome of new board members. As a
Member of Congress, again, I worry that we are going to set a
precedent where we haul board members in for any company that
is not doing things exactly how we want. I think that sets a
dangerous precedent. I don't know that we have done that. I
think we did it with Enron a while back--again, a unique
situation which feels appropriate.
I want to switch to something else. Hopefully, we can get
through it. Do you have any immediate plans to run for
Congress?
Mr. Scharf. No, I don't, Congressman.
Mr. Gonzalez of Ohio. Good job. Do you seek to become a
legislator at any point?
Mr. Scharf. No, I don't, Congressman.
Mr. Gonzalez of Ohio. Do you like running your bank? Do you
like running banks?
Mr. Scharf. Congressman, I am very proud and I do enjoy
running the bank.
Mr. Gonzalez of Ohio. So I am going to urge you to run your
bank. Run your bank according to the laws of this country. We
are the legislators. I don't want to run your bank. I don't
think you want any of us running your bank. I don't think you
want us telling you who to do business with, what to do, how to
operate, all those sorts of things. You run the bank consistent
with the consent orders and the laws of this country. We will
create the laws. It is a beautiful system. If we start mucking
it up by telling you who you can and can't do business with, I
think we set a very terrible precedent once again.
And with that, I yield back.
Chairwoman Waters. The gentlewoman from Iowa, Mrs. Axne, is
recognized for 5 minutes.
Mrs. Axne. Thank you, Madam Chairwoman, and thank you, Mr.
Scharf, for being here today. I appreciate it. My colleagues
have already addressed most of my questions, and I know you are
new to the bank, so I am not going to rehash most of the issues
that Wells Fargo has had. From everything I have been hearing
so far, and from talking with you individually as well, it
sounds like things are improving, and I really hope that
continues, because I think all of us here expect better than
what we have seen from Wells Fargo and from your predecessors.
My interest in Wells Fargo doing better, as you are
probably aware, is very acute due to the fact that I have
almost 15,000 Wells Fargo employees in my district, so thank
you for that. We have a vested interest in making sure that
Wells Fargo is a successful bank, to keep those jobs.
Can you give me some assurances that fixing the previous
problems will be your top priority and that you are going to
work to ensure that any future plans aren't creating the kinds
of risks that were so poorly monitored before?
Mr. Scharf. Congresswoman, there is no question in my mind,
there is no question in our board's mind, I don't think there
is a question in the employees of Wells Fargo's mind, or
shareholders, at this point, that our number-one priority is to
fix these issues. I have said it internally. I have written it
internally multiple times. I have talked about it on our
quarterly earnings calls, where they have called for specifics
relative to strategy and growth and other things like that, and
I have said I am not in a position to give you information on
that. I am focused on fixing these issues that we have, which
are these regulatory problems and the underlying control
infrastructure work, and that has to come before everything.
So I deeply believe that, and I have told everyone who is
associated with the company that that is the case. And I think
given the work that we have to get done, that is totally
appropriate.
I'm sorry--your second question?
Mrs. Axne. No, thank you. You answered that question
exactly the way that I would like you to answer that question,
and we will be, obviously, as you are fully aware, making sure
that we are on top of that. And I appreciate you bringing that
up. As the leader of the company, it is important for you to be
making sure that message is being pushed down all the way
through the ranks, and allowing for those folks who are in the
front-line jobs to be able to push up to management as well, to
ensure that there is a good culture.
So thank you so much, because representing those employees
and providing a voice for them truly is one of my biggest
responsibilities out here. And I was really happy to see that
Wells just announced an increase to its minimum wage. That
said, I do want to ask you, will you continue to look for ways
to ensure that all of your employees are paid a living wage,
and put more money in their pockets, and what might be some of
those things you are doing?
Mr. Scharf. Congresswoman, we absolutely have to continue
to look for ways to help our employees, especially the lower-
paid employees. When I got there and we looked at this issue,
we did think it was appropriate to look at the cost of living
in different parts of the country, so that we could represent
to ourselves that we were thinking about what that living wage
looks like.
And so differentiating and paying $20 an hour in the
highest-cost locations is, we think, very appropriate, and
scaling it based upon that cost of living also seemed to make
sense. As we go forward, that is something we should continue
to look at. That is not something that we do once that just is
set in stone. We need to make sure that we are being as
conscious of that cost of living as we possibly can.
We also have to look at the health care benefits. This past
year, when we set premiums and put money into people's HSAs,
the majority of the lower-paid people, if not all of the lower-
paid people, didn't see any increase, and many saw a decrease,
and that is something else. That was done before I got there,
but that is something that as we go through the process this
year, we are going to take a look at and say, are we sharing
health care costs appropriately across the company?
And then certainly giving people an opportunity inside the
company is extraordinarily important, whether it is within a
location so that people can continue to grow, take on more
responsibility and earn more money as time goes on, or do
something in a different part of the bank is something that
should be core to what our employees think of when they think
of Wells.
Mrs. Axne. I appreciate that. Last year, I asked Mr. Sloan,
in front of this committee, about Wells Fargo's announcement to
lay off 400 people in Des Moines, and whether those jobs were
going to be moved overseas. To make matters worse, although
those workers were found to be eligible for retraining and
other help, that certification didn't come until just 2 months
ago, so way too late to be of much use to a lot of those folks.
Wells Fargo has always been an American bank. It still gets
a significant majority of its revenue from the United States.
And my priority will be to those people who work at Wells
Fargo.
Will you commit to fully considering where Wells has built
its business and what it is going to do to make sure that we
don't move jobs overseas?
Mr. Scharf. Congresswoman, we would like to keep as many
jobs in the U.S. as possible, and we will commit to offering
retraining to anyone who winds up in a situation where we have
to make a change in their location.
Mrs. Axne. Thank you.
Chairwoman Waters. The gentleman from Tennessee, Mr. Rose,
is recognized for 5 minutes.
Mr. Rose. Thank you, Chairwoman Waters and Ranking Member
McHenry, and thank you, Mr. Scharf, for being here today.
Contrary to some of my colleagues, I want to applaud you for
taking on this role. I note that it is a challenge, but with
great risk comes great reward, and I applaud you for having the
courage to step up to the plate and to hopefully rebuild one of
our great American institutions.
In many ways you are here today to not only answer about
your plans moving forward with Wells Fargo, but, fair or not,
you are also here to answer for the mistakes of your
predecessors. Mr. Scharf, I understand you have led an
intensive review of the bank since you became the CEO in
October of last year, and to some extent, I know you have
already addressed this, but could you discuss again what you
learned from this review in terms of the culture at Wells Fargo
and risk management and other related issues?
Mr. Scharf. Congressman, I have had the opportunity to talk
to so many of the employees at Wells Fargo whom I have found to
be extremely open and forthcoming of their opinions of what we,
as a company, and what the management team has done right and
has done wrong. They recognize that the problems that we have
are extraordinarily significant, and they look at management
and they say, ``You need to do something very different than
you have done.''
So as we think about the work that we need to do, it is
around culture, it is around structure, it is around people and
jobs, and probably most importantly, because it sets the tone
for so many things, it is about accountability, both for people
in staying in jobs but also whether we are appropriately
impacting them for both the good and the bad that they have
done inside the company. And there are actions that we are
taking on every one of those items to ensure that the company
is run differently than it has been in the past.
Mr. Rose. Thank you. One thing we have learned since 2016
is that Wells Fargo's leadership then repeatedly provided
incomplete information to the public. As the Republican staff
report finds, evidence showed that former CEO Tim Sloan and his
team provided incomplete and exceedingly optimistic information
to Congress, the public, and the board of directors at Wells
Fargo. Wells Fargo was no closer to complying with the
regulators' consent orders when Tim Sloan resigned in March of
2019, than when his team took over in 2016.
For better or for worse, the financial services industry
has been under a microscope since the financial crisis. And
whenever a major bank like Wells Fargo fails to uphold its duty
to their shareholders, their customers, the public, and their
regulators, it reflects poorly on the entire industry. And when
that happens, some of my colleagues here on this committee
claim that the bank is too big to manage, and the financial
services industry, as a whole, is rife with abuse. That is not
the case.
So the burden falls on you, Mr. Scharf, and Wells Fargo at
large to prove to us, and to your regulators, that Wells Fargo
is a changed institution.
Mr. Scharf, we have talked a lot today about the changes
the bank is making under your leadership to strengthen the bank
going forward. As I listen to you talk, I am reminded of an old
quote that I heard many times as a young man growing up, that
trust takes years to build, seconds to break, and forever to
rebuild.
So I ask you, what are you doing? What is Wells Fargo doing
to not only earn back the trust of your customers but also that
of this Congress?
Mr. Scharf. Congressman, we need to run the company
fundamentally differently than we have run it in the past, and
my approach, both here at Congress, with our employees, and
with everyone outside the company, is to be completely open,
forthright, and honest. I am not trying to paint a picture
which is better or worse than anything I see, because you and
others will find out.
I live my life as simply as I can. There is one story. It
is what I believe, and if find out that I am wrong, then I will
deal with that and change the course.
