Transcripts For CSPAN3 Wells Fargo CEO Testifies Before House Financial Services 20240713

noise the committee will come to order. Without objection, the chair is authorized to declare recess of the committee at any time. This hearing is entitled Holding Wells Fargo Accountable and ceo perspectives for the bank that broke americas trust. I now recognize myself for five minutes with an Opening Statement. Today, wells far go ceo, charles scharf, will testify before the committee about how he plans to end wells fargo egregious battle of abuse. Hes the third wells fargo ceo to testify before this committee and less than three and a half years. I will note that each time wells fargo ceo testified before this committee, he has resigned soon thereafter. Mr. Charles scharf, you have taken on a massive challenge and while i certainly wish you luck, it is clear to this committee that the bank you inherited is essentially a flawless organization that has caused widespread harm to millions of consumers around the nation. Wells fargo has opened 3. 5 million fraudulent accounts with their customers names which caused consumers over 6 Million Dollars. Charged to consumers for insurance policies that they did not need. Resulting in some consumers losing their automobiles. Engaged in a legal Student Loans servicing practices and charts consumers inappropriate Overdraft Fees and overcharge veterans for refinanced loans and fraudulently sold con plexus Financial Products to Retail Investors last week and a committee released majority staff report for wells fargo compliance with five considered by regulatory agencies and the response to the companies widespread consumer abuses and compliance breakdowns. Among the disturbing finds thats uncovered, the office of the controller of the currency is aware of dozens of cases that wells fargo with the number of consumers or customer accounts required through mediation or through the consumer abuse exceeds 50,000 or the amount of harm exceeds 10 million. Im very concerned the banks pattern of harming its consumers appears to possess the majority staff report and also uncovered notes from may 2019 Federal Reserve meeting with wells fargo reflecting that the wells fargo executive stated, quote, if he was ceo, he would not allow the addition of any new customers to the Company Since the firm is operating in this environment unquote. Based on the findings of the majority staff report, i agree with the sentiment that wells fargo isnt ready to be Americas Bank again. This is the challenge before you Mister Scharf. We must not only rebuild this institution you must rebuild americas trust. That begins with your testimony today. When your predecessor press sets predecessor testified in misleading testimony. I urge you not to follow this example. To be transparent and honest, this is first of several to commit its convenience to hold wells fargo accountable. Its part of this oversight will be looking at legislation to do just that. The Federal Reserves cap is a good start and doesnt seem to change the banks behavior. We will discuss a number of bills that will compel further action and rain in the piece of banks like wells fargo to hold them including their management accountable to their actions. Thank you in the show chair now recognizes the Ranking Member the gentleman from North Carolina mr. Mac henry. My colleagues on the other side of the aisle were talking about wells fargo long ago. In fact, before we received a single document of the then now chair of the committee in 2016 that she had quote come to the conclusion that wells fargo should be broken up, its too big to manage, and quote. Again, that was before the committee receive a single document or even a shred of evidence into the investigation of wells fargos sales practice. After reviewing half 1 million documents, but with both the democrats and republicans on this committee that has access to and hundreds of pages of witness testimony, we know breaking up the bank is not the answer. Wells fargo isnt too big to manage, the findings of these documents will show that it is mostly mismatched. The evidence shows that the core of the companys problems at its core braided structure. The Leadership Team that couldnt 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 fargos large bank fears. We will spend all day in this hearing of the wells fargo new ceo that has been on the drop for six months and has no connection to whats in question. Well have to other Board Members of the sole purpose of embarrassing their documents that are deeply embarrassing to those Board Members of wells fargo and that is true. Chairwoman call on them to resign and they did and the markets were calling on them to resign and the system works. Im not sure what we hope to accomplish tomorrow with witnesses who are low longer in position to fix this moving forward. We dont have the luxury of three politically motivated, ideological ways on wells fargo right now. Serious things happening in the world where were having this hearing. Investors fear of the spread of coronavirus has had widespread consequences for Financial Services industry, the economy in the markets. Our constituents have real concerns and expect us to put aside politics, focus on the urgent matter at hand. We will spend the day asking mr. Scharf over and over again how he wants to fix the bank. Mr. Scharf and his plan launched a plan that looks good on paper. We hold him accountable for executing that plan. In fact, his stockholders will hold him accountable for that plan. The regulators, the justice will hold him accountable for executing that plan. In fact, the regulars of the Justice Department of an extremely aggressive on wells fargo. They continue to hear from them on whether or not mr. Scharf plans and we expect them to stay engaged. I look forward to this hearing today, scharf and hopefully our members will know what youre doing to prepare for your massive footprint to protect their safety. How you will protect the safety and status of your institution given whats happening in the marketplace and the fears we have in the reaction and the impact that my consumers, my constituents will have with changes in credit card, mortgages and other things. With that, madam chair id like to introduce for documents into the record and these are to allow supervisory information and these are issued by the ccf pd and Federal Reserve and important notes about these waivers theyre not to discuss csis. They were asked not to discuss these ratings and risk assessments in are not to name Supervisory Staff to either answer our questions and with that mr. Scharf i appreciate you and your company requesting us to be more forthright and with that i will ask consent to have the march six letter from the cfc be in the aoc sea and to march six letter from the Federal Reserve detailing what im outlining. Thank you very much and id like without objection. The documents are accepted. Id like to know, you have permission to disclose the names. I understand the agency asked us not to do that. Well, i was not asked by the agency to not do that and therefore i just said it in public what they outlined. These are letters to you and mr. Green. I am see seat on these things to have that request and i would have liked to have heard it before you announcing it here today and on this committee. That is what i understand. Weve already heard five hours of testimony from the ceo when i held for wells far so id like to set that to the record and your information is put into the record. The chair now recognizes the chairman of the subcommittee on oversight and investigations mr. Green. Thank you madam chair. My constituents would like to know, how is it that wells fargo and their three billion dollar fine can commit fraud, open accounts without knowledge of customers and not one person goes to jail. Of all of the top banks and too big to fail banks it has never been a ceo, a top officer of any of these two big to fail banks to go to jail. It seems like theyre not only too big to fail, theyre 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 this to atone for its transgression. Its more than it has to do to 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 as 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 now recognizes the subcommittee Ranking Member mr. Barr for one minute. Thank you chairwoman waters and mr. Scharf, welcome back to the committee for your appearance and your current role. Its plaguing wells far go and addressing the problems in the aftermath and a breach of public trust and Consumer Protection we are not here to relitigate which they come committed in previous reports. Were looking to understand what the new management as done and how theyre compliant with regulators and directives to plant to ensure this doesnt happen again. Wells fargo interval inventive individualized and this conduct has been applied to all banks and much of which you hear from my colleagues today. Lately, all