Transcripts For CSPAN2 Wells Fargo CEO Testifies Before House Financial Services 20240713

[inaudible conversations] this committee will come to order. Without objection the chairs authorized to declare a recess at any time to be entitled Holding Wells Fargo Accountable the bank that broke americas trust i recognize myself for four minutes to give an Opening Statement. Today wells fargo ceo will testify before the committee about how he plans to and wells fargo egregious pattern of consumer abuses. We invited him to testify before this committee the last three and half years. We will note each time a ceo has testified before this committee he has resigned they are soon after. [laughter] you are taking on a massive challenge i certainly wish you luck it is clear to this committee that the bank you inherited is a lawless organization has caused widespread harm to millions of consumers throughout theor nation. Ells fargo has opened three. 5 million fraudulent accounts in their customers names which cause consumers over 6 million charged consumers for automobile insurance policies they did not need causing some consumers to lose their automobiles and engaging in illegal practices charging inappropriate overdraft fees, overcharging veterans to refinancee loans fraudulently selling products to Retail Investors and lastly the community reached the report with the compliance with these issues of regulatory agencies in response to the widespread consumer abuses and compliance breakdowns among the disturbing findings in the report the office of the comptroller of the currency is aware of dozens of cases where the number of consumers and customer accounts require mediation for consumer abuse with the amount of harm. I am very concerned the banks pattern appears to persist it also uncovered notes from the Federal Reserve meeting at a senior wells fargo allowing any new customers to the country unless operating in on this environment. So the findings of the majority staff report that wells fargo is not ready to be Americas Bank again you must not only reveal this institution but americas trust and to testify before this committee to give an accurate testimony i urge you not to follow this example but to be transparent it is the first of several the committee is convening to hold walt wells fargo accountable as part of the oversight we will look at legislation well the Federal Reserve asset cap is a good start it did not change the banks behavior accordingly we will discuss those that would compel further action to the regulators including management actions and now the chair recognizes the Ranking Member of the committee the gentle man from North Carolina for an Opening Statement. Thank you madam chair. My colleagues on the other side of the aisle made up their mind about wells fargo long ago in fact before we received ath single document the now chair of the committee in 2016 said she come to a conclusion wells fargo should be broken up, it is too big to manage. Us. That was before the Committee Received a single document or had a shred of evidence into the investigation practices. Now after reviewing half a million documents that the democrats and republicans on this committee have access to it hundreds of pages of witness testimony, we know breaking up the bank is not the answer. Wells fargo is not too big to manage. The findings of these documents show it was poorly mismanaged. The evidence shows the problem was it structure and the Leadership Team that could not fixth 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 fargos from the brandnew ceo who is then on the job a whole six months has no question now we have two former Board Members for the sole purpose to embarrass meant and those documents that are embarrassing to the boardrd members and to wells fargo that is true the chairwoman, them to resign and they did in the markets called on them to resign. The system works im not sure what we hope to accomplish more with positions that are no longer to fix the Company Moving forward but also to have the luxury of three politically motivatedx th ideological there are serious things happening in the world do we are having thiss hearing investors fear the spread of coronavirust with widespread consequences for the Financial Services industry in the markets and the economy our constituents have concerns and they expect to decide politics to decide on an urgent matter at hand. We will spend the day asking them over and over how he intends to fix ther bank. Here are the facts it looks good on paper. Well hold him accountable to execute that plan. In fact the stockholders will hold him accountable for the plan and the regulators in the Justice Department will hold him accountable to execute that plan. They have been extremely aggressive during the Trump Administration with wells fargo and we will continue to hear from them about whether mr. Scharf plans are working we expect them to stay engaged so at least some of the members will want to know what you are doing to prepare for your massive footprint of employees and how you protect their safety how you want protect their safety with the institution in the marketplace and the fears and reaction to this virus and the impact my consumers and constituents will have changes to credit card and mortgages and other things in light of the crisis so with that i would like to introduce for documents and the record waivers tond allow mr. Scharf to discuss confidential information from the Federal Reserve and its important to note first they are not blanket waivers to discuss csi he was asked not to discuss occ the risk assessments and the supervisory ratings. Second he has been asked not to name Supervisory Staff. That would be unfair to put him in a position to answer the question or violate a regulatory directive. So with that i appreciate you requesting these waivers to be more forthright with the committee that i would ask unanimous consent to submit letter from the occ in those march letters detailing what ive outlined. Thank you veryfe much. Without objection. Those documents are accepted you also have permission to discloses is waivers. I understand the agency asked us not to do that. I was not asked by the agencies to not do that the czar letters to you and mr. Green how they had that request i wouldve liked to have heard it before now. That is what i understand. We already heard five hours of testimony when i called for wells fargo so with that objection or information is inserted into the record. We now recognize the chairman of the subcommittee of oversight for one minute. Madam chair our constituents would like to know how is it wells fargo can pay a 3 billiondollar fine and commit fraud open account without the knowledge of customers and not one person goes to jail . Of all of the top banks that are too big to fail there has never been a ceo of any of these two big to fail banks to go to jail. It seems theyre not only too big to fail there too big to jail. This issue has to be resolved and it cannot be resolved by paying off the government. Wells fargo has to atone for its transgression the more it has to do how it treats employees but it will do to make sure this never happens again but more importantly , wells fargo has got to understand that it cannot continue with what appears to be a criminal enterprise. I yield back the balance of my time. The chair recognizes the subcommittee Ranking Member for one minute. Will come back to the committee and for your appearance in your current role plaguing Senior Management to address the problem of the aftermath with a breach of public trust as a shortfall in Consumer Protection. We are not here to relitigate the details of those practices d which the committee covered in previous hearings and reports but to understand what the new management has done to correct the mistakes of the past and complying to make sure this does not happen again. Wells fargo misconduct sparked anti fairbank rhetoric apply to all banks of all sizes much of which you will hear from my colleagues todayay but to blame all banks as the villains of capitalism takes it easier for those on the far left to put socialism on the free market economy we are here to focus on only one isolated bank and a path to rebuild trust i look forward to hear weve