So what you are hearing from me is exactly what I think. I
am not trying to minimize the work that is necessary. It is a
lot of work. There is no question about that. But I do believe,
based upon what I have seen at other institutions and the
issues that we have, that we can run the bank in a way which
will earn back the trust and respect of all those outside of
our company.
Mr. Rose. There is, of course, tremendous work left to be
done from a reputational standpoint, and I hope you will commit
to being transparent with Congress, your regulators, and the
public every step of the way.
Chairwoman Waters. Thank you. The gentlewoman from
Virginia, Ms. Wexton, is recognized for 5 minutes.
Ms. Wexton. Thank you, Madam Chairwoman, and thank you, Mr.
Scharf, for joining us here today.
Mr. Scharf, have you had the opportunity to review the
House Majority staff's report?
Mr. Scharf. Congresswoman, yes, I have.
Ms. Wexton. Okay. And it is entitled, ``The Real Wells
Fargo: Board & Management Failures, Consumer Abuses, and
Ineffective Regulatory Oversight.'' Is that correct?
Mr. Scharf. I believe so.
Ms. Wexton. Now, you know that in this report, they cited
the July 2019 OCC report of the examination which concluded
that the OCC had not observed a drive towards greater
consistency, and a large number of plans had to be submitted
multiple times to the OCC. You do acknowledge that, right?
Mr. Scharf. Yes, Congresswoman.
Ms. Wexton. And that the OCC remains concerned about the
overarching vision around remediation.
Mr. Scharf. Yes, Congresswoman.
Ms. Wexton. Okay. And you also then are aware that the
report concluded that Wells Fargo's board abdicated its
responsibility to oversee the bank's compliance with the 2016
sales practices consent orders.
Mr. Scharf. Yes, I am aware that is what the report says.
Ms. Wexton. Do you agree that the board did not provide
robust oversight of those consent orders?
Mr. Scharf. Congresswoman, what I can talk about is what I
have seen of the board since I have joined.
Ms. Wexton. Okay.
Mr. Scharf. I wasn't there.
Ms. Wexton. That is fine. We will just focus on being
forward-looking.
Mr. Scharf. And what I--
Ms. Wexton. Because as a result of this report--well, I
don't know if it is a result of this report, but right after
this report was released, two of your directors resigned
yesterday. Is that correct?
Mr. Scharf. They did resign Sunday, I believe.
Ms. Wexton. Sunday. Okay.
Mr. Scharf. Sorry. Yesterday morning.
Ms. Wexton. Okay. And you also said, in response to an
earlier question, that 70 percent of your board was new. Is
that correct?
Mr. Scharf. I said I believe that is approximately the
number.
Ms. Wexton. So, there has been a lot of turnover on the
board since you took office?
Mr. Scharf. Yes, there has been. Excuse me. I'm sorry. Can
I correct myself? Since I joined the board, we have had one new
board member join.
Ms. Wexton. Okay. And as CEO, you serve on the board of
directors, correct?
Mr. Scharf. Yes, I do.
Ms. Wexton. Do you have a role in selecting new members, in
recruiting and selecting new members for the board of
directors?
Mr. Scharf. Our directors are selected first by our
governance and nominating committee, which I am not a member
of, and then they are voted upon by the full board. So, I would
be aware of it. I would be part of a conversation but I don't
have the responsibility to do that.
Ms. Wexton. Okay. But you believe that the board's role is
to provide oversight of the directors in the company--of the
executives in the company. Is that correct?
Mr. Scharf. Yes, I do.
Ms. Wexton. And when looking for somebody to serve on the
board, are you looking for somebody who can credibly challenge
you? Would that be something that you would look for?
Mr. Scharf. Congresswoman, again, I would be speaking just
for myself.
Ms. Wexton. For yourself, yes.
Mr. Scharf. Not for the entire board. I think as a board,
we absolutely need people who are going to challenge us, who
come from different places, have different backgrounds, have
different kinds of diversity, and that people with that
diversity or background should help us get to the best
conclusion.
Ms. Wexton. The reason I ask is because Warren Buffett just
sent out his annual letter to shareholders, just very recently,
and in there he talked about the fact that corporate chiefs
rarely bring in outside advisors who provide dissenting
opinions, and that as a result, when seeking directors, CEOs
don't look for pit bulls. It is the cocker spaniel that gets
taken home.
So for you, in your decision, when you cast that vote for
who is going to replace the two members of the board of
directors who resigned, will you commit to look for a pit bull
and not a cocker spaniel?
Mr. Scharf. Congresswoman, I absolutely want someone who is
going to speak up, who is going to speak their mind, who
understands things that I don't understand, and adds to the
conversation. There is no question that I think boards are
better off for having people like that.
Ms. Wexton. And pushes back on behalf of shareholders and
other folks and account holders?
Mr. Scharf. Congresswoman, I absolutely believe that boards
have to be independent and push back whenever appropriate on
the management team.
Ms. Wexton. Thank you very much. I yield back.
Chairwoman Waters. The gentleman from North Carolina, Mr.
Budd, is recognized for 5 minutes.
Mr. Budd. Thank you, Madam Chairwoman, and thank you again,
Mr. Scharf, for being here today.
So who knew, 33 years ago, as a teenager in Advance, North
Carolina, opening my very first checking account, with my dad
taking me there, that it would be at First Union National Bank,
later part of Wachovia, and then later Wells Fargo? And who
also knew that it would be right next to my congressional
office? So, this bank is important to me, not just for those
sentimental reasons, but because it is important to my
constituents, and to thousands and thousands of families there
in my district. And it is also important because it is
important to our economy.
I want to again thank you for coming a few months ago to
meet with my staff and to talk about what you are bringing to
Wells Fargo, and I want to commend you, from what I understand,
on your fierce commitment to fixing the wrongs of your
predecessors. It is not an easy matter to deal with, but I have
no doubt in my mind that you are the right person for the job.
So, Mr. Scharf, in your day one letter to Wells Fargo
employees, you stated this: ``The seriousness of what we do
brings tremendous responsibility. To that end, our top priority
is to run the company with the highest standards of operational
excellence and integrity. Risk, control, and compliance are the
price of admission, and will always be the highest priority. We
cannot serve our customers in the manner they, and all other
stakeholders, expect of us if we do not operate the company to
these standards.''
So my question is, can you please elaborate more on some of
the new standards you are putting in place at Wells, and how
that will reshape the culture or the institution for the
betterment of the consumers?
Mr. Scharf. Thank you, Congressman. I do think it is
extraordinarily important that there is clarity inside the
organization of what is expected, and that starts with the
management team and the responsibility and accountability that
we take for either driving the success or the failures across
the organization.
We have dramatically changed both the compensation and the
performance management review system for our senior folks. I
think if you look back historically at how we pay people, there
was not the accountability that most people would expect, given
the results that we have had.
When we look at what we are doing going forward, I think
you will see a meaningful change in that. We carve out a
specific piece of the individual's performance, the company
performance, which we are very honest about, and then we say,
``What are you doing in order to do the appropriate risk and
control work?'' To the extent people aren't doing that, and
that includes the remediation on these consent orders, that can
only be a takeaway. Because as you talked about in my note, I
believe it is the price of admission. That sends a very
powerful signal through the organization in a way that didn't
exist before.
And I don't want to take up all of your time by going on
about that one question, but I think if I had to say one thing
which I think will set the tone inside the company, which is
extremely different, I think that ranks towards the top.
Mr. Budd. Very good. Thank you. So, a little more on
incentives. It has now been several years since the bank's
unauthorized scandal came to light. In that case, it was clear
that the bank's sales culture was one of the root causes, and
the bank has admitted as much.
Your predecessors ultimately failed to change the sales
culture of the bank in an impactful way. How can you ensure
that the culture shift that you are implementing at the bank
will have a lasting and meaningful impact? I get what you were
saying earlier, thank you, but how do we know that this is
going to last and be meaningful?
Mr. Scharf. Congressman, I do agree that we have to ensure
that we don't just fix this problem once but we fix it
everywhere inside the institution, and we have a systematic
process to ensure it doesn't happen again.
In addition to all of the risk management controls that we
have spoken about, that now are being built out across the
whole company, we have just added a new role called our sales
practice oversight officer, which looks independently at all of
our sales practices across the entire company, is responsible
for ensuring that we do not have any gaps in our practices, and
ensures that they all operate in a manner which represents the
way we want the company to be run in the future. That is not
just looking and approving the plans, but it is ensuring that
the right reporting exists and the right management processes
exist to support the kind of behavior that we know we need at
Wells Fargo.
Mr. Budd. Just as quickly as possible, it is no secret that
regulators were asleep at the switch when the bank was tied up
with the scandal. What measures are you taking to ensure that
all current and future practices are above board with
regulations?
And it seems that I am out of time, so I would ask you to
respond in writing. Thank you.
Chairwoman Waters. The gentlewoman from Pennsylvania, Ms.
Dean, is recognized for 5 minutes.
Ms. Dean. Thank you, Madam Chairwoman. And thank you, Mr.
Scharf, for being here. Like many of my colleagues here, I
really do wish you well. Wells Fargo needs powerful leadership
to right the ship and to correct the wrongs of the past. We
have had a lot of conversation today about governance, about
culture, about what is going on presently, a review of those
systems and leadership moving forward.