banks as the villains of capitalism make it easier for some on the far left to justify their quest to impose socialism on our free market economy and politicized access to capital. Were here to focus on only one isolated bank in its path to rebuild trust and mr. Scharf, i look forward to the work that you have done at the bank and to work with you to ensure wells fargo upholds in its promises. I yield back. I want to welcome to the committee charles swath. The officer of the welsh pharco company, scharf he is held this position at wells fargo since october 2019 and previously, from scharf he served at the senior official with the number of Financial Institutions including the chief executive officer of the Visa Incorporated and as chief executive officer and chairman of the board of the bank of new york mellon and without objection your written statement will be made part of the record but before we begin id like to share the witness 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 matter is now under consideration will be the truth, the whole truth and nothing but the truth so help you god. I do. Thank you. Let the record show that the witness answered in the affirmative and take your seat mr. Scharf you will have five minutes to use your testimony and with an one minute though yellow light will appear and will ask you to wrap up your testimony. So we can be respectful of the Committee Members and mr. Scharf you are now recognized to represent your oral testimony. Chairman waters, Ranking Member mchenry, good morning. Thank you very much for the opportunity to be here today. Im joined wells fargo just over four months ago after serving a ceo of the and why mellon and visa. In its early days i welcome the opportunity to discuss the next steps for wells fargo the. Members of these committees are welcoming with wells fargos history. The settlement with the doj and sec is the administrative taken by the oh sea against former employees. These matters described deeply disturbing conduct as utterly unacceptable and has no place in our company. In addition, recently released reports from this committee reinforces what ive said since i arrived. We have not done whats necessary to address our shortcomings. Simply said, we had a flawed Business Model and now the company is matched. Our structure and culture are problematic and the companys leadership failed the stakeholders. Today, id like to talk to you about our plan to show up a better course. I took this jobs i believe our country and communities benefit from a strong wells fargo. Im confident we can do whats necessary to significantly improve in this direction. It will take time, the transformation has begun. I realized the path forward will be difficult. I realize the path forward will be difficult and optimistic about our future. Heres some important steps we have taken so far. First, i provide an honest assessment to go 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 technical problem part of our culture especially if we flatter organizational structure and direct representation are ability its a clear line of sight and direct involvement which will provide Greater Transparency to how our businesses are working and what kinds of risk theyre taking on, how theyre treating customers and whether theyre operating at the highest efforts. Fifth, were introducing a new set of prophesys to thoroughly review our process and our progress against our regulatory effort. Six, we offer all evaluation and compensation practices that significantly greater accountability and continue to make tough decisions around our leaders. Seventh, redefining our culture. Especially regarding how we were together. We will have a strong, centralized and controlled infrastructure. We will ensure we have the right people in the right rules. We will move it with a sense of urgency, we will hold each other accountable for our commitments. We will judge ourselves based on our outcomes and not our words. Most importantly, the guiding principle in these decisions is that everything starts and ends with our customers. We must put them first in our decisionmaking in all we do. As we move forward, i have no preconceived notions about our banks but i firmly believe that we must be able to manage all of it. I also know that progress will take time, and ultimately our regulators will decide when we have met our obligations and my commitment to a regulators is that we will approach this with the greatest sense of urgency. To my colleagues at wells fargo, we heard more from the banks leadership and the feelings that occurred that major jobs difficult. Im committed to doing better as we seek to ensure that such things never occur again at wells fargo. To the committee, ill give you my personal assurance that we will do the work necessary to put wells fargo on a sound footing and our customers, employees, regulators, shareholders and communities. Thank you and im happy to answer your questions. 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 committees and the discovered report, there are dozens of consumer abuses that had affected 50,000 a customers or accounts into mediation. Mr. Scharf, this is one of the most troubling findings of the report because after more than three and a half years 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 site in the report . Chairwoman, i do not know the answer that question. Will any consumer that its been harmed by the bank and identify and receive payment within the next 30 days . Chairwoman, taking care of our customers is the most important thing for us. During the process of doing all of the work thats required of us to mediate everything we can and we will take longer than that. But the process has to be complete, it has to be thorough and were committed to doing it. How long will it take to for these consumers to receive payment in the reported fix . I said about 30 days and you not asked her answer that directly. How long do you think it will take . Chairwoman, as of now, our plan is to take us into 2021 to ensure that all of the payments are made appropriately. A particularly, fresh look at how we do mediation to make sure or us thorough as we possibly can and meeting everyone we should and to ask the question, the changes we can make to get this done more quickly. My concern is only deepened as i think about the millions of customers who will be looking to wells fargo to support the economic pain. Inflicted by the coronavirus. Wells fargo and its foundation have offered about 11 million to support efforts to combat the virus. Banks like yours will be asked to have payments on mortgages, credit cards. How can your customers regulate this in the public of any confidence in your institutions ability to support your customers when you have dozens of ongoing instances of consumer abuse . Chairwoman, i appreciate 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 really means for every american out there. Its how i think about it. Its starting with those that are the most affected. 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 were a source of strength and we will approach it that way. I know that you understand theyll be looking for a lot more specificity than you have just described. Now, i know that you became ceo four months ago and there are lots of changes needed at wells fargo. I think absence, significant reductions and wells fargos footprint will never be able to rein in the culture of consumer abuse. What can you tell us about reducing the footprint . Chairwoman, what i can tell you is that we have 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 for months ago as you mentioned is to ask the questions around what 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 were looking across the company id what we do. To answer the question, does everything belong under the roof of wells fargo . Given the priorities that i have, my expectation is that will take through the end of the year to accomplish that work. As you know, the asset cap, there is a cap on the assets of the bank, have youve been trying to undo that since youve been done or review left alone and do you think thats fair . I dont have any knowledge of us try to do anything other than by it. Were trying to do the work necessary that will satisfy our regulators. And its appropriate and im focused on getting the work done. Thank you and i yield back the balance of my time and Ranking Member mr. Mchenry is recognized for five minutes. Thank you for your testimony. We understand your plan as you outlined and also to Committee Members use mentioned it briefly in your Opening Statement and youre intentions to write this ship. To remedy harm as quickly as possible. To comply with regulatory orders and the failure of wills far go is not a failure of some sort of innovation and lack of adapting to the marketplace. Lack of adhering to existing laws and regulatory orders. When regulators called institution on that for those breaking