done to change the culture of the bank and to ensure wells fargo upholds its promises. I yielde back. We welcome to the committee mr. Scharf president and ceo of Wells Fargo Company with his position with wells fargo and Company Since october 2019 recently working at a number of Financial Institutions including ceo to cooperate as chief executive officer and chairman of the board of new york dallas without objection your written statement will be made part of the record but before we begin i would like to share with the witness please stand and raise your right hand. Do you solemnly swear or affirm that the testimony you will give before this committee and matters now under consideration will be the truth, the whole truth and nothing but the truth so help you god . Thank you let the record show the witness answered in the affirmative. You may take yourr seat. You will have five minutes to summarize your testimony when you have one minute remaining a yellow light will appear at that time i will ask you to wrap up your testimony so we can be respectful of Committee Members time. You are now recognize to present your oral testimony. Chairwoman waters Ranking Member and members of the Committee Good morning. Thank you very much for the opportunity to be here today. I join wells fargo just over four months ago after serving as ceo of the why melon and i look forward to discuss the next steps although it is early members of the committee or fill one familiar with the history detailing the settlement with the doj and sec and administrative actions taken by the occ against former employees. These matters describe deeply disturbing contact that is utterly unacceptable and has no place in our company. In addition recently released reports from this committee reinforced that we have not done where it is necessary to address our shortcomings and simply w said we had a flawed Business Model how the company was managed on the companys leadership failed stakeholders. But today i would like to talk about our plans to chart a better course i took this job because i believe our country and communities benefit from a strong wells fargo im confident we can do what is necessary to move in a significantly improved direction while it will take time i realize the path forward will be difficult im optimistic of our future. Here are some important steps we have taken so far. To provide an honest assessment assessment of our significant shortcomings and our failure to effectively address them. Second, i made it clear internally and externally we must prioritize the work outlined by our regulators aboveal all else and that work is essential to run the highest standards of Operational Excellence and integrity. Third to make substantial changes to our Leadership Team and then to expect to more to join the operating committee 75 percent of that group is new to the Company Since 2018 hiring experience people with a proven track record is necessary to bring about the change required to reorganize the structure to make sure we have clear responsibility and accountability to create a new role ofs chief operating officer to make sure consistent ox on execution is part of the culture especially with regard to regulatory work with that structure with more direct representation on the operating committee for more direct involvement across the company and to provide Greater Transparency to how businesses are working what types of risks they are taking and whether they are operating at the highest standards. To introduce a new said process one our progress against oursy regulatory work offering valuation and compensation packages significantly greater accountability and will continue to make tough decisions around our leaders. To redefine our culture especially regarding how we Work Together to have a strong centralized structure to ensure we have the right people in the right goals. We will have a sense of urgency and hold each other accountable for our commitments and judge yourself based on outcomesof not our words. Most important the guiding principle how it starts and ends with customers he was put them first in the decisionmaking. As we move forward i have no preconceivedi notions but i firmly believe that progress of the plan will take time for the regulators when we meet the obligations under the Consent Orders. Into the colleagues that wells fargo the feelings that occurred in the past i am committed to doing better as we seek to ensure such things never occur again at wells fargo and they give you my personal insurance one assurance we have a sound footing with our customers shareholders in communities. Thank you and im happy to answer your questions. They give very much. I would now like to engage with a few questions that i have about the findings that were reported to the majority staff. According to the Committee Report currently consumer abuse 250,000 accounts. This is one of the most troubling findings in the report after more than three and a half years wells fargo still could be harming millions of consumers inn fact those that were harmed by the bank as a result by those abuses of the report. Chairwoman i do not know the answer to the question. Will any consumer that has been harmed by the bank it has credit reporting fixed in ther next 30 days . Chairwoman, taking care of our customers is the most important thing for us in the process doing all the work that is required for us to remediate everything we can. It will certainly take longer than that. But the process has to be complete andme thorough and we are committed to doing that. How long will itce take for these consumers to receive payment . I asked 30 days how long do you think it will take . As of nowow the plans take us into 2021 to make sure everything is done appropriately we are taking a fresh look at remediation to be as thorough as we can and remediate everyone we should to ask if question if we can get this done more quickly. My concern as i think of the millions of customers that have been put through that economic pain and now with the coronavirus now to offer 11 million to support the efforts to combat the virus megabanks like yours will asked to forbear payments and other Consumer Debt and mortgages. How can your regulators in the public have any confidence in your institutions ability to c support your customers with dozensab of instances of consumer abuse . I understand the question all i can tell you is that we are approaching the virus the way you would expect us to. We are thinking about it in terms of what it means for every american out there. How i think about it starting with those that are the most affected. As we think about what we could be doing relative to late fees and missed payments , we want our customers to believe we are a source of strength for them and will approache it. I know you understand we are looking for a lot more specificity than what you just described. I know you became ceo just four months ago and you think there are a lot of changes needed. However i think absent significant reduction in the wells fargo footprint you with the bank can never rain of the culture of consumer abuse. What can you tell us about reducing that quick. I can tell you we have sold off businesses the last several years and we continue to look at the make up of the company. My First Priority since i arrived only four monthsha ago is to ask the questions what do we need to do to get the regulatory work in far better is. E than it at the same time we have launched meetings looking across the company and what we do and to answer your question does everything belonging to the roof at wells fargo and given the priorities that i have mywe expectation is that will go through the end of the work. O accomplish that the asset cap on the assets of the bank have you been trying to undo that . Are have you left them alone or is that fair . I dont have any knowledge of us trying to do anything other than abide by it although obviously we are trying to do the work necessary to satisfy the regulators. I believe where we are it is appropriate and focused on getting the work done required by the Federal Reserve. I yield back the balance of my time. You are recognizedd for five minutes. Thank you for your testimony. We understand your plan as you outlined the marketing