What I would like to focus on is the people left in its
wake, and the harms that have been done. As important as it is
that you right the ship moving forward, I believe everyone who
has been harmed by Wells Fargo is entitled to remedies, a full
return of their damages.
We know from the OCC reports--and I will read just a part
of it, from the Majority report, page 63--that one year after
setting up a center of excellence, a customer center of
excellence, the OCC found that the bank's remediation program
is critical to the organization, as the current approach to
remediation is inefficient, inconsistent, often lacks
appropriate accountability, and takes far too long.
I am going to use one simple example, because I think
personal stories often do it. In 2017, Samir Hanif had his car
repossessed. It was under a loan from Wells Fargo. I think
unbeknownst to him or duplicating to him was insurance sold,
car insurance that he did not need, driving him into
delinquency on the car. After paying hundreds of dollars to get
the car back, he found that the greater harm to him was his
credit score. He had lost 100 points on his credit score as a
result of the corrupt, fraudulent practices of Wells Fargo.
That is one case.
So my question is, in your own analysis, has your company
done a full look-back on every single person who was harmed,
whether it is the 3.5 million fake accounts; the fraudulent
sale of car insurance; the wrongful disclosures, which your
predecessor said came as a result of a computer glitch, a
years-long computer glitch; the taking of people's homes
improperly; the failure to modify mortgages improperly; lost
houses; lost cars; lost creditworthiness.
How many people have been harmed, and are you looking
individual by individual to know their damages and get them
compensation?
Mr. Scharf. Congresswoman, I share both the passion as well
as the frustration. When we look at the things that we have
done and the mistakes that we have made, it is one thing to say
that we have made mistakes and we will make them better going
forward, but we have to do the right remediation work. There is
no question in my mind that we need to move faster and we need
to be as complete as we possibly can in the thinking.
We have a significant number of people working on this, but
with me coming into the company, and a new chief operating
officer coming into the company, we want to take a fresh look
at what that actually means.
Ms. Dean. Well, that is what I am asking you. What have you
commanded your team to do in terms of the--we are taking
millions of customers.
Mr. Scharf. Right.
Ms. Dean. What have you commanded that they do in terms of
looking at the harm? And I hate the word, ``remediation.'' That
sounds like something that you do out in the yard when there is
a spill. This is damages to human beings. This is customers who
have suffered harms. What are you doing to identify the harm
and compensating them for that harm?
Mr. Scharf. What I have directed our people to do is to
take a fresh look at every one of the instances where we have
harmed consumers, and to ask the question, have we sized the
answer properly, and what can we do to make sure that the work
is done much more quickly than it has been to date?
Ms. Dean. Let me contrast what your predecessor said. For
example, on mortgage foreclosures, he said that they took a
look and where they had made some mistakes they sent $15,000
checks to people, and if they heard nothing back, they thought
that was probably satisfactory. Is that your approach?
Mr. Scharf. Our approach is to make sure that everyone who
is harmed gets compensated properly.
Ms. Dean. How do you calculate that? That is what I want to
know.
Mr. Scharf. Congresswoman, I would be glad to take that
offline and talk about some examples of what that is, piece by
piece.
Ms. Dean. I would love to know that, but in a global way.
So, each and every person gets compensated. Thank you very
much, and I wish you well with your work. I sincerely do.
Chairwoman Waters. Thank you. The gentleman from Texas, Mr.
Gooden, is recognized for 5 minutes.
Mr. Gooden. Thank you, Madam Chairwoman. I am going to
yield my time to Mr. Steil. Thank you.
Mr. Steil. Thank you, Mr. Gooden, and thank you, Mr.
Scharf, for being here today. Wells Fargo needs strong, ethical
leadership to turn the tide. The board thinks you are that
person. I think time will tell. But I appreciate you being here
today to talk about what you are doing.
In your day one letter to Wells Fargo employees, you wrote
that your firm needs to be doing the following: ``Set clear
priorities and execute, execute, execute. Words are nice but
actions are what matter. Priorities, strategies, and ideas are
useless without clear execution.''
I want to talk to you today about the priorities and about
your execution, your leadership at Wells Fargo. Can you walk me
through what your priorities are that have been set, and the
status of those priorities? What are the most important
priorities, and what needs to be achieved to fix Wells Fargo
and restore the public trust? And importantly, what has
actually been achieved and what has not yet been achieved? And
for those that are unresolved, what is getting in the way of
that successful execution?
Mr. Scharf. Congressman, I think the most important thing
that I did when I arrived at the company, when I talked about
setting the clear priorities, is making sure that everyone
understands that our first priority, by far, is to do all of
the regulatory work that is required. We need to do it both
because our regulators have asked us but also because it is the
right thing to do to build the proper foundation.
It wasn't clear to me, inside the company, that everyone
understood that, and when we looked at the activities that
people were spending their time on, and where we were investing
our money, it equally wasn't clear to me.
So setting that as a priority, and then as we go through
our budgeting exercises and business reviews, asking the
questions, are we doing everything that we should and putting
the appropriate resources towards the activities? You wind up
with a different answer, I think, than we had last time.
I think the way we go about managing these activities today
is very, very different. The amount of time that I am spending
on these activities is 70 to 80 percent of my time. We brought
in a new chief operating officer, under whom all of the
responsibility for driving the work across the company on the
remediation now sits. He is probably spending 90 percent of his
time on these activities.
We, as a company, are working together differently than we
worked together before, and so the priority, the process, the
people. And then if I were to dig down and talk about each of
the individual consent orders and how we are going about
thinking about doing the work, it is a far more professionally
managed set of circumstances than it was when I got there.
This is just setting the framework for doing the work, and
I remind everyone internally, all the time, that what we have
done is we have put in place our ability to get the work done,
but we have to go do it piece by piece. It is a lot. It is
going to take a period of time. I have not committed to that
period of time because I am not sure what it is yet. But we
will stay as focused as we have to be to ensure that we get to
the finish line on it.
Mr. Steil. Thank you. A lot of my colleagues here have
discussed concerns about the culture at Wells Fargo when you
arrived, and it is well-documented about some of those abuses.
Can you just touch on some of the recruitment efforts, in
particular at the senior staff level, that played into Wells
Fargo's efforts to change that corporate culture?
Mr. Scharf. Sure. I think one of the problems that we had
across the company is we didn't always put the right people in
the right jobs. I said that in my opening remarks. The culture
of the company was more family-like, and family can be good but
family can be bad. Making the tough decisions about who really
is capable and who is not capable, who is performing and who is
not performing, is extremely important, at all levels in an
organization, and I don't think we have done that as well as we
could.
So if people don't have the right skills or don't have the
right experience for things that we need, we need to get people
who do, as long as we treat people with the utmost respect. So
when we look at the people that we have brought in from the
outside, or people that we promoted up from within, I think
people, both inside and outside the company say that they fit
the bill. They have the experience, they have the know-how,
they have the proven ability to get the work done.
And so, again, we are set up with the right infrastructure
now to get the work done, in a way that we weren't 4 months
ago.
Mr. Steil. Thank you very much. I appreciate you being
here, and we will continue to observe the progress that you
will be making. Thank you very much. I yield back.
Mr. Scharf. Thank you.
Chairwoman Waters. The gentleman from Utah, Mr. McAdams, is
recognized for 5 minutes.
Mr. McAdams. Thank you, Madam Chairwoman, and thank you,
Mr. Scharf, for being here today.
It was almost one year ago when another Wells Fargo CEO sat
in that same chair, promising to turn the company around, and I
will repeat to you what I told Mr. Sloan. I want Wells Fargo to
succeed because I want these bad practices to cease, and for
customers, for veterans, for small businesses, I want them not
to be taken advantage of. I want Wells Fargo to succeed because
Wells has 3,000 employees in my State, and I want those
employees to be proud of where they work, and not to have a
workplace that pushes them to act unethically or illegally. And
I believe that you share these same sentiments.
So, Mr. Scharf, you generally accept that Wells Fargo
failed its customers, failed its employees, and must do
substantially better, correct?
Mr. Scharf. Congressman, yes, I do.
Mr. McAdams. Thank you. Look, I am glad you answered that
way because to answer otherwise would start us off on a very
bad foot.
The extent of Wells' failures over the last decade runs far
and wide. So, let's talk about how we do better. Before the
hearing today, I re-read the note that you sent to all
employees on your first day as CEO, and I really appreciated
that note. One of the points you made in that communication was
that Wells needed to move with a sense of urgency, and you said
that all stakeholders expect you to move forward faster than
ever, but at the top of that list is to remediate past issues.
And one of the things in the Majority staff report was that
Wells Fargo's board and management prioritized financial and
other considerations above fixing issues that were identified
by regulators. Can you commit to me and to this committee that
you will prioritize fixing the past mistakes of Wells rather
than prioritizing short-term profits?
Mr. Scharf. Congressman, these are the most important
issues we have. We will prioritize them at the top of
everything. I will not only commit to you here, I have told
employees that verbally, I have told them that in letters, and
I have told our shareholders that on an earnings call.
Mr. McAdams. Thank you, and we expect to see that happen,
but thank you for your commitment to that.