orders, they refused to comply before your last ceo and your predecessor was bounced as a result of that. Both democrats and colleagues is here is the report. In this report, they outlined the consumer harmony Risk Management failures of your institution. Have you reviewed both of these reports . Yes i have. I know you may disagree with some conclusions that we have in terms of policy with the democrats side but the findings of fact you have any disagreement with the democratic report or republican report . I do not. The only thing i would add, my reaction to those reports is very similar to yours. Which is what . Which is the serious behavior described should never have happened to the company. The failures described on or a direct result of not managing the Company Properly and i do believe that is possible to manage that differently to fulfill the responsibilities we have and its clear when you read the report and i said during my Opening Statement that its consistent with what i found since i arrived at the company and not being done whats necessary. In this structure that you outlined your plan you had a wide risk control similar to your peers and is that true . Yes it is Ranking Member. Why . Because there is no way that a company with multiple businesses would ensure that is doing the right thing across the entire enterprise unless youre taking a consistent view of that. Visibility into cross the enterprise . You need greater visibility and you need a group of folks that are independent of the businesses occurring are not and making judgments. So, along those lines your experience in previous roles as ceo, youre trying to bring that expertise from Risk Management to this enterprise . Absolutely. As well as the practices of the large institutions that ive done this at. In light of what has happened in the marketplace over the last month, are these institutions well capitalized . Ranking member i think were very well capitalized. The whole Banking System is far well more capitalized in the time of financial crisis in the capital that the banks have in three trillion or so in deposits. You have the access to the liquidity to make sure these prices are as you would see . In terms of safety, your mitigating customer harm from a previous regime thats positive and in terms of 50 50 in Risk Management your cleaning up the ship. Our expectations is that we should have no problems in terms of safety, is that fair . I think its fair to say once we finish the work that ive laid out, absolutely we should feel that way. How many employees do you have that wells fargo . 265,000. How many are your customers facing . I dont know the answer to that but it has to be easily 100,000. Do you have plans to respond to the current threats because of covid19 . And what is happening across the country in your footprint of california . Absolutely. As well as Washington State and other primaries that weve seen the outbreak . Our approach over covid19 is that we should do everything 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 the we encourage folks to work from home. Yesterday, with 62,000 people locked in working from home. To the extent that there are issues in the institution will do everything we can to protect everyone else. Thank you. Let the record show that during this investigation all the information was shared with the republicans, they tried to rush the report out before we got ours out. This Ranking Member would like to have it both ways. Madam chair one of personal privilege. The majority and minority outlined in the statement does not imputing the report is the conclusions of your report, i yield back. Youre trying to have it both ways. We can have this debate in front of everyone. Yes we can and as a chair of the committee if you want to have this debate we will have this debate. The gentlewoman from new york is now recognized for five minutes. Dont take shots at me without having me respond. You have responded the gentlemans time is now recognized. I think the chair lady for yielding. Mr. Scharf, you are brought in to clean things up into a change of the culture at wells fargo. I would certainly hope you do. I would like to talk about one area where i believe you do need to change direction. When your predecessor testified i asked about wells fargos policies the gun industry and theyre absolutely egregious and your bank has been financially in gun manufacturers that are making members that are killing our children and our neighbors. Mr. Sloan said that he thinks they should quote, go above and beyond what the law inquires on guns even though, the bank states that it goes above and beyond the law in areas including human rights. He refused to revise well far goes policy in the gun industry. Many of your competitors such as city bank and bank of america already have a sensible policies to ensure responsible lending to their businesses with the gun industry. Under the policy, all of the banks Business Partners in the gun industry must require background check before they sell a firearm and prohibit selling a firearm to teenagers. These are common sense policies that will increase public safety, and save lives. I want to ask you, do you commit to changing wells fargos policy on financing the gun industry . Congressman, i want to say i share your concerns about the impact of guns. Sitting here today, i dont personally believe i know enough to make that commitment. I know its something that we need to be far more thoughtful about. I know that we have created some financing for some non partisan research. As part of that, we need to go back and make sure that were thinking about what the right thing to do is. In the series of said to the industries cannot baking this one way or the other its something i spent enough time on but i recognize your concern. Thank you and after you review this policy and major decision, you get back to the committee in writing about your decision and the reasons for making that decision respectfully. Thank you. In the Committee Staff report there was an email and i want to compliment the committee on this excellent report that has gotten a lot of positive feedback. But in it, theres this email from your officer michael lawton, where he said and i quote, the committee of the 200 million proposed customer mediation was left over. We promised to give it to charity. Only after the cfo pd and the oh sissi lets us out of the consistent order that they do not make a donation but put the onus back on them. Your chief risk officer was gone trying to play hardball of the regulators that were compensating the victims of the fake accounts, scandal and charitable donation. Mr. Scharf, they expect you to do the right thing by your customers and that your bank has defrauded and we expect you to work with your regulators to come and save them from the scandals and the misuse of their funds and other frauds. 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 concerns about how the bank mediates harm and consumers. First of all the, gentlemen you refer to is no longer the chief officer of the company and certainly when i heard those comments theyre inexcusable and not something that should ever be thought of by someone inside of the company and to your question about what were doing, first of all we put in someone of our a mediation process and that person reports to our new chief operating officer we brought in from the outside and has experience in dealing with customer mediations and the mandate that i recommend is to rethink what it is and how we do. Dont stop the work thats ongoing, but going through piece by piece and asking the question of what can we do to ensure that we are doing everything we can for all of our customers as quickly as we possibly can. Thank you. Earlier you were asking how many people you defrauded do you know at that time. The gentleladys time has expired. Miss wagner is now recognized for five minutes. I thank you madam chairwoman and thank you for joining us today and updating this committee on your progress as the ceo of wells fargo and being with someones money and wealth in 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 to improve earnings and share prices. That was categorically wrong. Not only did wells fargo fail these customers, some of whom are my constituents in the second Congressional District. Our regulators failed as well and they can either identify or prevent this malpractice from happening in the first place. It was the obama administrations oh sissi and see f pd that covered this problem and it was not the oh sissi and the cfo ppb of the Previous Administration it was in fact the l. A. Times and the media that had this Companies Practice a light. Your predecessors were appear through the committee in the members that wells fargo it was on track to comply with regulators consent and the evidence outlined in the third report regarding wells fargo says otherwise and your predecessor was overly optimistic about the banks