Committee Members and your Opening Statement and your intention to right the ship to remedy chris on customer harm as quickly as possible and comply with regulatory orders the failure of wells fargo is not of failure of innovation but a lack of it acting to the new marketplace lack of adhering to existing laws and regulatory orders and when regulators for those breaking orders they refused in a timely manner. So both democrats so here is the republican report so to outline the consumer harm in the Risk Management failures of your institution. Have you review both of these reports . Yes i have. I know you may disagree with the conclusion for the republican or democratic side but do you have any disagreements with the report . I do not. My reaction is probably pretty similar to yours which is the series of behavior describe never shouldve happened at the company. The failures described are a direct result of us not managing the companyto t proper. Enterprisewide risk control system similar to your peers, is that true . Ias it is. Y. . There is no way a company with multiple businesses can ensure that its doing the right thing across the entire enterprise unless you are taking inconsistency with that. Risk across the enterprise. E. You need greater visibility and proof of folks independent of the business is conquering or not and making judgments. So, along those lines you are experiencing your previous role in trying to bring that expertise for Risk Management to this enterprise. Absolutely as well as the practices of other large institutions. In light of what has happened in the marketplace over the last month is this institution wellcapitalized . I think they ar we are extrey wellcapitalized. Theres w no question the whole Banking System is better capitalized than it was back at the time of the financial crisis whether its the additional billion dollars of capital the banks have with a 3 trillion orn or so in deposits and liquid securities. You have access to liquidity is. Any crisis you would foresee . You are mitigating customer harm from the previous regime. Thats positive. In terms of safety and soundness and Risk Management, you are cleaning up so the expectation is we should haveof no problemsn thiinto terms of safety and soud this is that fair . Once we finish the work ive laid out somete absolutely. How many employees do you have that wells fargo . Approximately 265,000. How man many are customers facing . I dont know the answer to that, but it has to be easily 100,000. Do you have plans in order to respond to the current threads because of covid19 and what is happening across the country especially the footprint inau california. Absolutely. We are as i said jameson as well as Washington State and other areas that have seen an outbreak. Our approach on covid19 is that we should do anything that we can to ensure the safety of our employees as well as being helpful for our customers. We have an open line with them wherever there is concern we encourage folks to work from home. Yesterday we had 62,000 people logged in working from home. To the extent that there are issues within the institution, we will do everything we can to protect everyone else. Let the record show that during this investigation all of the information was shared with the republicans and they tried to rush the report before we got ourselves. The Ranking Member would like to have itt both ways [inaudible] we both issued reports that the majority and minority as i outlined in a statement i wasnt impugning your report that the conclusions. You are trying to have it both ways. We can have this debate in front of anyone or guess we can and if you want to have this debate we will. The gentleman from new york is now recognized for five minutes. Dont take shots at me without the opportunity to respond. The gentleman is now recognized. You were brought into clean things up and change the culture at wells fargo, andf, i certainy hope do. I would like to talk about one area where i believe you do need to change direction. When your predecessor testified last year, i asked him about wells fargos policies on financing the gun industry which the policies are absolutely egregious. Theyve been financing gun manufacturers making weapons literally killing our children and neighbors. Mr. Sloan said he didnt think wells fargo should go above and beyond what the law requires on guns even though the bank explicitly states it goes above and beyond in many areas including human rights. So he refused to revise the 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 businesses in the gun industry. Under the city policy all of the banks Business Partners and 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 our commonsense policies that increase Public Safety and to save lives. So i want to ask you what you commit to changing wells fargos policies on financing the gun industry . First of all i d didnt wanto say i share your concerns about the impact of guns. Sitting here today, i dont personally believe i know enough to make that commitment that i do know its something we need to be far more thoughtful about the. I do know weve created financing for someht nonpartisan research and as part of that we need to go back and make sure we are thinking about what the do is in theo Sensitive Industries and im not making judgments one way or another. R. Its just not something ive spentd enough time on but i recognize your concerns. Thank you. After you have reviewed the policy and meett your decisions will you get back to the canadian writincommittee in wrir decisions and the reasons for making that decision respectfully . In the committees staff report, there is an email and i want to compliment the committee on this excellent report that has gotten a lot of positive feedback there is an email from your risk officer where he said, and i quote, if any of the 200 million in proposed customer remediation is left over, we promise to give it to charity only after the cfp b. And the occ let us out of the Consent Order. If they do not, no donation, pt the onus back on them. 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. This committee expects you to do the right thing by the customers that your bank has defrauded and we expect you to work with regulators to compensate them for the scandals and misuse of their funds and other fraud so i want to ask since you took over as the ceo in october 2019, what specific actions have you taken to address the concerns about how the bank remediate harm consumers . First of all garbag all, then yoyou refer 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 of by someone inside our company. To the question about what they are doing, first of all, we put in someone new to run the remediation process. That person reports to the new chief operating officer that we brought in from the outside that has experience dealing with customer remediations and the mandate ive given them is to rethink what it is and how we do it. Dont stop the work thats ongoing but going through piece by piece asking what can we do to ensure they are doingin everything we can for all of our customers as quickly as we possibly can. Earlier you were asked how many people were defrauded. Do you know now . Of ththe ladys time has exp. The gentleman from new jersey is recognized for five minutes. Thank you, madam chairwoman. Thank you for joining us today and updating the committee on your progress as the brandnew ceo of wells fargo. Placing ones 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 saleser performance goals d ultimately improved earnings and share prices. That was categorically wrong. Not only did wells farg that wed its employees failed the customers some of whom are my constituents in missouris second Congressional District but the regulators failed as well. They neither identified were prevented this malpractice from occurring in the first place. It was the Obama Administrations occ and cfp that first uncovered this problem, but it was not i should say the Previous Administration that first uncovereat first unc, it was the la times, the media that first broke your companys practices to light. Your predecessors appear before this committee and the short members of wells fargo was on track to complying with financial regulators can send