Also in your note to employees was that your people set you
apart, and that the best and brightest people work for Wells. I
pressed Mr. Sloan on employee issues last year and the ability
for employees to raise concerns, and his answers displayed a
lack of understanding of the magnitude of the problem that he
had at the company.
At the heart of the past Wells scandal, I think was a
culture issue, a culture where profit was king and where
employees didn't feel like they could raise their voices to
flag concerning activities. Can you please tell me how you are
soliciting employee feedback and incorporating the feedback
into your plans?
Mr. Scharf. Congressman, we do employee surveys, and even
more important than actually doing the survey is making sure
employees know that you read them, you listen to it, and you
are going to do something about it. So I have spoken about the
results that I have seen in the employee survey, and many of
the actions that we have taken are a result of what we have
seen.
We have town hall meetings. I host a town hall meeting
every quarter of every employee inside the company, and I
encourage people to give me feedback, and I get feedback. I get
hundreds and hundreds and hundreds of emails any time I send
something out, not just after those quarterly meetings, and
even between them.
Mr. McAdams. And are you ensuring that employees can give
that feedback anonymously? It sounds like they can give it
outside of the ordinary chain of command, but also do so
anonymously so they are not afraid of retaliation?
Mr. Scharf. Congressman, absolutely. I get both signed as
well as anonymous, and then we also have a hotline where people
can talk to us anonymously.
Mr. McAdams. Thank you, Mr. Scharf.
Changing topics, one thing that has been dominating my
discussions with constituents has been coronavirus and how best
to prepare for its potential effects on families, our economy,
and on our government. And as more employees are affected and
forced to quarantine, the economic effects of that will weigh
heavily on those individuals and on their families. How are
they going to put food on their table, or how are they going to
pay their mortgage, et cetera? How is a small business owner
going to keep the lights on as his or her supply chain is
disrupted?
Can you tell me what steps Wells Fargo is prepared to take
to respond to this pandemic, and how it will assist its
individual and small-business customers who are struggling due
to lost income or business disruptions? Are there such things
as loan forbearance, flexible repayment schedules, late payment
fee waivers, et cetera?
Mr. Scharf. Congressman, this is something that we are--we
absolutely want our customers to look at us as a source of
strength for them. We don't know where this ends, and it is
something that we think about and understand the impact it will
have on individuals' lives. And we do ask the question both for
our employees as well as our customers, what can we do to be
there for them?
So as of today--not as of today, but sitting here today, we
have a number set up that we are publicizing to our customers
where they can call us, and talk about their hardships. We will
talk to them about extension of fees. We will talk to them
about other things that we could do for their loans.
Mr. McAdams. Thank you, and I yield back.
Chairwoman Waters. The gentleman from Wisconsin, Mr. Steil,
is recognized for 5 minutes.
Mr. Steil. Thank you, and I yield to my colleague, Mr.
Gooden from Texas.
Mr. Gooden. Thank you, Mr. Steil, and I thank you for being
here, Mr. Scharf. I just have a few questions, and a yes or no
will suffice, but feel free to answer as long as you would
like. Is Wells Fargo the largest bank in the world?
Mr. Scharf. No. Wells Fargo is not the largest.
Mr. Gooden. Is it the largest bank in the Western
hemisphere?
Mr. Scharf. No, we are not.
Mr. Gooden. What about North America?
Mr. Scharf. No, we are not.
Mr. Gooden. So not the United States either, I am guessing.
Mr. Scharf. No, Congressman.
Mr. Gooden. Of the banks that are larger than Wells Fargo,
are you aware of any that were involved in a scandal of such
magnitude as Wells Fargo's, and if so, about how many?
Mr. Scharf. I am not aware of another bank that has had the
extent of the issues that we have had.
Mr. Gooden. I guess what I am getting at is, it is obvious
that there are large banks in this country that are doing a
pretty good job, and is it fair to say that Wells Fargo's
problems are perhaps unique and you all are trying to get to a
point where, like the other large banks in our nation, they are
able to operate fairly smoothly and honestly, despite being
large?
Mr. Scharf. Congressman, I do believe that we have not been
run the way we should be run, and our culture wasn't what it
should be, but it is possible to change those things, and it is
possible to run the company well.
Mr. Gooden. I appreciate that, and I thank you for being
here. I also wanted to kind of just make an observation. I am
looking through some of the Majority's report, and it has been
very helpful, and I appreciate all the work they put into it.
Before I made that observation, I was just going to point out
that we had the head of the OCC here last month, and kind of
one of the overarching themes was that there was mismanagement
going on and he was, to paraphrase, doing the bidding of the
Trump Administration.
A report that this committee put out, a news release, on
February 3, 2020, kind of really blasted the FDIC's and the
OCC's plans to weaken components of the Volcker Rule. And in
the press releases that I have read it made clear that they
held these accountability groups, the FDIC, and the OCC,
responsible for putting out the--for doing the wishes of the
Trump Administration. So, they kind of blamed the
Administration for decisions by the OCC.
The reason I bring that up is because when I look at this
report, on page 23, Committee Staff Findings--and I don't
dispute these findings; I am sure they are accurate--it says
before the 2016 and 2018 consent orders, financial regulators
knew about serious enterprise-wide deficiencies at Wells Fargo
for years, without alerting the public.
Well, our great President was elected in 2016. And so, when
I read all of these deficiencies and regulatory efforts, page
24, on April 19th, 2017, a report issued by the OCC's Office of
Enterprise Government and the Ombudsman reviewing the OCC's
supervision of the bank sales practices concluded that the OCC
did not take timely and effective supervisory actions. The OCC
failed to conduct comprehensive reviews in testing and
monitoring systems and controls over sales practices between
2011 and 2014. That is right in the middle of the Obama
Administration. I just can't help but wonder how this report
would read if a Republican were in the White House during the
years of mismanagement by the regulatory groups that just
allowed this to go on. And so my conclusion that I would like
to make is that the Trump Administration has really done a
great job.
In their first 2 years, they have executed on enforcement
action, and I think that things are really turning around, and
I want to applaud the Trump Administration for their progress.
I am disappointed that so much of this was apparently asleep-
at-the-switch actions during the Obama Administration, but I
wish you luck and I thank you for coming here before us today.
And I yield back to the chairwoman.
Chairwoman Waters. The gentleman from Illinois, Mr. Garcia,
is recognized for 5 minutes.
Mr. Garcia of Illinois. Thank you, Madam Chairwoman, for
holding this hearing along with the ranking member, and thank
you, Mr. Scharf, for being here. In 2018, the Federal Reserve
imposed an asset cap on Wells Fargo due to, in part, pending
compliance issues at that time. Despite this, Wells Fargo
remains one of the country's biggest banks, but that wasn't
always the case. In 1998, Wells Fargo merged with Northwest. In
2017, the independent directors of Wells Fargo released a
report on the company's sales practices, and they found that
the company's focus on cross-selling and aggressive sales goals
came largely from Northwest. Mr. Scharf, is that correct to
your knowledge?
Mr. Scharf. That is what I have been told, but I don't have
any evidence of that.
Mr. Garcia of Illinois. In the decade after the Northwest
merger, Wells Fargo acquired the National Bank of Alaska, First
Security Corporation, HD Vest Financial Services, Placer Sierra
Bank, Greater Bay Bancorp, United Bank Corporation of Wyoming,
and on and on, but you get the point. Lots of mergers. Then in
2008, Wells Fargo acquired Wachovia, doubling the size of the
bank. Is that correct, approximately?
Mr. Scharf. I believe so.
Mr. Garcia of Illinois. Again, according to the independent
directors report, Wells Fargo's ``sales-oriented culture''
quickly spread through Wachovia branches. Is that correct?
Mr. Scharf. I do believe the Wells Fargo management model
was implemented in the Wachovia branches, yes.
Mr. Garcia of Illinois. So from my perspective, these
constant acquisitions have not only made Wells Fargo bigger and
more complex, but have also brought irresponsible and illegal
corporate practices to more and more customers, thus the
consent pieces that are out there. Mr. Scharf, if the Federal
Reserve releases Wells Fargo from its asset cap, will you
commit to not pushing for more acquisitions?
Mr. Scharf. Congressman, I am not thinking about anything
like that today. What I am thinking about is the work that we
have to do, and I think that there are examples, plenty of
examples of acquisitions that have taken place where companies
have been run properly. Our issues relate to the fact that we
didn't have the appropriate management in place. We didn't have
the appropriate controls in place. We didn't have the
appropriate risk infrastructure in place.
Mr. Garcia of Illinois. As you have pointed out, so that of
sort of sounds like a no to me. But, frankly, Wells Fargo,
unchanged by your response, continues to illustrate how endless
acquisitions and mergers are dangerous. That is why I
introduced, with Senator Warren in the Senate, the Bank Merger
Review Modernization Act, to stop the rubber stamping of bank
mergers. Between 2006 and 2017, the Fed reviewed 3,819 bank
merger applications. It approved all of them.