progress towards the oh sissi and the Federal Reserve cap and the public statements ushering the banks progress that they did not matchup with what was taking place behind the scenes and i will am consciously 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 address and resolve these deep seated issues within wells fargo . Thank you congresswoman ive been lucky enough to have a series of experiences that have been both well run and troubled coming out of those experiences i believe that there are things that ive learned that could be taken here. Things that ive done that ive done coming into wells fargo its a stark contrast to how weve heard these issues in the past. If youre inside the company, you feel like youre approaching these issues differently and ive been very open and honest about our lack of progress, not pointing out the promises but also focusing in on having an impact. The sense of urgency and its very different today than it was and im spending the majority of my time on these issues and 75 to 80 of the time not focus on growth, new businesses or anything like that. Mr. Im scharf not hearing any specifics. Wells fargo fragmented structure and are part of the compliance challenges and we expect to see changes to affect major outstanding issues . We will have a much stronger centralized court in everything that relates to control. We will run the company as if its one company, with consistent set of standards and consistent set of policies. Everyone understands that and we believe its the best way to run the company. The report found that wells fargo request extensions for mediation and they typically granted those requests by the banks plans to remain insufficient even with the extra time. What steps are you taking to ensure they can submit these plans on time without deadline extension are you still using these contractors to draft plans for cfpb and occ under these orders . In the things i just mentioned, were putting a Different Group of people in charge of these issues. I am the operating committee and are getting deeply involved in all of this. It will take time because as you know there are series of orders that are outstanding and be as methodical as they can and managing it in a very different way and in a very tight way just like you would manage any Significant Institution like wells fargo. I yield back. Thank you. The gentlewoman from new york miss vazquez is recognized for five minutes. Thank you madam chair. Mr. Scharf, i dont like being misled and i dont really like being lied to and last year but about the status of wells fargo and in the 2018 consent you responded to me by stating wells fargo had made the oversight into required benefit and we now know that it 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 board. Congresswoman, i cant give you an answer to that today. Ultimately, when we believe were in compliance of whats important and not believe in wherein compliance. We have an enormous amount of resources working on this and are highly focused as a my but i cannot sit here today. Mr. Scharf including two correspondents wells fargo will meet plans to address Risk Management by april 30th 2020. Do you still expect a plan by april 2020 . Congresswoman, i cant answer that question today. Were focused on doing the work necessary as we review it and its in the condition the question is no. So, wells fargo has already submitted two plants that have been rejected by the fed and has numerous extensions. Why will they not meet this deadline . Do you think they have a right to know. This is your deadline by the way, sir. This is the wells fargo deadline. I understand why you feel the way you do but what i can tell you is what i discovered since i got to the company. My obligation is to we remove all the things necessary and be as honest as we can about what we can get done. Sir, as we have been discussing its the ceo to come before this committee and will far goes failure to comply with the feds 2018 derives from the culture in these profits instead of Risk Management and as a new ceo, how will you emphasize operational Risk Management at wells fargo . Congresswoman, i think its both of our words and our actions. I have said publicly, including on our First Investor call that this work will come ahead of Everything Else and the results may be hard. That is exactly what this committee expects from you. You said you set a deadline of april 2020. That is the type of action that we need. Our consumers that we use, of your consumers that were misled and charged excessive fees for accounts that they didnt sign up for. Yes, i agree with the Ranking Member that we should be concerned about the coronavirus and your workers. For that fact and for that matter workers across america. But you are responsible for the fact that to many consumers were overcharged for problems that they didnt sign up for. You are the third ceo so my question is is there anything else that might be coming to light in terms of wrongdoing . Congresswoman, not that im aware of. I could hear the answers that you have that we have to do far better than what weve done. Thank you for holding this hearing and for feeling our responsibility of oversight and i yield back. Thank you. Mr. For scharf, i would like you to be a specific as you can possibly be about what you are doing to correct what was done in what they are going to be repaid for it and the questions that will come back to you time and time again today. The gentleman from kentucky mr. Barr. Mr. Sharp if, right here and welcome back to the committee mr. Sharp if you are welcome to wells fargo but not new to the job in the Global Systemic Important Bank and recently left the position of chief executive are fiercer of another global systemically Important Bank and given your past experience running a large and global institution. Do you believe that wells fargo is too big to manage some of the colleagues are suggesting. No i dont congressman. What do you believe contributed whirls far go and past failures. Was it more the culture of the Management Structure that was used in place or do you believe it was the size of the institution. Theres no question in my mind that the culture and structure of the company. Because my friend from new york i have to ask that wells fargos policy on financing firearms had anything to do whatsoever on the aggressive shale sales practices and the opening of unauthorized accounts . Not at all to my knowledge. I will say as an editorial comment that if your bank allows politics to impact lending decisions it runs the risk of only distracting your bank from doing the things that they need to do to i will not. To take on the task at hand which is to reform the culture at the bank and to reform the Management Structure that you identified as the problem. Please, i urge you to resist a temptation to politicize lending and focus on the actual issues. Let me ask you, in the past wells fargo as a model in which Core Functions as Risk Management in business lines with lizzo visibility or capability to wells fargo and they identified in the republican published last week. The company has moved to build out an enterprise that your peers and they are a flatter organization. Yes. How will this flatter organizational structure and correct mistakes from the past . Congressman, its a combination of both of the things that you referred to. Theres no question that we need the independent control of infrastructure that does not accountable to any business and in the case of risk and in the board of directors. That group is independent and makes independent judgments and in combination with the Management Team or direct exposure to the issues because your people at the table talking about them. It allows us to be much more engaged with the independent control infrastructure at the same table and the ability to have this not become a problem. Wells fargo response to regulators left something to be desired and relate to complete and totally insufficient. We agree to that and further, the teams consent deliverables were shifted around the chart wells fargo and supporting the team suggesting a relative importance in the overall pecking order in a more hands oversight process and working with regulators in compliance and i think your testimony will take this as an urgent basis as your word. Would you describe the changes youre making to the Team Managing wells fargo response to these owners . We centralized the management of all of these orders under our chief operating officer who came in from the outside who has extensive experience in his prior role in the mid dealing with similar issues. Under him, we have an organization that is organized around the work thats got to get done. Centralized trucker is very different than we had in the past. I agree with you when you say our country and communities would benefit from this and i wish you all the best as you make these important changes to correct these failures from the past