Republican lawmakers on Tuesday blamed Wells Fargo for a string of bank scandals that they said have given rise to angry public rhetoric against all U.S. banks.
Rep. Patrick McHenry, the top Republican on the House Financial Services Committee, told CEO Tim Sloan at a hearing that Congress has been told time and again that Wells Fargo “promises to make sure it doesn’t happen again” when a scandal arises. “Then, a few months later, we hear about another case of dishonest sales practices or gross mismanagement,” he said.
“The bank’s actions have given a voice to those who want to unfairly taint the reputation of the entire banking sector,” added Rep. Andy Barr, R-Ky. “Your bank’s misconduct has fueled the kind of unfair hyperbolic and anti-bank rhetoric you will hear today, which threatens access to capital, job creation and economic growth.”
Sloan took over for Wells Fargo when his predecessor, John Stumpf, was forced out after the bank disclosed that millions of phony customer accounts were created. At the hearing, Sloan focused on his reform efforts, but lawmakers were harsh, particularly Democrats, who repeatedly questioned whether the bank is “too big to manage.”
The bank’s struggles since the phony accounts were disclosed, which Sloan attributed in part to his efforts to root out and correct and accumulation of problems, provided ample fodder for such questions. In late February, insurers for current and former Wells Fargo leadership, from Sloan himself to board members, agreed to pay $240 million to settle shareholder lawsuits claiming they didn’t live up to their responsibilities to prevent the fake-accounts scandal.
In December, the San Francisco-based lender agreed to pay $575 million to resolve claims with prosecutors in all 50 states and Washington, D.C., related to both the phony accounts that were created by employees trying to meet aggressive sales targets, and issues in its auto- and mortgage-lending businesses.
In early 2018, the Federal Reserve ordered the bank not to expand its total assets beyond the nearly $2 trillion held at the end of 2017 until it resolves the regulator’s oversight concerns.
Afterward, the bank agreed to pay $1 billion in civil penalties to settle government claims it sold some auto borrowers insurance they didn’t need under the pretense they might not qualify for their loans otherwise and charged fees to mortgage customers that it was supposed to be absorbing.
In August, the bank said it would pay $2.09 billion to settle Justice Department allegations that the bank packaged mortgages that were higher risk than they appeared into securities sold before the 2008 financial crisis. Company officials were aware that the borrowers had misstated their incomes, the department said, which would impede their ability to repay the loans.
“Wells Fargo is a recidivist financial institution that creates widespread harm with a broad range of offenses,” said Committee Chairwoman Maxine Waters, a California Democrat who stepped into her current role when her party regained a majority in the House of Representatives during November’s midterm elections. “All the changes you said you have made are not evident.”
Correcting Wells Fargo’s mistakes for every customer takes time, Sloan acknowledged.
While the bank is attempting to refund money that customers lost due to its mistakes and has centralized its oversight to ensure senior managers are more aware of problems as they develop, it has also sought to force some customers out of lawsuits and into private mediation, where actions aren’t made public, Sloan conceded.
“I can’t wrap my head around why and how” so many divisions of Wells Fargo were “engaging in some sort of fraudulent activity, if it wasn’t coming form the top,” said Rep. Jennifer Wexton, a Virginia Democrat.
“Would it be your position that all banks do this kind of thing and Wells Fargo was just the one that got caught?” she continued, prompting a quick negative from the CEO. She then questioned why a 31-year veteran such as Sloan is the best choice for reforming the bank since many of the bank’s current issues arose while he was working there.
That tenure, which includes a 10-month stint as chief operating officer, “allows me to make the difficult decisions to reorganize the company more quickly, and that’s what i have done,” Sloan replied. “This company has gone through fundamental change, more fundamental change than it’s ever gone through in its history. I’ve made all the decisions, and I take responsibility for those decisions and whether they work or they don’t.”
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