As banks get larger and larger, they become more difficult
to manage, as I am sure you will experience, to regulate and
enforce existing rules, and they risk becoming too-big-to-fail
and put our entire economy at risk. This endangers all of us,
but especially working-class families like the ones that I
represent in Chicago and a part of the suburbs. After the 2008
crash, dozens of my friends, neighbors, and constituents were
foreclosed on. We sold my parents' flat. The impact of big
banks' greed wiped out wealth for millions, including more than
half of the wealth that Black Americans owned in our country.
We cannot let that happen again.
My bill requires Consumer Financial Protection Bureau
approval of mergers, requires regulators to evaluate systemic
risk factors of proposed mergers, requires disclosure of
discussions between institutions and regulators that go on
before the merger is filed, and more. We need this bill so that
what happened at Wells, illegal practices on an enormous scale,
won't happen again. Thank you, and I yield back, Madam
Chairwoman.
Chairwoman Waters. The gentleman from New York, Mr. Zeldin,
is recognized for 5 minutes.
Mr. Zeldin. Thank you, Chairwoman Waters and Ranking Member
McHenry, for holding this hearing. Thank you, Mr. Scharf, for
being here today, and for your testimony. We met recently, and
I found you to be highly motivated to do a good job, genuine,
and candid with all of your answers. And as someone who
represents the 1st Congressional District of New York, where
you have been spotted from time to time on the beautiful East
End of Long Island, we are proud to see you in the position
that you are now.
I wanted to talk to you a little bit about some of the
veterans' issues that I had discussed with your predecessor the
last time he was here. You can't be blamed for what happened
before you arrived, but you are here today to answer questions
about the path forward, and that is much appreciated. You have
publicly highlighted initiatives that you are undertaking,
including a flatter line of business organizational structure
that reorganizes leader responsibility specifically by creating
five principal lines of business to ensure clear authority,
accountability, and responsibility. It is clear you want to
communicate progress, but also be upfront about what went
wrong. Under previous leadership, Wells Fargo had an
unfortunate history of wrongly treating active-duty
servicemembers and veterans. For example, it has been widely
documented that the bank improperly repossessed cars from
active military servicemembers and overcharged veterans for
refinancing their mortgages. Can you elaborate on some of the
initiatives that you have been working on to help veterans in
the wake of the scandal?
Mr. Scharf. Yes, thank you, Congressman. First of all, I
should start with just the statement that we have zero
tolerance for Servicemembers Civil Relief Act (SCRA) errors
inside the company. The things that you described, as well as
some of the other things that others have described, and the
harm that we have caused is completely inexcusable, and just
flies in the face of who we should be as a company.
Specifically, for current members of the military and
former military, we have the utmost respect for what they do.
And so, we have to make sure that for that population, as well
as for other populations, that we have all of the right
controls in place. What I believe that we have in place and is
effective at this point is a centralized group to review all of
those that are covered by SCRA to ensure that those mistakes
where harm was caused doesn't happen again.
As we continue to go through my process of reviewing the
company piece by piece, we will go and look at that to ensure
it is as robust as it needs to be across all the businesses
inside the company. I am told that people believe that is the
case today, but we will verify it.
Mr. Zeldin. Thank you, and I appreciate a continued open
line of communication between you and not just myself and my
team, but everyone on this committee on that issue, which is
close to my heart, as I would imagine it is for everyone on
this committee. Transitioning a little, I just wanted to talk
about a topic that is of growing concern to me and my
constituents, which is the de-banking of legitimate, lawful
businesses due to pressure from social activists.
I will give you an example. I am the proud leader of H.R.
5595, the Israel Anti-Boycott Act, which would prohibit
boycotts or requests for boycotts imposed by international
governmental organizations against Israel, and would protect
American companies from being coerced to provide information to
those organizations for the purpose of furthering boycotts
against Israel. This legislation does not impede the right of
any individual American to boycott or criticize Israel. It is
okay to have reasonable, legitimate criticism of any
government, including our own, or our allies like Israel, but
this hate-fueled movement is not all about affirming the rights
of Palestinians. Likewise, the pressure and coercion from those
cloaked under the guise of social activism to de-bank lawful,
legitimate businesses in the U.S. is not only wrong, but I
worry this type of tactic could seep into insidious movements,
like the boycott, divestment and sanctions (BDS) movement, when
it comes to pressuring those who provide financial services.
I understand you are running a bank, and that lending
requires discretion in underwriting, but can you assure me that
Wells Fargo's internal processes will not discriminate against
creditworthy individuals and businesses, no matter how those in
the public with loud, extreme opinions may try to cut off
access for them?
Mr. Scharf. Congressman, we intend to treat all individuals
fairly.
Mr. Zeldin. Thank you. There has been an immense amount of
public power in government, advantages entrusted to banks to
facilitate commerce, and they should not abuse those privileges
acting as de facto regulators. My time is up, so I yield back.
Chairwoman Waters. The gentlewoman from Texas, Ms. Garcia,
is recognized for 5 minutes.
Ms. Garcia of Texas. Thank you, Madam Chairwoman, and thank
you for holding this very important hearing so that we have an
opportunity to visit with the CEO of Wells Fargo Bank. And, Mr.
Scharf, I know that we were originally scheduled to have you
come by the office to visit, and it got canceled and not
rescheduled, so could we work on that?
I wanted to quickly ask you, on February 12th, Wells Fargo
announced that it would no longer require mandatory arbitration
for future sexual harassment claims by employees. I applaud you
for that. I think that is a step in the right direction.
However, Wells Fargo still includes mandatory arbitration
provisions in their credit card agreements and in their
consumer account agreements. When can we see changes there?
This body has passed a bill to end arbitration clauses in
contractual agreements. I know that I personally have been
forced to sign some, and I didn't want to. So, when can we
expect you to remove those clauses from those type of
agreements?
Mr. Scharf. Congresswoman, as you pointed out, we did make
those changes to employees regarding sexual harassment. We have
also been able to settle the sales practice exams without
referring those to arbitration as well, so there are places
that we have looked around the company. We want to have a
process in place that is fair and effective for both employees
and our customers, so this is something that we have just
started to look through, and there is nothing more to report on
that today. But as we continue to think about it, we would be
willing to continue to engage with you on the topic.
Ms. Garcia of Texas. Great. So was this a practice that you
also maintained in your previous employment in the banking
industry?
Mr. Scharf. I don't believe BNY Mellon had arbitration, but
I am not exactly sure.
Ms. Garcia of Texas. Could we check on that, too?
So you are saying today that you can't commit to get us on
the right track on those particular agreements?
Mr. Scharf. Congresswoman, I believe that we have a goal of
being fair and effective in how we handle disputes with our
customers and our employees. There are different ways to
accomplish that, and we are going to look and determine what we
think is the best way to do that.
Ms. Garcia of Texas. Well, this body has found that
arbitration clauses were not fair to the consumer, and I can
tell you as a consumer myself, I find them really repugnant,
and as an attorney and a former judge, I find them repugnant. I
know that you also deny consumers the right to participate in
any class action lawsuits or class arbitrations against the
bank. Is that true, and when can we see a change in that?
Mr. Scharf. Congresswoman, I don't know the specifics of
that.
Ms. Garcia of Texas. You don't?
Mr. Scharf. I do not.
Ms. Garcia of Texas. Okay. Well, when you go back to your
office, could you check into that or add it to your list, so we
can work on that also?
Mr. Scharf. I would be glad to talk to you about that.
Ms. Garcia of Texas. Well, great. Thank you. Now, I want to
go back to an answer that you gave to one of my colleagues
earlier when we were talking about a lot of the accountability
issues with the prior management of the bank. And you said that
you will no longer use any reviews based on sales, that you
would be focused on customer service, and that you would look
at balanced growth. What does that mean?
Mr. Scharf. Congresswoman, I was referring to the incentive
plans that have been changed, specifically in the consumer
bank, where the meaningful part of the compensation was based
upon sales goals that led to this behavior. Those have been
removed, and there are now several different pieces that go
into the evaluation, one of which is customer experience. The
second has to do with balances that exist inside the customer
accounts.
Ms. Garcia of Texas. You mean the dollar balances, or what
kind of balances are you talking about?
Mr. Scharf. Yes, the balances. The dollar balances.
Ms. Garcia of Texas. So, they will score more points on
their reviews if they handle a $1 million bank account versus a
consumer account of $100?
Mr. Scharf. No. Instead of just looking at the numbers of
accounts, because the numbers of accounts is a big part of what
led to the problems that existed, we want to attract more
balances inside of the branches. We have different bankers who
cover different customers at different wealth levels so that we
aren't judging those who deal with--
Ms. Garcia of Texas. But you are not suggesting that the
bigger the bank account number, the better treatment that
person is going to get?
Mr. Scharf. No, absolutely not.
Ms. Garcia of Texas. And if the average Joe walks in with a
$200 bank account, they are not going to get treated
differently because the person reviewed is going to get more
points for the higher value?
Mr. Scharf. They should not be treated differently.
Ms. Garcia of Texas. Thank you. Thank you, Madam
Chairwoman. I yield back.
Chairwoman Waters. The gentlewoman from California, Ms.
Porter, is recognized for 5 minutes.
Ms. Porter. Mr. Scharf, have you seen, ``Harold & Kumar Go
to White Castle?''
Mr. Scharf. Excuse me?
Ms. Porter. Have you seen the movie, ``Harold & Kumar Go to
White Castle?''