and i yield back. The gentleman from california is also the chair for the subcommittee and entrepreneurship in the Capital Markets is now recognized for five minutes. Ranking member and attacks the work of this committee, while at the same time saying its great that these two directors were forced to resign because they were highly embarrassing disclosures. The system does work. These highly embarrassing disclosures and did they arrive out of thin air . Were they presented to us by a god . No. These disclosures heroes because of the work of our chair, Maxine Waters and the chair of the subcommittee and the democratic staff. Had we continued the hear no evil, see no evil approach that this committee had in the prior congress these embarrassing disclosures would never have come out in these embarrassing Board Members would still be on your board. Were guard lists of the outbreak we cant allow the outrageous to blind us into the present and we have the coronavirus, people are afraid and the Economic System could get better and could get worse. Not only do we have a coronavirus we have a decline in oil prices that is shaking of the market, the fact we have two problems that doesnt unionized us from the third or fourth thing happening. Weve done a stress test to look at other things that could hit our economy. Youve got a plan in place six or seven months ago and will send 31. 4 billion dollars out of our cap to the stare holder shareholders. We dont know what the world will happen after this coronavirus. You are certainly too big to fail. Mr. Sharp will you say you will suspend stock buybacks until we know what this coronavirus is going to do the worlds economy and to the bank . Congressman, we do a stress test as you are aware. Which puts all of the banks im aware of that. But that stress test was for some other stress happening which could happen. You have to stress is already. Youve done a stress test but you havent done a stress test with the other calamity occurs in the middle of the coronavirus thats affecting the entire world. Youre stress tests we already have the stress and you havent done a double stress test. You are too big to fail, youve injured our economy by the d practices that were here to discuss with this committee. You want to do something good and commit to ending stock buybacks until we know what the coronavirus will do to your bank solvency. Yes or no . I have limited time, yes or no. We will run the bank the way we think is prudent with our regulators. In other words youre having dealt harshly with consumers and will do nothing to insulate our economy and our society from the possible. Meltdown of the thank. You ripped off consumers, they have the overdraft protection to protect consumers and we have lobbying power and brilliant lobbyists and when we have represented you, do you commit that they will be lobbying for carolyn maloneys protection act and do you want to be on the right side of history . This is not a trick question i asked this exact year ago today and we told your people this was coming. We announced two new accounts that has no overdraft protection. I didnt ask that. He repeating exactly what your resigned predecessor said. Will you commit a lobbying power of your bank to work for the overdraft protection act, yes or no . I will commit we will support the types of accounts that we Just Announced. That does not mean that you will work for legislation pending to protect consumers from unreasonable overdraft protection or the phony ordering of the checks that clear and any particular day of this consumer. Finally, will you enforce the arbitration in your contract even as to the phony accounts where the consumer never signed for that account . Congressman, we were able to settle ourselves in these matters. What about the ones that are still pending . We continue to pursue it but its something that we will continue to look at. Thank you. The gentleman from missouri mr. Lieu kumar. Thank you madam chair. I want to spend some time in regards to the report that republicans have put together to try to go back and get some given taken back and forth from mr. Scharf. Our side has done this since 2016, have the documents here or retained by republicans now as a result of the fact that they would in turn them over. The trump ministration is in charge of documents into the regulators that will have a better picture of whats going on here. One of the things that concerns me is that, as a former regulator this is the first of three more meetings which we have several prior to this and we have not had a single report or single hearing on the regulators who are asleep at the switch and in fact, in our report it says the Los Angeles Times reported that the employees failed to meet their quotas and that the cfpb was embedded in 2014 and yet, wells fargo have notified at the Los Angeles County was going to file a civil suit of the sales practices and this is on may the 4th. Six months after the fact. The copd come rolling in on their whitehorse and are going to say the day. He was asleep at the wheel again and its very unfortunate because this is a situation when your predecessor was in front of us i asked the question as a former regulator im aware that they live in your bank. I asked him the question. How many regulators were in your bank today . At that point he told me 75 where their fulltime. Do you know off the top your head you how many regulators are in your bank fulltime . I do not but it is significant. Would you say more than that or less than that . I would guess more what we can certainly come back to you on that. Thank you. It is very frustrating to see that the cpd had regulators sitting in your facilities, knowing these practices were going on, was told about it by the Los Angeles Story and six months later finally take action. I think because of that, the situation continued to grow and went out of control. Now, we are after the fact trying to find a way to stop the nonsense. One of the other questions i asked your predecessor when he was here, because at that time there was a situation according to our own report here, there was 1000 people a year roughly for five years that were being fired for their actions and involvements in these sales schemes. I asked him at the time, as i recall there was a third year that this had happened. I asked him. What is wrong with your culture . In that here we have a situation where you fired 1000 people the first year, i understand you recognize your problem. The second year another thousand, youre not fixing your culture. How will you fix it . Finally we have a new individual takeover, we have you in its place. I guess my question is how will you change the culture that your predecessors never addressed . What are you doing different, how do you see yourself Going Forward with your teams of people . Certainly i think, we have to be clear on how a series of things come together to form a culture. We as a senior Leadership Team have to dress it. That includes 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 any harm, we have to be the ones to deal with it as quickly as we can. If there is wrongdoing inside the company, dont just look at an individual and say they did something wrong. Ask the question do we have something in our structure that is wrong . I think all those things come together with accountability being the most important thing. I want to follow up with something my colleague from kentucky talked about. Thats basically allowing the government to come in and change your Business Model. Im very concerned about the attempts to intimidate you and your board by doing or not doing business with certain industries. According to me thats a decision you should make another government. With that i yield rest of my time. Its not intimidation, its called standing up. Madam chairman if you want to discuss this id be happy to discuss it. We are talking about here today, you dont you want to deny that but that is the truth. Committee will become will come to order. The gentleman from new york who is also the chair of the subcommittee on Consumer Protection is recognized for five minutes. Thank you madam chair. First i want to thank the chairwoman and Maxine Waters and the chair of the Oversight Committee 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. I think that, to mr. Shaft, 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 four months. It should give you further ideas of what needs to be done to fix wells fargo. To move forward. I think it would be an opportunity to look at it and take it very seriously. For me, you know coming in, anybody who was on the board or had anything to do the way you first showed you wanted to clean things up, you clean everybody out. Because anyone that is there that was part of the decisionmaking process while these procedures were going on. They do not have clean hands, they have dirty hands. And so then that continues to be there so the only way you fix an