orders. Evidence outlined in the third report produced byac committees republicans providing wells fargo says otherwise. Your predecessor was overly optimistic about the Bank Progress towards complying with cfp b. And occ cande send orders and the Federal Reserve board cap. Public statements th assured the think progress to achieve compliance did not match up with what was taking place behind the scenes. I am cautiously optimistic that you are the right man to bring the bank into compliance and to bring these scandals to rest. What makes you different from your predecessors to adequately address and resolve these deepseated issues in wells fargo . Thank you, congresswoman. Ive been lucky enough to have a series of experiences in companies that have been both wellrun and troubled into coming out of those experiences i believe there is a series of things that can be very applicable here. Things ive done since ive come to wells fargo i think our in stark contrast to how weve approached some of these in the past. I think if you are inside the company you feel we are approaching this veryy differently. These very differently. Ive been open and honeste abot our lack of progress not positives bothe being realistic and focusing on the negatives because that is where we can have an impact. The sense of urgency people are working within the company is different today than it was four months ago. I am personally spending the majority of my time on these issues easily 75 to 80 of my time not focused on growth, new businesses or anything like that. What other changes are going to implement to the fragmented structure that proved to be one of the root causes of the ongoing compliance challenges. Can we expect to see additional changes to address these, some specifics please. We will have a stronger centralized core and 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 standardsat ad policies. Everyone understands that and we will have people in place that believes that is the best way to run the company. They found wells fargo requested extensions to deadlines for remediation and reform plans. Regulators typically granted tht requests but the bank plans remain insufficient even with the extra time. What steps are you taking to a sure wells fargo can submit these plans on time without deadline extensions and are you still using these consultative contractors to draft plans to the cfp b. And occ under the Consent Order is . In addition to the things i just mentioned, we are putting a substantially Different Group of people in charge of these issues. I personally am getting deeply involveds in all of this. Its 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 piece by piece and managing in a very different way and a tight way just like you would manage any significant project in an institution like wells fargo. I will yield back. Thank you. The gentleman from new york is recognized for five minutes. Thank you madam chair. I dont like being misled or lied to. Last year i asked your predecessor about the status of wells fargo compliance and he responded to me by stating wells fargo had made oversight improvements required by the fed and 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 2018 Consent Order . Congresswoman, i cant give you an answer to the sitting here today. Ultimately, when they believe they are in compliance is whats important and not findd we believe we are. Whabut i can point you his we he an enormous amount of resources working on this, as am i. According to correspondence, do they plan to address governance and Risk Management by april, 2022 you still expect to resubmit the plans by april, 2020 . We are focused on doing the work necessary if we feel it is in the condition that they would expect. So the question answer is no. There were two plans that have been rejected by the fed and had been granted with numerous extensions. Why will they not make this deadline . Do you think that we have the right tou know . Congresswoman thi this is your deadline by thee way, sir. I understand why you feel the way you do but what i can tell you is what ive discovered bunce ive gotten to the company. To make sure we are doing all of the work necessary and being as honest as we can about what we can get done an done in with pef time. You are the ceo to come for this committee. Wells fargos failure to comply with the 2018 Consent Order from the culture instead of Risk Management in as the new ceo its both in our words and actions. I said publicly including on the First Investor call this work will come ahead of Everything Else had the Financial Results it that is exactly what this committee expects from you. You said and to set the deadline april 2020. Thats the type of action that we need. A lot of consumers who use a were misled and charged excessive fees for things they didnt sign up for. I agree we should be concerned about the virus. 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 didnt sign up for. And you are the third ceo. So my question is if there is anything else that might be coming to light in terms of wrongdoing, not that im aware of and i share the concerns you have and i agree that weve got to do far better than weve done. I yield back. Thank you for holding this hearing in fulfilling the responsibility of oversight. I yield back. Thank you. 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. And the questions that will come back to you time and time. The gentleman from kentucky is recognized for five minutes. Over here. Welcome back to the committee. You are new to wells fargo but not to the job of running a global systemic important thing. You recently left the position of chief executive officer of another global syste systemic important bank. Given your past experience running apo large and sophisticated globala institution, do you believe that wells fargo is too big to manage as some of my colleagues are suggesting . No i dont, congressman. What do you believe contributeds more to wells fargos past failures . Do you believe it was more of the culture and Management Structure that was in place in the past or do you believe that it was the size of the institution . Because my friend from new york brought it up, i have to ask do you believe that wells fargos policy on financing firearms had anything to do whatsoever on the aggressive sales practices and opening of unauthorized accounts . Not at all to my knowledge. I will say as an editorial comment i believe if your bankdg allows politics to impact lending decisions it runs the risk of only distracting your bank from actually doing the things you need to do. Will thwhile the gentleman s no i will not, to take on the task at hand which is to refom the culture at the bank and to reform the Management Structure that youve identified as the problem. So please, i urge you to resist ble temptation to politicize funding and focus on the actual issues at the institution. Let me ask you in the past wells fargo maintained a model in which Core Functions such as Risk Management word decentralized in the minds with little disability from work accountability to a Wells Fargo Company leadership. This was a teen management breakdown identified in the republican report published last week. I understand the company moved to build an Enterprise Program like many of your peers. I think youve identified this as a organizational structure is that correct . How will this correct the mistakes of the past . Theres no question that we need an independent control infrastructure that is not accountable to any individual line of business. With the independent control infrastructure at the same table left something to be desired and is related as insufficient. I think you testified that they would agree to that. Further, the teams managing the Consent Order deliverables were frequently shifted around the chart in wells fargo and subordinated within th the teams suggesting a low relative importance in the overall border. You committed to maintaining a more handson oversight of the process and working with regulators to ensure sufficient and timely compliance with directors. I think that your testimony was youre going to take this as an teurgent asis with your word. Would you please describe the changes you made to the teams managing wells fargos response