Mr. Scharf. No, I have not, Congresswoman.
Ms. Porter. There is a famous scene in that movie where
Neil Patrick Harris borrows a car and completely trashes it.
And Wells Fargo lends money to consumers to buy cars, and Wells
Fargo wants the consumers to take good care of the car. That is
the collateral, protect that value, but there is always this
Neil Patrick Harris risk. Someone crashes the car, defaults on
the loan, and the value is not enough, and there is a risk of a
loss. To guard against that loss, Wells Fargo has consumers pay
for GAP waivers. ``GAP'' stands for ``guaranteed asset
protection,'' and the GAP waiver cancels the remaining balance
on the loan if the regular auto liability payout after the car
is damaged is insufficient.
But when someone pays off the loan, there is no need for
that GAP waiver. There is no need for debt cancellation because
the debt is paid off, but you, Wells Fargo, keep charging for
that GAP waiver. You didn't tell consumers after they paid off
the loan early that you owed them money back, about $350 each.
Effectively, the bank stole this money from 1.7 million
consumers nationwide, leaving Wells Fargo sitting on over $600
million in ill-gotten gains. How much of that $600 million that
Wells Fargo owes consumers in GAP overcharges has been
returned?
Mr. Scharf. Congresswoman, I don't know the exact number,
sitting here, of what we have returned.
Ms. Porter. Okay. The chart on the side, this is how much
you owe, $600 million. This is how much you have returned,
zero. You told me in my office that Wells Fargo in the past has
been penny wise, but pound foolish, and I agreed, resisting
doing what is right and paying consumers. And I really saw that
when I was the monitor for the State of California during the
foreclosure crisis. So if you are here today to tell us that
Wells Fargo has changed its ways, you should have no problem
committing to giving these people their own money back in terms
of GAP overcharges. Will you commit to give them their money
back?
Mr. Scharf. Congresswoman, there is no question if we have
harmed customers, then we should, in fact, do that, and we will
go back and take a look at the specific example and understand
why it hasn't been done, and how we can move quickly to rectify
it.
Ms. Porter. This is the pleading in that case that is
pending in which Wells Fargo is currently arguing that even
though it charged people for many years of GAP insurance, and
the consumer paid off the loan early, they have not, in fact,
refunded that GAP insurance. And that $350 means a lot. It is
18 bags of groceries for families. So I would love you for you
to commit to doing that. I also wanted to ask you, have you
heard of the song, ``Mammas, Don't Let Your Babies Grow Up to
be Cowboys?''
Mr. Scharf. I don't believe I have.
Ms. Porter. It is written by an American hero, Willie
Nelson. I have three kids, Mr. Scharf, and I am thinking of
writing a new song, ``Mammas, Don't Let Your Babies Grow Up to
be Bank Tellers.'' Mr. Scharf, how many of your tellers are
currently receiving public assistance in this country?
Mr. Scharf. I am not aware, Congresswoman.
Ms. Porter. Right now, one-third of bank tellers in the
United States receive public assistance. Madam Chairwoman, I
would like permission to enter into the record the study from
the University of California-Berkeley that shows that the cost
of public benefits to families of bank tellers is almost $900
million per year.
Chairwoman Waters. Without objection, it is so ordered.
Ms. Porter. So, taxpayers are subsidizing Wells Fargo's
wages to the tune of $900 million per year. I don't want my
kids to grow up and be Wells Fargo tellers because,
statistically speaking, one of the three would end up needing
public assistance. Is Wells Fargo profitable?
[No response.]
Ms. Porter. Is Wells Fargo profitable?
Mr. Scharf. I believe it is, yes, Congresswoman.
Ms. Porter. You believe it is? It is $19.5 billion last
year, so we can round that up to $20 billion. That is profit.
So the bank can afford to pay its tellers significantly more.
Do you think the hardworking taxpayers of this country should
be shoring up Wells Fargo's teller salaries when the bank has
profits of $20 billion a year and paid out $30 billion in
buybacks and dividends last year?
Mr. Scharf. Congresswoman, I believe we should pay people
fairly, and I believe the actions that we have taken,
especially recently by raising the minimum wage, does, in fact,
do that. We also in addition to compensation--
Ms. Porter. You raised the wage only in high-cost areas,
however, not across-the-board.
Mr. Scharf. Excuse me?
Ms. Porter. You raised the wage only in high-cost areas,
not across-the-board.
Mr. Scharf. We raised our wages in four different tiers.
Ms. Porter. With that, I yield back.
Chairwoman Waters. The gentleman from Illinois, Mr. Casten,
is recognized for 5 minutes.
Mr. Casten. Thank you, Madam Chairwoman. And thank you, Mr.
Scharf, for the long day here. I want to shift a little bit to
some of the recent market activity specifically in the oil
sector, and I am an energy guy by history. I don't want to make
too much of one-day volatility, but certainly the fact is clear
after yesterday's news that Russian and Saudi interests are not
aligned with our own, and we need to brace ourselves for a
potential downturn. As I am sure you know, in the 2016 period,
Wells Fargo, your energy fund was exposed to significant losses
because of the Cubic Energy bankruptcy. And what I would like
to understand is how much capital exposure does Wells Fargo
currently have exposed to the oil and gas sector?
Mr. Scharf. Congressman, I don't have that number sitting
right here. The last time I looked, I looked at our exposure as
a percentage of our total loan exposure, as well as our
percentage of equity, and it looks similar to what the other
larger banks have.
Mr. Casten. Okay. And you tell me if this is right. If
there is exposure, would it all be in the, I guess you now call
it the Wells Fargo Energy Group? Is that where all the energy
lending would take place?
Mr. Scharf. I am not sure, Congressman.
Mr. Casten. Okay. This is from your website. It is an
October 2018 report, so I don't know if it is right, but it
says that you have $42 billion committed to public and private
companies across the upstream, midstream, and downstream
services. And if I am just looking at this, it says 41 percent
in exploration and production, 15 in midstream. If I think
exploration production pipelines, that is perhaps $23 billion
of exposure to this space. Does that feel about right to you?
And I am trying to do the math in my head. I am not trying to
put you on the spot.
Mr. Scharf. I will take your word for it, if you have the
document, Congressman.
Mr. Casten. Okay. Do you have any sense of how much of that
is in equity versus debt?
Mr. Scharf. No, I don't, Congressman.
Mr. Casten. Okay. And, again, I am just trying to do the
math. In your most recent 10-K, it said that your total loan
portfolio for oil, gas, and pipeline was $13.56 billion. I am
assuming that is just the debt side. So is it a reasonable
guess that there is maybe $10 billion in equity, ballpark?
Mr. Scharf. Congressman, I don't know the specifics sitting
here today.
Mr. Casten. Okay. Can you estimate on the debt side how
much would be second lien versus senior debt?
Mr. Scharf. No, I can't sitting here today, Congressman.
Mr. Casten. Okay. Well, I suspect we are going to have a
lot of you don't knows, but if you could get back to us on all
these. Do you know how far the oil price would have to fall for
your senior loans to be in technical default, just on an asset-
to-value test?
Mr. Scharf. Congressman, we have a risk function and a
business function that I am sure has run models like that
specific question that I don't have the answer to.
Mr. Casten. Okay. I won't hold you to this. Do you have any
general sense, given the oil market volatility right now, how
concerned your risk function is about that oil market
volatility?
Mr. Scharf. Congressman, there is certainly a heightened
degree of activity around the oil and gas exposures that we
have. We took those exposures, we took them in the context of
what we thought the risk we could tolerate, and so beyond that,
I can't answer additional questions on it.
Mr. Casten. Okay. Well, do you think your exposure is sort
of representative of the industry, the broader banking
industry?
Mr. Scharf. Again, I can't speak for the rest of the
industry, and I don't know the specifics of their exposures.
Mr. Casten. Do you have any idea how much you have reserved
for potential losses in the sector?
Mr. Scharf. I don't sitting here today, and I am not sure
it is something I would want to share broadly anyway.
Mr. Casten. Okay. Well, I will follow up, so if you could
get answers back to me in writing, I would appreciate it.
What I am trying to understand is what is this systemic
risk created to the entire banking sector, of which you are a
participant, if there is a sustained reduction in the value on
the books of the oil companies in this country. When Cubic
Energy went bankrupt, Jon Ross, and, again, where you took a
complete wipeout on the equity, John Ross, their vice president
of operations, said, ``What is really worth anything at $40 oil
and $2 gas? It is hard for me to say right now.'' Now, the
answer for the equity holders, including Wells Fargo, was zero.
As of today, West Texas crude is at $34, and natural gas,
Henry Hub, is at $1.90. It is a concern for me that you don't
know. I realize this is just recent news, but if you could get
back to us with some sense of what the exposure is, and how
concerned we should be about broader market exposure in the
banking sector, I would appreciate it.
Mr. Scharf. Congressman, I can assure you that it is a
topic of conversation inside the company.
Mr. Casten. Thank you. I yield back.
Chairwoman Waters. The gentleman from Colorado, Mr.
Perlmutter, is recognized for 5 minutes.
Mr. Perlmutter. It's good to see you, Mr. Scharf. I have
sort of three questions, two that kind of follow along Ms.