organization in that regards as far as im concerned is you clean out. Now i will, in full disclosure, let me know that i have had the ability and time to work with you in your previous capacity at bank of melon. For the life of me, i dont know why you took this job. Because, anyone who is there has got to be held accountable and look to see what you are going to do to improve all of the horrendous. Ive taken mr. Sloan and others to task in a very strict way. I do intend whether they resign or not, these board of directors that were there and part of the policies, i will take them to task tomorrow. I do think that you should take this report very seriously and to heart and to 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 of which i sit on. Two of them. One is with andy eyes. There have been a series of hearings because in the eyes in my estimation can come into communities where maybe the big banks should not be because they do not want to be there. As far as giving out mortgages and making sure that they are able to provide services to communities, local communities where banks are appearing. Weve been trying to make sure that these Community Banks and and the ayes with the underserved institutions get capital from some of the big banks. Weve had that discussion you told me you are going to discuss it and come back. My first question is have you had that discussion . And what if anything is wells fargo looking to do . Because i want all the big banks, every one of them, to figure out how we can do to put capital into some of these big banks, i mean Small Community once. Congressman we will do something about it. I completely agree about the importance of the minority depositary institutions. As you said, they reach neighborhoods that we cant necessarily reach. We have been focused historically on connections expertise but it is, more about capital as weve learned. So we are going to commit to invest up to 50 Million Dollars of capital directly into these institutions. As either tier one or regulatory capital. Still keep them in a position where they are still minority owned but provide opportunity for those institutions. I dont want to cut you off what im down on time. Im going to go through that with you on a continuous basis because what we have been talking about, we dont want the big banks to just give money to small churches. We want big major investments. So i want to have a further dialog and conversation with you in regards to that. The other piece ive got 20 sonds. I want to know about cra modernization saying hes discount theres a 75 discount on mortgage ratings that are sold off. That will stop people from getting out mortgages, but i would like to get an answer from you in writing later whether or not you think that is the appropriate thing and the way the controller is looking to deal with cra months station thank you. The gentleman from michigan is recognized for five minutes. Thank you madam chair. Let me start out with a tone of unity. I will agree with my colleague and friend from new york mr. Meeks when he said im not sure why you would take this job. I would agree. It is in all seriousness, this is a significant undertaking. Im glad you are doing it however because we know for the United States to remain competitive in the world stage needs to have Financial Institutions they can handle these Large International and National Accounts and those kinds of things. But there are problems in the past. Mr. Sharp, i am interested in what changes to the Consent Order plan running process you have made since youve taken over a ceo. Its my understanding that none of the Consent Orders have received a non objection, i think thats 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. Im curious, walk me through that process with how you are dealing with that and maybe an update on that. Congressman we have changed our entire management approach to Consent Orders. Im personally deeply involved in all of our control related works including Consent Orders. Our new chief operating officer that we brought in from the outside who has experience dealing with issues like this at another bank that was going through a series of issues is on board now. Those responsibilities sit directly under him. Hes probably spending 90 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 it accompanied to make sure the work is getting done. Can you identify with the Biggest Barriers are to achieve those acceptable submissions under Consent Orders are . Or what you believe the regulators have not identified them a but maybe they have. The Biggest Issue for us is everyone across the Company Including those in the frontline understand that Risk Management, especially operational Risk Management is everyones job. We need to educate them on what that means and how that fits into a seamless structure inside that company. Has that really been the barrier for you too receive those non objections from the regulators . Or is there more to it . I cant speak to what happened before but based on the actions that i have taken, there is a different sense of urgency, theres a different focus, we have different people with different dip disciplines with different review process and place. We are fundamentally managing these differently. Weve made clear that these are the priorities of the company above all else. And you are updating then those Consent Orders . Working with the regulators to get those in order . We regulate we regularly talk to them about this yes. Let me move on a little bit. You touched 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 . Weve changed all of the practices that led to the bad sales behavior including those sales goals that led to that behavior. Today our frontline bankers are paid based on a series of criteria, none of which are sales goals. Its things such as Customer Experience. It is balances in the overall account. And things like that. So we do not have goals like that. How do you measure the Customer Satisfaction . Historically, weve used a third party to provide those where they come in and do Mystery Shopping in the branches and provide feedback directly to the branch. Going forward, we will be moving towards a Net Promoter Score where we actually do direct surveys of our own clients. Ive got 45 seconds i want to hear a few quick things. Could you talk about the board makeup . That was one of my questions from my colleague from new york was cleaning house. What is cleaning house on your board looked like so far . I do not have the numbers in front of me but i believe Something Like 70 of the board is new to the board since 2017. But i can get that for you. What i heard was 14 out of the 16. But if you could confirm that, that 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 changes are really fundamentally need to happen here . Absolutely. Im sorry my time is expired. What fundamental cultural change you felt as necessary and we can follow up and if the chair is going to give you 30 seconds. The gentleman times has expired the gentleman from missouri is also the chair for the subcommittee community developed is recognized for five minutes. Thank you madam chair and thank you for your testimony today mr. Scharf. We are a student borrower and founded by former cfpb student loan in seth frontman in the red lining that they are taking out private Student Loans to attend Community College that they pay more than situated borrowers thinking the ten to 12year institution. They applied for products for wells fargo and they applied for a 10,000 dollar loan to attend a Community College and wrapping up more in seeking the same loan to attend for your college. Do you think thats fair . Congressman, there is no room for discrimination. You intend on changing the culture . I will go back and look at the specifics but if we have done something wrong, we will make it right and make sure nothing like this is happening Going Forward. Under your consent you have a policy that steers people who would otherwise would qualify for prime mortgages. Into subprime mortgages and thats part of one of the consent owners. Are you aware of that . I am not congressman but will circle back and look at it. How would you you make those people hole that apply through your bank and would then go into higher cause . What would you do to direct . It congressman, if weve dug to the derogatory obligation and specifically thats what we will look at. Would you help those borrowers by reimbursing them or resetting the loans and a reasonable interest rate. We look at all of the circumstances around it and what the right thing to do is for those customers. Customers as well as multiple of us on this committee are looking for fairness for the people that are looking for help. Do you agree . I completely agree. If we have harmed people and not treated them properly should we make the appropriate relationship. Getting into another area, are you knowing well far goes lennon see in the state of missouri and in