to these serious Consent Order is . The centralized management. They have extensive experience in this prior role dealing with similar issues. Under him we have an organization that is organized around the work thats got to get done of the Consent Orders. Its different than what weve hadth in the past. My time is almost expired. I agree when you say the country and the communities would benefit from a strong wells fargo. I wish you all the best as they make these very important changes to correct the failures in the past and with that i would yield back. The gentleman from california, mr. Sherman and also the Investor Protection entrepreneurship and Capital Markets is now recognized for five minutes. The Ranking Member of attacks the work of the committee while at the same time saying its great that these two directors are forced to reassign because of the highly embarrassing disclosures. These highly embarrassing disclosures, madam chair, to date arise out of thin air, were they presented to us by a demagogue . No. These disclosures arose because of the work of the chair, Maxine Waters, the chair of the subcommittee al green and the democratic staff. Had we continued east hear no evil, see no evil approaches that the committee had in the prior congress, these embarrassing disclosures would never have come out and these Board Members would still be on the board. Regardless of the we cannot allow the outrage of the past to blind us to the crisis inr the present. Thwe have a coronavirus, people are afraid. The Economic System could get better or could get worse. Not only do we have a coronavirus but a sudden decline in oil prices that are shaking up the markets and the fact that we have two problems doesnt immunize us from a third or fourth thing happening in fact your bank has done stress tests to look at other things that could hit the economy. Youve got a plan put in place six months, seven months ago to send 31. 4 billion out of your capital into your shareholders. You dont know, i dont know what this virus is going to do to the World Economy. You may notot be too big to manage, you may be that you are certainly too bigon to fail. Do you connect to the committee that h they will suspend divides aand stock buybacks until we kw what this virus is going to do to the World Economy and to the solvency of your bank . We do a stress test as you are aware which is all of the banks i am aware of that, but that was for some other stress happening which could have been and you have two stresses already. So, youve done aas stress test but not with the other calamity that occurs in the middle of a coronavirus that is affecting the entire world, so your stress test, we already have thi alreas hostresswhat youve done a doubs test. You are too bigg to fail. Youve injured the economy by the practices that we are here to discuss in this committee. You want to do something good for the country and commit to ending stock buybacks and dividends until we know what the virus is going to do to your bank solvency. We are committed to yes or no. I have limited time. Yes or no. We are going to do what we think is prudent with our regulators. In other words, you are having dealt with 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. Chair maloney has her overdraft protection act which wouldld protect consumers. You have substantial lobbying power, brilliant lobbyists. Paper presented you. Will you commit that they will be lobbying starting tomorrow for the overdraft protection act . Do you want to be on the right side off history . And this is not a trick question. I asked your predecessors predecessort almost a year ago today and we told people this was coming. We announced two new accounts recently. One that has no overdraft protection. I didnt ask that. You are repeating exactly what youre reassign to predecessor said. Will you commit to the lobbying power off your bank to work for the overdraft protection act, yes or no . I will commit that we will support th the accounts that we justor announced. We were able to settle. What about those that are still pending quick. For arbitration. They give madam chair. With regards to the interim report republicans put together to go back and forth on this. What we have done since 2016 retained by republicans as a result the Obama Administration would not turn them over. The trump is one Trump Administration with other regulators so one of the things that concerns me is if i am a regulator the first of three more meetings but yet weve not had a single report a single hearing on the regulators asleep at the switch on the whole episode that is as december 2013 l. A. Times reported that they failed to meet their quotas and the Supervisory Staff and yet wells fargo had to notify the attorney will file a civil suit and this was may 4th and then six months after the fact they come rolling in on the right horse to save the day and to be asleep at the wheel again because this is a situationn when the new predecessor i asked the question from the regulator so how many regulators are in your bank today . You know how many times what youre being fulltime today . No we do not but it is significant. Would you say more than that or less than i that . I would guess more. It is very frustrating that the cpb has regulators sitting in the facilities while this practice is going on and was told about it by the New York Times when they broke the story and because of that the situation continued to grow and are trying toto find a way to stop this so one of the other questions i asked of your predecessor because at that time there was a situation according to our reports to verify there was 1000 people here roughly over five years that were fired for their actions and their involvement in the situation. I asked at the time if i recall and said what is wrong with your culture . And the culture is affixed how will you fix it . So finally we have a new individual take over. So my question is how do you change the culture that your predecessors never addressed quite frankly. How do you see yourself Going Forward with your teams of people . Certainly we have to be clear on the series of things come together and we as a senior Leadership Team to make sure we are not behaving that way changing compensation, the way we evaluate people the things that we look at to include risk and Customer Experience as part of that evaluation anytime we see harm we have to deal with it as quickly as we can if theres wrongdoing dont just look at the individual and say they did something wrong but asked the question do we have something in our structure that is wrong. All those thingsgs come together with accountability to be the most important. Just to follow up that my colleague talked about to allow the government to come in and change your Business Model im very concerned about the attempts especially in the other side of the aisle to intimidate you and your board to change your Business Model to not doing business with certain industries. To me this is something you as a board and as a leader done allowed socialization of the government i yield back the balance of my time. It is not intimidation it is called standing up. I would be happy to discuss this with you but if you want to deny that you can but that is not true. That is disrespectful. The gentle man from new york also the chair for the subcommittee on Consumer Protection Financial Institutions recognized for five minutes. Think about of chair. Thank you to the chairwoman and Maxine Waters and the chair of the Oversight Committee to do the work and the research that avails a continuing pattern that has taken place at wells fargo over this period of time. Ands i think that this is something that should be an opportunity because if you look at the investigatory work that took place in the did the most of it or all of it before your four months, that should give you further ideas of what needs to be donest to fix wells fargo to move forward so i think that would be an opportunity for you to look at that and take it very seriously. For me, coming in anybody on the border had anything to do with the way that you for sure you want to clean things up as you clean everybody out because everybody there that was part of the decisionmaking process while these procedures were