Wells Fargo & Co. Chief Executive Tim Sloan traveled to Capitol Hill on Tuesday with a message of contrition for the company’s many scandals and commitment to treating its employees and customers right.
Lawmakers from both parties weren’t buying it.
They unloaded on him with bipartisan anger that showed the giant San Francisco financial institution has a long way to go to get past its reputation-shattering controversies that exploded in 2016.
“Wells Fargo’s ongoing lawlessness and failure to right the ship suggest the bank, with approximately $1.9 trillion in assets and serving one in three U.S. households, is simply too big to manage,” said Rep. Maxine Waters (D-Los Angeles).
The contentious four-hour hearing increased pressure on regulators to continue their tough approach to Wells Fargo, and helps fuel Democratic efforts to seek the breakup of giant banks that have a history of consumer abuses.
Sloan was the first megabank chief executive whom Waters, an outspoken critic of Wells Fargo, summoned to appear before the House Financial Services Committee since she took over as its chairwoman in January after the midterm election that gave Democrats control of the House.
Waters concluded the hearing by saying regulators should consider removing Sloan as Wells Fargo’s chief executive and declaring she would reintroduce legislation that would direct regulators to downsize or even shut down banks with a pattern of violating consumer protection laws.
“This hearing has revealed Wells Fargo has failed to clean up its act, it’s too big to manage and the steps regulators have taken to date are wholly inadequate,” she said, adding it was time for Congress to “take bold action.”
Republicans are unlikely to support the bill, but they joined Waters and her fellow Democrats on Tuesday in hammering away at Sloan for Wells Fargo’s continued problems.
“Each time a new scandal breaks, Wells Fargo promises to get to the bottom of it. It promises to make sure it doesn’t happen again, but then a few months later, we hear about another case of dishonest sales practices or gross mismanagement,” said Rep. Patrick T. McHenry (R-N.C.).
“Every single member of this committee has constituents in their state who were impacted by Wells Fargo,” he told Sloan. “Our constituents should be able to trust their own bank.”
Even one of the bank’s regulators, the Office of the Comptroller of the Currency, joined in the criticism.
“We continue to be disappointed with [Wells Fargo’s] performance under our consent orders and its inability to execute effective corporate governance and a successful risk management program,” said agency spokesman Bryan Hubbard.
The Los Angeles Times first reported Wells Fargo’s high-pressure sales practices in 2013. Three years later, the bank acknowledged that its employees had opened millions of checking, savings and credit card accounts that customers never authorized.
Wells Fargo has paid about $4 billion in settlements with regulators and plaintiffs who have brought private lawsuits.
Last year, Federal Reserve regulators ordered the bank to cap its growth until it could show it had improved its corporate governance. Sloan has said he expected the cap to remain in place through this year, and the bipartisan criticism he received Tuesday is likely to increase pressure on the Fed to keep it longer.
Jaret Seiberg, an analyst with brokerage and investment bank Cowen & Co., said in a research note this week that “we don’t believe the Federal Reserve will lift the asset cap until anger on Capitol Hill has lessened.”
Sloan was hoping to do that Tuesday.
Before the hearing began, he walked up the multilevel dais and shook hands with Waters and other committee members. He smiled for the cameras as he awaited for the gavel to fall.
But after Waters banged the gavel, Sloan’s smile disappeared.
He acknowledged that “the past few years have been a very difficult time in Wells Fargo’s storied history,” but said the bank had overhauled its sales practices and has “provided millions of dollars in compensation to our customers to date” for the abuses.
“We have more work to do and that is an ongoing commitment by all of Wells Fargo’s 260,000 team members — starting with me — to put our customers’ needs first, to act with honesty, integrity and accountability; and to strive to be the best bank in America,” Sloan told the committee.
But Sloan, who has been at Wells Fargo for 31 years, took fire for having been an executive during some of the scandals before taking over as chief executive in October 2016. He took over for John Stumpf, who was pilloried by Democrats and Republicans that fall as he struggled to explain how the bank’s bad practices could have gone on for years.
His performance at a pair of congressional hearings was so bad that he was ousted and retired a few weeks later.
Wells Fargo’s stock closed down 11 cents at $49.65 on Tuesday and has increased only about 2% since the scandal broke in September 2016 with the first major regulatory settlements. The KBW Bank index, a benchmark for the sector, is up 37% since then and some giant banks have experienced even greater stock gains.
Sloan got some credit Tuesday for taking steps to address the problems. But overall, lawmakers chastised him for not being able to halt a continuing string of controversies.
Regulators hit Wells Fargo with a $1-billion fine last year for forcing auto-loan customers into unneeded insurance policies and charging improper fees to some mortgage borrowers. And in a securities filing this month, Wells Fargo said it could be required to pay as much as $2.7 billion more than it had set aside as of the end of December to resolve legal cases, including ongoing probes by the Justice Department and the Securities and Exchange Commission.
“Mr. Sloan, you cannot sit there with a straight face and claim to not be responsible for all these abuses that have been committed against consumers,” Rep. Nydia M. Velazquez (D-N.Y.) told him as she pointed her finger at him.
Pushed by McHenry to say if he could give his “personal assurance” that the scandals were over, Sloan said the bank was serving its customers effectively.
“I can’t promise you perfection, but what I can promise you is that ... the substantive changes that we’ve implemented since I became CEO are going to prevent them from occurring as best as we can,” Sloan said.
In a particularly contentious exchange, Rep. Brad Sherman (D-Northridge) denounced Wells Fargo for forcing customers who tried to sue over unauthorized accounts to take their disputes to private arbitration because of clauses they signed when opening legitimate accounts.
Sherman asked if Sloan would allow customers to sue Wells Fargo if they were unable to qualify for a mortgage because of a credit score damaged by a fake account. Sloan responded that the bank’s efforts to compensate customers were “extensive and comprehensive” and there was no need to go to court.
“So you’re smart, they’re dumb,” Sherman said. “They have lawyers. They want to go to court, and you’re telling them they are stupid for wanting to go to court.”
“Congressman,” Sloan said, “I don’t think our customers are stupid.”
Last year, a federal court judge approved a $142-million settlement that provides an average of $35 to Wells Fargo account holders who had bogus accounts created in their name. The judge called it “rough justice” and an “imperfect solution,” but said there weren’t better alternatives.
Sloan’s testimony came the day after a report released by the Committee for Better Banks, an advocacy group that includes some current and former Wells Fargo employees, said the bank “has not fixed its culture of fear and intimidation.”
Although Wells Fargo announced in 2017 that it was overhauling the incentive compensation system that was at the root of the unauthorized-accounts scandal, the report said new customer-unfriendly sales incentives were reemerging.
Rep. Andy Barr (R-Ky.) told Sloan that Wells Fargo had sullied the reputation of the entire banking industry.
“You’re here today because Wells Fargo mistreated and defrauded its customers … but Wells Fargo’s reputation is not my chief concern,” Barr told Sloan at the start of the hearing.
“Your bank’s misconduct has fueled the kind of unfair, hyperbolic and anti-bank rhetoric that you will hear today, which threatens access to capital, job creation and economic growth,” Barr said.