Southern Illinois that i represent . Do you know the volume or whats known in other businesses . Im sorry congressman i dont. Could you get me with this with the committee. And what programs are in place for wells fargo employees in Private Banking and are the programs linked to pay for bonuses . Im talking about the incident that i recently read about your bank. I dont understand the question. The typical Retail Branch at wells appears to be on the low end and with Corporate Investment banking but you do incentivize with bringing in high dollar customers. Congressman, we have changed the Compensation Plans of our bankers so that they will have Customer Experience and balanced growth as well as some other factors right now. Its relative to sales ghouls. How do we address the culture of the bank that you treat all customers with some respect and dignity. With the Customer Experience goal and method of working people based upon Customer Feedback and what it directly is. Thank you and i yield back. The gentleman from colorado mr. Tippin is on the clock for five minutes. Just a little followup in terms of some of the sales goals and from the reason that you are here and its from the sales goals and the initiatives put in place that were open. Can you expand on that a little more so i can understand the Customer Experience in the balances that is going to be rewarded and looking at further abuse . Weve changed the entire Compensation Plan but weve changed the Management Structure so that anything related to those sales goals will drive that kind of behavior and the process that went along with it are no longer there. The people that work on our branches regardless of level have a series of things that they used to dredge their performance and if you were to go around and ask the folks that its Customer Experience. Today, it is mystery shops to take place inside the branch and moving towards Customer Feedback because we do believe that if a customer is not happy inside of our institution, then that is very bad for us. Are you pretty confident that you have a structure through the change of command to make sure that that is going to be implemented properly . Yes i am. In your first meeting you mention youd be introducing points on how the company will be run. Can you underline what those look like and how theyre different from previous occupants in your seat. Yes congressman. They meet regularly for two hours and meet once a month for a full month and their suspected to look at whats going on in their businesses and what theyre doing with the control issues that were aware of or anything knew that we should be aware of. We do hold the cfo and i Monthly Business reviews that were not held in the past and we meet with every business along with their senior folks and review their results and the wrist control, progress or making on people including the diversity report myth on a basis that is a budget process which is far more robust than something weve had in the past which is becoming a mechanism for us in making decisions prior to that were made in the individual businesses. Thanks for that. I come from a rural area and we have a lot of conversation in this committee in regards to urban impacts. Could you highlight the importance of wells fargo that has a branches in my district in rural communities. Does that play through the Important Role of the sea are a and credit for Small Businesses . Its not just important for our numbers but when we think about some of the things that this has done well and not done well. Serving in underserved communities is important to the company. The branches that we have in these communities where weve been for a long time are very important to us. Investments that we have in the lead big that we do which is certainly will be looking to go forward. Wed like to give you the opportunity and we had a question earlier on whether or not in regards to the coronavirus and their challenges that may come up to our Financial Institutions, in terms of expanding a little bit on your well capitalized and will take that into consideration. The point that i was going to make is that, when you look at the stress test that we went through it takes unemployment going Something Like 10 , gdp going down 8 and real estate dropping by the commercial values that are very significant. As part of the process, we have to be able to continue to rain the ratios in that event with the capitol actions. As institution, we do our own stress areas which lead us to make decisions in terms of how he when the company. We focused on that with all the issues that we have done and we have very well capitalized and continue to do that. Thank you and i yield back. The gentleman from georgia mr. Scott is recognized for five minutes. Mr. Scharf, how are you . Fine. Thank you congressman. Our Banking System is the heart and the soul of our financial system. This hearing this morning at its core is about trust. Its about Consumer Trust and its about what i want to ask you, is this. Can the consumers, can the people in this Country Trust wells fargo now . People can trust wells fargo to do the right thing, yes. Well then, why is it that we have Consent Orders and weve had Consent Orders from the office of the control of the currency. Youve had Consent Orders from the Consumer Protection bureau. Youve even had Consent Orders from the Federal Reserve. To my information you have not adequately answered those. Am i correct . You are correct. May i ask you to explain why . You have not responded . Congressman, i joined and im not in the position to explain what was done right and what was done wrong because i wasnt there. The changes that were making is different and existed prior to my rival. Well, i will tell you that this is important for you to really understand that you will have a lot of customers out there and one of which is me. I am a customer of your bank and ive had great experience with it. You you have been a leader in my community with helping help get some of the funding and to help folks out there who are suffering from this committee who worked hard to get that done and we all didnt agree and voted for the first bailout and obama got ticked off with many of us but we said this president , we love you and we want you to do good. But you cant just throw all this money out to the ranks and not do something about the struggling homeowners who are the victims. He said go back and do something about it, we did and we came up with 2. 8 billion dollars and we called georgia home and safe. There are some good things with you all have done but my issue with you is, that you are on this in a due position but it is important what you get in a bad situation, in order to get out of that bad situation and 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. 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 thank you for appointing one recently, didnt 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 think you are being the chief executive officer. I am. Why is it that you cant assigned him to respond to these . If you dont respond to these Consent Orders that are being asked of you, by the regulators and the banking regulators than that trans factor that i mentioned at the very beginning is weakened. Will you move to respond to those Consent Orders after this hearing . Congressman all of my energy in management is put towards responding to them in a manner that is acceptable. Yes. Thank you. Gentleman from texas mr. Williams is recognized for five minutes. Thanks madam chairman. In 2016 not long after the first wells fargo scandal broke, it seemed like the only answer to our questions was i dont know. I called on him to resign immediately for such a lack of knowledge into his own Companies Practices. This is a slap in the face of all members of this committee but more importantly to the consumers who were taken advantage of because of his gross mismanagement. His answers were simply unacceptable. Fast forward to 2019 when the next ceo temps loan came before us to testify. I was somewhat optimistic that he would be able to fix the root cause that allowed sunni scandals to occur. It seemed like there was great progress. Institutional changes to make sure that these actions would never be able to go unnoticed again. This might be even more offensive than his predecessor was, i do not know. Since he was not taking the companies transgressions seriously when such damage was done to customers. On a more positive note im glad to see that wells fargo brought you in as an outsider to try and fix the mess that have been surrounding the bank for the past few years. It will not be an easy process youve talked about it regaining their trust but i hope that you will be able to get the bank moving in the right direction. Mr. Sharp i know you have previous experience in many Financial Institutions so my first question would be. How do the Management Structures differ between wells fargo and other forms where