going on do not have clean hands. They have dirty hands. So the only way you fix the organization in that regard as far as i am concerned is to clean out now with full disclosure i have had the ability to work with you in your previous capacity at the bank of melon bank of new york mellon frankly i know why you took this job because anybody that is they are will be held accountable to look and see what you will do for the horrendous i have taken others to task in a very strict way and i do intend whether they have resigned or not these board of directors that were there and part of the policies i will take them to task tomorrow. But i do thank you should take this report very seriously and to heart to make the changes necessary. Now i have been talking to about some issues that have been very important to me and the subcommittee of which i sit on two of them one has a series of hearings because in my estimation they come into the communities where the big bank should not be because they dont want to be there but as far as giving out mortgages to make sure they are able to provideca services to communities where banking deserts are appearing so these Community Banks where they are underserved get capital from some of the big bang so we have had that discussion you told me you would go discuss it and come back so my first question to you is have you had that discussioni and what if anything is wells fargo looking to do because i want big banks to ask and figure out how we can put capital into some of these big banks. Congressman we will do something about it we agree with the importance of those institutions a big reach neighborhood that we cannot necessarily reach. We have been focused historically on connections and expertise but its more about capital as we have learned. We will can one invest 50 million in two these institutions directly as either tier one or total regulatory capital so the position where they are still minority but provide that opportunity. I dont want to cut you off but i have low time but i want to go through that with you because we want the big banks just to give money to the small but Major Investments also this year a modernization to discount 75 percent for those Mortgage Loans that are sold off to me that will stop people from giving out mortgages but i would like to get an answer from you in writing later if you think that is the appropriate thing the comptroller is looking to do modernization. Thank you. The gentleman from michigan is recognized for five minutes. Thank you madam chair. Let me start out with a tone of unity and i will agree with my colleague from new york when he said im 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, we know to remain competitive on the world stage needs to have Financial Institutions that can handle these largeta international and National Accounts but there are problems. Ii am interested in what changes of the Consent Order that you have made and it is my understanding none of the Consent Orders have received a non objection. They have objected to each Consent Order. Even those issue 2016. So how do you deal with that now and maybe an update. We have changed the entire management approach to the Consent Order. First of all i am deeply involvedre in all control related work with all Consent Orders the newy coo for d issues like this another bank going through a series of issues is on board and those responsibilities that directly under him. He spending 90 percent of his time on thesese 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 country to ensure the work is getting done appropriately. Can you talk about those barriers. And what the regulators may not have identified. The Biggest Issue for us is to make sure everyone across the Company Including those on the front line understand that Risk Management especially operational Risk Management is everyones job and we need to educate them on what that means and how that fits into aae single structure. Has that been the barrieruc for you to receive those not objections from the regulators . Based upon the actions i have taken there is a different sense of urgency with a different sense of focus different review process in place so tof fundamentally manage these differently it is clear they are the priorities above all else. And you are working with the regulators to get those inn orders. We have talked to the regulators. Yes. You touched on everybody on thee frontlines needs to know the new culture. Can you describe how the employees are incentivize do you still use sales goals . We have changed all of the practices that include to the sales goals behavior that led to the behavior. Today they are paid based on a series of criteria none of which are sales goals just Customer Experience. Balances in the overall account and things like that. How do you measure Customer Satisfaction . Historically we had used a third party like Mystery Shopping and do feedback Going Forward we will do direct surveys of our own clients. Could you talk about thehe board makeup that was a question for my colleague from new york word is cleaning house on your board look like so far quick. I dont have the numbers in front of me but i believe 70 percent of the board is new since 2017. I heard 14 out of 16 but i thought i could confirm that and that would be helpful. I see behind you taking notes. That is good can you describe what cultural changes need to fundamentally happen . Absolutely. What fundamental cultural changes are necessary and then we can followis up in writing unless the chair will give you 30 seconds. Your time has expired. Now the chairman for the subcommittee on housing you are recognized for five minutes. Thankth you madam chair and also for yourop testimony today mr. Scharf. Recently the Protection Center of the organization founded by former cfpb ombudsman said released ast report card that found borrowers taking out Student Loans to attend Community College may pay more than similarly situated borrowers to attend a fouryear institution. To apply these products with wells fargo and found out wells wouldli charge a student the 10000dollar loan to attend a Community College 1100 more than a similarly situated borrower seeking a fouryear college. Do you think that is fair . There is no room for discrimination in any lendingco practice. Do you intend on changing the culture . I will go back and look at the specifics. I am not aware of it if we have done something wrong we will make it right and nothing like this happens Going Forward. S also under your consent decrees, you have the policy people that would otherwise qualify for prime mortgages that are in subprime mortgages and those under the Consent Orders are you aware of that. No i am not. But we will certainly go back and look at it. Had you make those people whole that applied through your bank . What do we do to correct that . If we have done something wrong then it is our obligation to do remediation and specifically that something i have to look at to see what the right thing to doli is. Word you assist or help those borrowers by reimbursing them add a more reasonable Interest Rate . Of course we would look at all circumstances around it to see the right thing to do for those customers. Your customers as well as most of us on the committee is looking for fairness for the people that come to your bank looking for help. I completely agree if we have harmed people are not treated them properly we should take the appropriate remediation. Getting into another area, do you know wells fargo old lending volume in the state of missouri or Southern Illinois regions that i represent . Do you know the volume for minority and william one womanowned businesses . Im sorry i do not. Could you get me that information and share with the committee . We will certainly go back. What incentive programs are in place for wells fargo employees in retail and Private Banking and are the programs link to payiv for bonuses . And im talking about an incident that i recently read about in your bank. Im sorry i understand the question. The typical Retail Branch employee tends to be on the lower end of the pay scale. Compared to your Investment Banking but you do incentivize. Yes. We have changed the Compensation Plan for our bankers they are no longer paid on