Porter's questions and then Mr. Casten's questions, and one
more general question about the company. A wise man once told
me that problems don't age very well, and this GAP insurance,
the guaranteed asset protection, where Wells Fargo has received
a premium to cover the loss of a car, then the car is either
sold and Wells Fargo is paid off, or they refinance it, the car
is paid off, Wells continues to hold that full premium, and
there are cases out there brought against the company to
recover that. They are small-dollar amounts, and as somebody
who has been outside counsel to financial institutions, your
outside lawyers are going to say, we can fight this, we can
require arbitration, we can make everybody come in to get their
$322. And you know what? We will be better off as an
institution. But I would remind you of this by saying problems
don't age very well, and as chief executive officer, I would
just ask that you consider Ms. Porter's discussion and also
that pleading, and take a look at just getting it settled,
because these things need to get behind the bank, which brings
me to sort of my second point.
I think the thing that really has been difficult for both
the Democrats and Republicans is just the series of consent
orders, the delay from the first one to today. And, the
question, I think, both reports to different magnitudes, is
there was an issue with management, issue with the boards,
issue with the regulators. And I think for us, the question is,
were the board of directors derelict in their duty, or is the
culture of the company such that it is difficult to get your
arms around it, or is this company too big to manage? And I
would just like to get your response to that.
Mr. Scharf. Thank you, Congressman. I think it is
absolutely possible to run a company like Wells Fargo well, and
there is a series of things that we haven't done to categorize
itself as running well, and that is evident in our lack of
ability to make progress in some of these activities that we
have spoken about today. Our culture did work against us. It is
not what it needs to be. We haven't had the right management
structure of the company in place, we haven't had the right
people in place, and we certainly didn't have the right
priority set across the company. And then, I have also spoken
today about the fact that we didn't have the right
accountability for people then to be able to map what those
priorities were and what it meant for them. I think when you
put those things together, and you get the right people in the
right seats, and you run the company very differently, it is
possible to have a very different outcome than we have seen.
Mr. Perlmutter. Okay. The last one is, well, and the proof
will be in the pudding. Further delays are only going to be
problems that continue to age and are not good for the company.
I have been a customer of the bank for 40 years, and I have had
some of those issues in my own accounts, so I want to see the
company right its ship and just do good.
The last thing is the softball I want to give you, and that
is, if you were sitting up here, and you have coronavirus, and
you see small businesses as potential victims of a recession--
the tourism industry, hospitality--and then you couple that
with this fight between Russia and Saudi Arabia on oil, if you
were sitting up here as a Member of Congress on the Financial
Services Committee thinking that a recession is a potential,
what should we be looking for in the financial sector generally
to help stem off something that would get worse?
Mr. Scharf. Congressman, I would certainly look and ask the
question, what are the banks doing in order to do what they can
to support all of the individuals who are affected by this? We
don't know how far it will go, but we know that it is
significant, and we know that there are things that we can do
to help the individuals, both at our own companies, the
consumers who are our clients, but also the impacted consumers
of the corporations that we do business with.
Mr. Perlmutter. And sort of a last point, those who could
be really affected--some things were done by your bank during
our shutdown. I would ask that you consider doing some similar
things to help those affected individuals. Thank you.
Chairwoman Waters. Thank you. The gentlewoman from
Michigan, Ms. Tlaib, is recognized for 5 minutes.
Ms. Tlaib. Thank you, Madam Chairwoman. First of all, I do
think it is important that many folks understand that I think
what our chairwoman is trying to do is not called intimidation.
It is called doing her job. This report alone is doing her job
as chairwoman of Financial Services and as somebody who
epecially oversees actions by banks like yours, that many
people are calling it a cultural issue, right? It is called
cheating. The definition of ``cheating'' is to act dishonestly
or unfairly in order to gain an advantage. I don't understand
why we are calling it culture when it is a criminal scheme.
Page 13 of the report alone, what you did to servicemembers
in our country who were facing evictions is a loan, something
that to me is just a criminal scheme that you all got away
with. And understandably, my colleagues will try to be a little
bit more forgiving, but when somebody in my community, a
resident, defrauds the government, they actually go to jail.
They get prosecuted. So, I am really taken aback by folks who
don't understand the consumer abuse by the company and
dismissing it, and kind of belittling it as a cultural issue.
It is not. It is a criminal scheme. You all got caught doing
something that was extremely disgusting, and that disadvantaged
so many of our folks, especially front-line communities like
mine.
Your predecessor at Wells Fargo made about $18.4 million in
2018. Did you know that?
Mr. Scharf. I have read that, yes.
Ms. Tlaib. Yes. You do know that is 283 times more than the
median income for your employees?
Mr. Scharf. Yes.
Ms. Tlaib. So my question to you is, do you think it is
appropriate for a bank caught cheating to not address the
excessive executive pay at Wells Fargo, at the bank you now
oversee?
Mr. Scharf. Congresswoman, I am focused on making sure that
we treat everyone fairly going forward.
Ms. Tlaib. Yes, let's talk about that. Do you know that
when you don't pay a living wage to our residents, many of whom
are your employees, that they end up going on assistance? So,
we have to cover health coverage maybe that you all don't
provide, adequate health coverage, or they have to get a second
job. And that is something you should absolutely write down,
Mr. Scharf, and find out what is actually happening in the
lives of the people who serve in your company.
One of the things that I have been trying to figure out is,
is there an amount of CEO pay that you would consider
inappropriate? So yes or no, would you recommend that you or
any other bank executives should have to forfeit some of your
own compensation to pay any penalties Wells Fargo faces under
your leadership?
Mr. Scharf. Congresswoman, I think all of the activities
that occur should be factored into the CEO's compensation.
Ms. Tlaib. How many CEOs has Wells had since all this
began? I am looking at the dates here. It has been 10 years,
and people are trying to say this is an issue with our
chairwoman. That is 10 years of doing this to real people who
lost their homes, lost their lives. This stuff is probably
still on their credit report while you still settle out of
court and get away with it.
I have a CEO tax bill, and it is really important--I
encourage my colleagues to look at this, because I think it is
critically important--the Tax Excessive CEO Pay Act that I co-
lead with Representative Lee and Senator Sanders. This bill
would actually put a penalty on all banks and corporations with
big gaps between CEO and worker pay. It is important that we
give banks and corporations incentives to end practices that
put all of us at risk. I say this to you all because I am
really tired of subsidizing, I mean, literally subsidizing for
you all not even paying a living wage to the residents who work
for the company, and, on top of that, you are actually also
around the corner scamming them.
And I am not convinced, and it is no fault of your own, Mr.
Scharf, or maybe it is because you chose this role, coming here
and continually saying, ``That was before my time.'' If I went
to my community in 13 District strong and said to them, ``I
just got here, I don't know,'' they would literally just push
and hold me accountable and say, ``You need to know.'' So we
are telling you, you come before this committee, you should
have been much more prepared and acknowledging and owning what
this company has done before, because that is not changing
culture when you don't even acknowledge that that is exactly
what you inherited, is a criminal scheme by your company that
is literally leaving people on the streets.
And this is not personal, Mr. Scharf. This is literally,
like, life and death for our residents at home. So when you
come here and you don't have answers, then it is really a
disgrace, and, honestly, it is disrespectful to this chamber.
You cannot come here and continue to say, ``I am new.'' That is
not the right answer. It should be--
Mr. Scharf. Congresswoman, I am sorry you feel that way. I
think I have provided many answers about what I am doing.
Ms. Tlaib. Thank you, Madam Chairwoman.
Chairwoman Waters. The gentlewoman from Ohio, Mrs. Beatty,
who is also the Chair of our Subcommittee on Diversity and
Inclusion, is recognized for 5 minutes.
Mrs. Beatty. Thank you, Madam Chairwoman. And thank you to
the witness. I am interested in how you plan to run the bank.
So, first, let me start with, did you know what you inherited
when you took this job? And mine are going to be yes-or-no
questions to move us along. You have had a long day. But did
you know? Do you think you were adequately prepared to know
what you were inheriting? Yes or no?
Mr. Scharf. I was--
Mrs. Beatty. Yes or no?
Mr. Scharf. I was as prepared as I could be. It is not--
Mrs. Beatty. So, is that a yes? You were adequately
prepared. Is that a yes?
Mr. Scharf. I was as prepared as I could--
Mrs. Beatty. Okay. So, that is a no. Can you tell me if you
think you were adequately prepared for this hearing today? Yes
or no, please, and it is for the sake of time. I have waited a
long time.
Mr. Scharf. I have done the best that I can for the 4
months I have been there.
Mrs. Beatty. So were you adequately prepared by your team
for this hearing? Yes or no?
Mr. Scharf. Congresswoman, that is for others to determine.
Mrs. Beatty. No, I am asking you. You are sitting in the
chair. You are our witness. Do you think you were adequately
prepared? And this is not a ``gotcha'' question.
Mr. Scharf. I believe I was--
Mrs. Beatty. Okay. So, then you--
Mr. Scharf. --but I think that is for others to determine.
Mrs. Beatty. Then, let me ask it this way. What do you
believe? Do you believe you were adequately prepared?