sales goals but Customer Experience along with other factors that i do not recall right now but its not related to sales goals. How do we better address the culture of the bank that e u treat all customers with respec respect . We are moving the Customer Experience method of rewarding people based on what Customer Feedback is. The gentleman from colorado was recognized for fivedb minutes. Thank you for taking the time to be here. This followup in terms of the sales goals and from those initiatives to put in place , can you expand on that so we can understand how Customer Experience will be rewarded . We change the entire Compensation Plan but beyond that we change Management Structure and reporting so anything related to those sales goals driving that behavior the managementt process is no longer there. The people who work in our branches regardless of level have a series of things they use to judge their performance but if you ask them interbranch they will say it is customerpe experience today those mystery shops thatth take place will move toward direct Customer Feedback which is a part of that because we do believe the customers are happy inside then if theyre not happy its bad for us. Are you confident to have a reporting structures to the chain of command to make sure that will be implemented properly . Of yes i am. During your first term you mentioned how the company would be run could you outline what that would look like and how thats different . Yes. We have an operating Committee Meeting regularly every single week for two hours we meet once a month everyone is expected to talk about what is going on in their businesses and how they are doing with the control issues we are aware of or anything new we should be aware of. The cfo and i hold mentally business reviews that were not held in the past where we meet with every business along with the senior folks and review the risk controls including the diversity component. Added to that is the budget process which is far more robust that were made in the individual businesses we have a lot of conversation with urban impact. Could you highlight the importance that wells fargo has a number of branches. Does play and Important Role with Credit Access to Small Business . Its extremely important but when we think about wells has done well and not done wel well, helping underserved communities. So the branches that we have in the communities where we have been have been fit one have been very important and will be Going Forward. And with regards to the coronavirus and other challenges that may caught up terms on whether or not you feel you are well capitalized taking that into consideration. The point that i would make looking at the stress test it takes unemployment 10 percent gdp going down 8 percent so as part of that process we have to be able to continue to maintain the ratio required and then as the institution which lead us to make decisions and then to be wellcapitalized. You are recognize. Thank you chair lady. Our Banking System is the heart and soul of our financial system. In this hearing this morning atof its core is about consumer trustor wells fargo consumers and when i want to ask you is can the consumers can those in the Country Trust wells fargo now . They can trust wells fargo to do the right thing. Yes. So to have Consent Orders from the office of the comptroller currency and those Consent Orders cfpb. And with the Federal Reserve. And to my information am i correct . You are correct. Can you explain why you have not responded . Congressman i joined the company four months ago im not in a position to explain what was done right and wrong because i was not there. But the changes that we are making are different and existed prior to my i arrival. I will tell you that this is important for you to really understand you have a myriad of customers out there one of which is me. I am a customer of your bank. You have been the leader helping to get the hardest hit funding to help folks out there we said we want to do good. But just to throw these up to the banks and not do this with the struggling homeowners. To come up with two two. 8 billion and this is thee hardest hit. Of my issue with you is in a new position. Not once you get in a bad situation you have to know how you got into the bad situation the first place. And it is unacceptable. That would be a good idea with the chief accountability officer. With the chief accountability officer for the Branch Banking business. So why is it you cannot assign him . With the banking regulators that we mentioned at the very beginning and after this hearing . All of the energy against responding to them. Coming here before this committee before the answer was i dont know i called on him to be resign immediately with lack of knowledge this is a slap in the face to all members of the committee but most importantly because of his gross mismanagement so the answers were simply unacceptable. But then the tim sloan the next ceo came before us optimistic he could fix the root cause of the issues and then to make sure there was great progress to make sure they would never be able to go unnoticed again it might be even more offensive than theon predecessor. Oui dont know since he was not taking the transgression seriously when damage was done to customers. And for those that is surrendering the bank over the past few years. Is not an easyu in process. So how the Management Structure has worked and then to go into detail about some changes. So what we had in the past was a federated model so those discussions how so things today are very different Business Leadersth in charge to report directly to me to question with the independent infrastructure and that level of responsibility of accountability that they have. So not as well run those who implemented this everybody understands why it is better to say that wells fargo is too big to manage it should be broken up and then to successfully with the appropriate Risk Management in place. I asked the same question to mr. Sloan and im curious to get your perspective. Before thean president obama with the New York Times was interviewed trying to remind myself that the economy is not something to put back together again without consequences. That is what president obama said. And to break up the biggest banks is unrealistic . I believe the country benefits from the large banks and that they can and should be run properly. Im a main street guy a car dealer in texas i have run this business 50 your on 50 years i know how important it is to expand operations how important risk and reward is. You a capitalist or socialist . I am a capitalist. Thank you. Wells fargo is one of the largest Small Business lenders in the country so what ensures that your people are not treated to the zip use of goals for incentive programs . Our Small Business franchise has the same as other franchises Risk Management is far more robust than it was and we have the independent risk function that is separate for the independent reporting line. Thank you and i yield back. Results for the chair. Fi for the persons that have worked so hard to pull this together we literally had to fight with those records they have received. It was not easy and republicans played no role in those records. They are playing catchup and not doing a very good job. Mr. Ten, we cannot allow the punishment of this level of fraud to simply become a cost of doing business. Nobody has gone to jail. It is true the ceos that have been too big to jail. We must do more than simply pay the government to find those of the frontline workers though paycheck to paycheck and 150 billion per year and in 2018 a bank ceo made 776 times the salary of a minimum age worker. The ceo made 24. 2 million dollars. You shall not mention his name but i will if i have to. But out of that adversity there is opportunity. To have an opportunity to help us but to change the culture across banking. All workers and banks should have a living wage. Not these nondisclosure agreements we had stronger whistleblower protections i do believe somebody wouldve weorded the circumstancee need to improve your standing banks are going out of business. You are in a position to change the course of destiny. For those in banks or women and people of color of color are the lowest paid odisproportionately in the highestpaid are white men. They are doing well. People of color and women are not doing as well. These are the kinds of issues that we refused to confront because there is a danger associated with it. A culture that has developed and will silence you and speak with a very loud voice and are not a part of those transgressions that took place with that solution not only to change the culture but across banking. And to have something that is posted in clear and concise. And to only mean anything left in this institution. Here are your rights to report without fear to somehow be punished so i ask that we meet again will you assure that you will meet with met again . Will you work on the scale of workers . I will absently work on the bill ofll rights. Thank you. So discussing your short time and then to be focused upon the customers. And then that the republicans take an evil stance and the republicans in 2016 on this committee and to have several hundreds of thousands of documents and those that were issued and the thousands more the Trump Administration has released voluntarily in the last year this isnt something asnew that has popped out of the woodwork but has been going on and it has been frustrating. I have been frustrated and concerned specifically over the lack of progress especially when it comes to the Consent Orders. And i encouraged as they have indicated that the bank has made progress. With this large of a committee your short tenure Everybody Knows the past. You will get the same questions repeated over and over so everybody can get eveir soundbite. But to hone in on the detail details, can you briefly describe and from that management perspective to come into compliance with the 14 outstanding Consent Orders and specifically the issues with risk of compliance how we run the risk to the role what everyone has to do with their level of d responsibility and ththat review work independent that Risk Management function of that that plays an extremely Important Role to have a third independent look. Those levels of independence are important but the robust of what we have in place not just the people that exist but the process and the documents to create very different controlled environment that existed historically at wells. You stated this before but as my colleagues stated also a wells fargo customer, under your Leadership Meeting regulators expectations and requirements as long as the needs of the customers and what i explained to people we are not doing this is because the regulators wanted but its a right way to run a company. We believe its right. When we run the company that way the regulators will be fine with that. My final question based onny netime, talk about restructuring. How did that and how does that resolve it . The Business Leaders have their own staff functions and risk functions. With those consistent set of policies application policies. This is what we have today and that overrules the individuals. Also the chair for the subcommittee. Two Board Members resigned in the predecessors and less than six months on the job so why in the world would you take this job . I appreciate the question to the third person glad to answer. I genuinely believe wells fargo is an Important Institution for this country i really do just because a company has not been well run does not mean it cant be well run i talk to customers of all sizes to middlemarket companies and look at the communities and talking to her own people i was in the branch yesterday why do you come to work every day i swear to god she said because i love this company i love the opportunities they have given me. Clearly that was not the entire culture of wells fargo but in the context of was doing for the employees, i believe if we have the opportunity to benefit more than if we didnt do it well. And now the extremely difficult part and i have a minority report from senator Sherrod Brown the like to add to the record. Without objection. Here is what is troublesome its about one of the blog post of one of the employees with the hate crimes hoaxes or three times as prevalent as the actual hatee crime i hate that i even dignify their existence with a statistic to recognizee them and then say fine lets say that they called him the and word does that make him racist or just holes looking for a way to get under his skin. This was from an appointed position at the cfpb which for somebody like me with my skin color that is insulting and also disheartening. Because there is a report that suggest so first of all is there a back channel . As is the first time you heard about this . The communication . I read the report all conversations with the cfpb to my knowledge or open and on the record that everyone is supposed to be aware of. Thats answer im looking fo t for. The person who made the statements is no longer there. But i am very much concerned. And the members when the cfpb was created that was great painstaking to go all the way down to keeping congress from getting involved in the funding of that department. And for those at the cfpb and those making decisions i yield back. Thank you to the chairwoman. It has been a long tradition for the ceo to spend his time on the Nations Capital and to spend a lot of energy that we have no business running but wells fargo proves with all sorts of regulations layer upon layer of redundancy that we just need more regulations and in spite of all of those regulations in. Franks and the federal regulators and all kinds of laws to make it illegal wells fargos alemployees did these bad things happened anyway human beings and all sorts of other companies to believe these things are happening there so what makes wells fargo so special so why could all of this happened at wells fargo . Your point is very fair we did not have appropriate controls in place in the appropriate culture. So just those other controls that other places have . What drove these people to do it . Was that passive for the affirmative push to do bad things . I think the control should have caught it after the fact be at the initial problem was the structure of the company was decentralized, the culture promoted these activities. And the culture was not one of accountability. So there is no culpability financially. How many fines in total has wells fargo paid as a consequence . I dont have that number right here. Is that a couple hundred like a speeding ticket like a. It is billions. Billions of dollars. It is fair to say if these culpabilitys result in billions of dollars in fines , did some people lose their jobs . Yes. Many people have lost their job jobs. Ceo. You are the third. Board members, bank managers, managers of departments, people who were supposed to manage risk, a lot of people been held accountable losing their job. Erd have they gone to jail . Not that i am aware of. Does this rise to the level of a crime . Congressman when we settle with the department of justice we stated a series of facts that individuals at the bank committed crimes. So its up to the department of justice to follow through and hold someone accountable. I think it is up to the department of justice what tmey determine is right and appropriate. All of america is looking for the department of justice and not just in the bank we are all wondering whether someone going to jail . There has been all sorts of abuse of trust in our p p county and frankly the government has violated a lot of it themselves. Wells fargo taking actions that are encouragingan and looking around by reputation to say yes the potential to change a very large organization. So to create the sales practice oversight management function. Can you envision what policies to put in place that they are accountable for their actions . Yes. Since the practice scandal looking at different sales practices to make sure we dont have the behavior that existed prior. One of the things we want to or thatGoing Forward to continued so to centralize that responsibility in one place under the chiefve operating officer to monitor what is necessary on a consistent basis to ensure even though something might not exist today weit dont find out it exist in the future. Thank you i yield. The committee stands and recess for five minutes. [inaudible conversations]