Mr. Scharf. Yes, I do.
Mrs. Beatty. Thank you. Now, are you familiar with the
interests of the subcommittee Chairs on this committee? Do you
know what subcommittee I Chair?
Mr. Scharf. You Chair the Diversity Subcommittee.
Mrs. Beatty. Okay. So, see, that is a thank you. It appears
that you were adequately prepared to know what I Chair. Did you
read the Wells Fargo report that was submitted to my
subcommittee?
Mr. Scharf. No, I did not, Congresswoman.
Mrs. Beatty. That is disappointing, and I am very serious,
so now I can answer the question. You were not adequately
prepared. For you to come here and say to me one of the biggest
things that we are doing is moving this needle, then you want
to understand why people ask you questions, because when we
talk about moving the needle for inclusion, we are also looking
at closing the wealth gap. We are looking at pay equity. It is
far beyond race and ethnicity and gender. It is about rural
people. It is about veterans. It is about how we move the
needle to make sure that people have equality and not
injustices. I am very sad because you can't answer half of the
rest of my questions since you didn't even take the time to
look at the report.
I have been very consistent. I have asked the same
questions for the last 6 years to every CEO who has been in his
room. This is my life mission, to make sure that women and
minorities, and, specifically for me, African Americans, stand
a fair chance in the world that you operate in and in the world
that you run. So from the transcript, when they talked about
hiring you, I don't know if you will remember this, but let me
quote. It said that you were passionate about diversity and
inclusion, and that you were committed to work with a talented
management pool of people, and then you answered and said you
were excited to come on board to do those things. See how I am
connecting the dots? If they thought you were passionate and
committed to diversity--
Mr. Scharf. I am, Congresswoman.
Mrs. Beatty. --and inclusion, and yet you don't read or
look at the DNI report, and you knew you were coming before
this committee, and I have asked every single person the same
question. So, let me ask you this. Can you give me a commitment
as you are talking about cleaning the house, bringing on new
people, do you or will you have a diversity and inclusion
executive on your team? Yes or no?
Mr. Scharf. Yes.
Mrs. Beatty. Do you have one?
Mr. Scharf. Yes, we do.
Mrs. Beatty. Does that person report to you?
Mr. Scharf. No, she does not.
Mrs. Beatty. Wrong answer. If you really believe in
diversity and inclusion, that person, especially with all the
inequities that you have in the lack of addressing the
questions that my colleagues have asked, you should look at
that person reporting to you. Now, you have a seat on the
board. I get the point that you don't serve on the nominating
committee. So the question to you is, will you push for
something like the Rooney Rule, sitting there as a board
member, or do you even know what the Rooney Rule is? Have you
heard of it?
Mr. Scharf. I do, and--
Mrs. Beatty. So then, you know the Rooney Rule. I have a
piece of legislation, thanks to our chairwoman, called the
Beatty Rule that was put into legislation and actually passed.
Will you participate in doing that? Yes or no?
Mr. Scharf. I can certainly have the conversation. I would
be supportive of it, but it is the board's decision.
Mrs. Beatty. How many people of color and women and other
diverse people are on the board?
Mr. Scharf. Thirty percent are women and 20 percent are
diverse.
Mrs. Beatty. Sorry. My time is up, and I yield back.
Chairwoman Waters. Thank you very much. Before we adjourn
the hearing, I yield 4 minutes to the gentleman from North
Carolina to close.
Mr. McHenry. Thank you for your testimony today, Mr.
Scharf. First, I think we have to say that you have outlined an
aggressive plan for the institution that is needed. You will be
held accountable by your regulator. You will be held
accountable by your board. You will be held accountable by your
shareholders, and you are certainly going to be held
accountable by those who make the law here on Capitol Hill and
have oversight over those regulators.
What is clear is in the history of your institution, wrong
was committed, but this hearing today was about the forward-
looking nature of this. So I want to be clear about the
legislative side of this and how we got here today. There have
been five reports issued by this committee, three by
Republicans, and two by Democrats. Now, we had access to the
same information from the Majority and Minority. After the
Wells Fargo sales practice scandal came to light in 2016, the
committee's Republican chairman opened an investigation. That
was Jeb Hensarling, when the Republicans were in charge of the
House. He called the CEO to testify and requested documents and
information from your company and the company's regulators.
All told, Mr. Hensarling obtained about 170,000 pages of
documents from your institution and from regulators. He had to
issue subpoenas to get some of those documents. He had to issue
subpoenas to get documents from our regulators that we have
oversight over, and that was during the Obama Administration.
So, Democrats were in those jobs, but it had to be a Republican
subpoena to get that information. But both the Majority and the
Minority at the time get those same documents, so we have that
same sort of insight into this process. At the time, the
Democrat Minority issued a report. Republicans issued two
reports during that last Congress.
Fast forward to 2019, and Democrats are now in charge of
the House of Representatives. The changeover is at the
regulators as well. We had a request for additional information
from Wells and the regulators, and another 370,000 pages were
turned over without a single subpoena from your institution or
from regulators. Now, the key difference is that every single
one of those pages came without a subpoena from the regulators.
That was different under the Trump Administration than it was,
for instance, under Richard Cordray and the CFPB where we had
to subpoena those documents. Now, this CFPB and this Director
freely handed those documents over, necessary documents for us
to have oversight over your institution, and ensuring that our
laws are appropriate and the enforcement is appropriate.
So between us, we obtained about a half a million pages of
documents that both the Democrats and Republicans on this
committee have. We have key findings of fact that are a real
indictment for your institution, Wells Fargo, an absolute
indictment for your institution. Key findings of fact of
wrongdoing, breaking laws, not adhering to regulation, failing
to comply with consent decrees, failing to comply with what the
institution pledged. So, we agree on those facts.
Now, we come to two different conclusions about how to deal
with your institution and institutions of your size, and that
becomes a decision for policymakers to make on what to do about
those key findings of facts. And we have a disagreement, and
that is an honest disagreement between Republicans and
Democrats, but the key findings of facts were bipartisan in
nature. So, we know that. Now, it is a question of what to do
with it. I think we need to have strong oversight of you. You
need to have better management practices and adhere to existing
law, and we can continue to go along with the current law and
legal structures that we have for institutions of your size.
With that, I yield back the balance of my time.
Chairwoman Waters. Thank you very much. Before we conclude
today's hearing, I yield myself 4 minutes to describe the
process the Majority undertook to conduct our Wells Fargo
investigation and create the report with those findings.
Over a year ago, at my direction, the Majority staff
initiated an investigation into Wells Fargo's compliance with
five consent orders. Majority committee staff requested and
reviewed about 330,000 pages of records in the course of the
investigation. Majority committee staff also received briefings
from the Federal Reserve, the OCC, the CFPB, the SEC, and Wells
Fargo, and conducted interviews with key executives at Wells
Fargo, and the former Chair of the board's risk committee. In
addition, they interviewed officials at the Federal Reserve,
the OCC, and the CFPB.
The documents which served as the basis for the Majority
staff report, and which the Minority also used for their
report, were obtained because the Majority staff spent months
working to obtain them from regulators and the bank. The
regulators and the bank did not offer these documents up on
their own, but instead only provided them to us after months
and months of intense and productive negotiation. The Majority
staff determined the focus of this investigation, drafted the
document request to the OCC, the CFPB, and the Federal Reserve,
Wells Fargo Bank and Wells Fargo's board of directors, and
determined the scope of those inquiries. The Majority staff
selected the witnesses the committee interviewed, and
negotiated their appearances for interviews. At the same time,
Republicans had access to all of the documents and had the
opportunity to participate in all formal interviews.
I would like to publicly acknowledge the work of the
following key Majority staff members, without whose year-long
effort, this report would not have been possible: Bruce
Johnson, deputy chief oversight counsel; Carolyn Hahn, senior
counsel; Kevin Burris, chief oversight counsel; Christine
Baltazar, paralegal; Glen Sears, director of consumer
protection policy; Avy Mallik, senior counsel; Yana Miles,
senior counsel; Pierre Whatley, professional staff member: Eric
Hersey, communications director; Erica Loewe, deputy
communications director; Marcos Manosalvas, digital director;
and Eden Harris, press assistant.
The Majority's investigation revealed deeply-troubling
failures on the part of the bank's board management and
regulators, and shows that the bank is still broken and
continues to harm consumers. It also made clear that Congress
needs to act to ensure that a megabank can never again escape
accountability to the public or responsibility of harm to
consumers. At this hearing, we have made it clear to Mr. Scharf
that this committee is keeping a close eye on Wells Fargo, and
we will be holding them accountable for ending the bank's
egregious pattern of consumer abuse. He has an immense task
ahead of him, and the committee will not relent in its scrutiny
of the bank until its appalling practices end for good, and
megabanks understand that they are not above the law.
No matter what is being said about who did what and when, I
am in charge of this committee. I have the gavel, and we have
put together this report. We are going to follow up with it.
And all of the information, incorrect information, that has
been shared today about who is responsible for what, we are
responsible for this report. We stand by it. So, 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.
The hearing is now adjourned. Thank you.
[Whereupon, at 2:00 p.m., the hearing was adjourned.]
A P P E N D I X
March 10, 2020
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