you have worked. Give you the opportunity once again to go into the detail changes that you will institute. What we have today is more similar to what the large well managed institutions have and what we had in the past. What we had in the past it was a federated model but there was not enough representation at the Senior Management table of all different businesses. The discussions that were able to occur regarding decisions, the structure did not encourage that to happen. Thanks today or very different and that there is a clear understanding that we will run the company as one. We have Business Leaders in charge of significant business that report directly to me. We have opportunity to question everything that goes on. There is an independent infrastructure around all of the risk control work that needs to happen. People understand that that is independent and the level of responsibility and accountability that they have. Having said that, its still early on. I do not think we are as well run as other firms yet, we just implemented this. But everyone understands why its better for the company and is supportive of it. I think the fact you questioned it is important some glad to hear that. The other side of the aisle has reiterated that wells fargo is too big to manage and should be broken up. I completely disagree considering the other banks of similar sizes have been able to successfully cooperate when they have appropriate Risk Management structures in place. So i ask this same question to mr. Sloan and im 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 ive consistently try to remind myself over the course of my presidency is that the economy is not an abstraction. It is not something you can just redesign, break up and put back together without consequences. That is what president obama said. Do you agree with that sentiment, that breaking up the biggest banks is unrealistic . I think the country benefits from the large banks and they can be run properly and should be run properly. All right. On the main street guy, im a car dealer in texas, 50 years. Ive owned the business for 50 years and i know how important access to capital is for Company Looking to expand operations. How important risk and reward it is. My question is are you a capitalist or socialist . Im a capitalist. Since wells fargo is one of the largest Business Leaders in the country. I would like to know what controls you so that Small Businesses like me are not subjected to abusive practices. Our Small Business is the same. We have first line Risk Management which is far more robust, firsttime meaning it is part of the business. It is far more robust than it was at the time of the sales practice problems and we have an independent risk function that is separate from them that has in independent reporting line. Thank you i yield back. The gentleman from texas mr. Green was also the chair for the subcommittee on oversight and investigations is recognized. You have five minutes. Thank you madam chair. Madam chair please allow me to thank the persons who have worked so hard to pull this report together. The staff. Madam chair 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 catchup and not doing a very good job. Now, mr. Sharp. 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 two big to fail banks have thus far been too big to jail. We must do more than simply pay the government of fine. Most of the front line bankers live paycheck to paycheck. While the banks have made profits in excess of 150 billion dollars of year. Since the recession. In 2018, a bank ceo made 776 times the salary of a minimum age worker. That ceo made approximately 24. 2 Million Dollars. I shall not mention his name but im prepared to if i have to. I have visited with you. Thus far, you have been straight with me. I do believe out of adversity there is opportunity. The greater the adversity the greater the opportunity. You now have an opportunity to 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 would not be sitting here today. We need to improve your mentor protegee standing. Like banks are going out of business, we have approximately 18 or 19 now depending on whos 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 institutions. 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 are not a part of the transgressions that took place but you can be apart and i believe you really want to be a part of a solution that can change not only the culture at wells fargo, 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 it, 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 you doing the right thing. So im going to ask that we meet again. Will you assure me that you will meet with me again . Absolutely congressman. Will you assure me that you will work with me to develop this bill of rights for workers . Well you assure me sir . I will absolutely work on a bill of rights that is sensible to wells fargo. I thank you and yield the balance of my time. The gentleman from georgia is recognized for five minutes. Mr. Scharf thank you for being here. Considering your short time and your vision to correct these problems and move forward to make wells fargo compliant and focused on its customers. Before i get into my questions, i want to remind my colleagues i heard something earlier saying that the republicans took a hear no evil see no evil stance on this. I want to remind you that republicans in 2016 that began the investigation into wells fargo. And we obtained several hundreds of thousands of pages of documents. This report that was submitted today is not the first, its not the second but the third report that was issued, that was based on those documents and the thousands more than the Trump Administration has released voluntarily in the last year. This is not something new, it is not just something that has popped out of the woodwork, its something that has been going on, that we have given our utmost attention to. Through all of that it has been somewhat frustrating. I have been frustrated and concerned over specifically the lack of progress we saw over that time. Especially when it came to complying with the Consent Orders by the regulators. From our meeting and other information that i have received, i encouraged that the olc has indicated under your short tenure that the bank has made progress towards complying with these Consent Orders. So with this large of the committee, you are short tenure, everyone knows the past, you are going to get the same questions repeated over and over again. Some of my sound bites my questions might have been asked before but i want to 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 imposedy . They relate to Operational Risk and compliance. Weve significantly increased the staffing but more importantly than just the people, its putting the right framework in place so everyone across the company understands how we will 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 the business has to do, what theyre level of responsibility is, how will we do the review work independent. Then we have the third line which is the internal audit which takes a third look independent look at everything that is done. All those levels of independence are extraordinarily important, but most importantly the robustness of what we have in place, not just the people but the process and the documents that we are building create a very different control environment than existed historically at wells. Thank you. You stated this before but i would like to ask it again. As mr. Scott, my colleague from georgia stated, im also a wells fargo customer and ive always had good Customer Experience. Under your leadership, is meeting regulators expectations and requirements as well as the needs of the customers be the top priority . Theres no question that that has to be the top priority. I take it a step further inside the company and explain it to the people, were not doing just because the regulators want to do it we do it because its the right way to run a company. We do it because we believe its right and when we run the company that way the regulators will be fine with it. Probably my final question based on time is, youve talked about restructuring from a more federalist type organization to a more streamlined centralized organization. How did that decentralized organization contribute to this problem . And thus how decentralizing it, how does that resolve it . That structure congressman did not have the appropriate checks and balances that we have today. So Business Leaders control their own staff functions. They control their own risk functions and Everything Else that went along with it. There was not a consistent set of policies, not a consistent set of application of policies and there was not the independent functions to come in and say we like or agree with what theyre doing or we dont therefore you have to change it. That is what we are doing today and that overrule what individual businesses want. Thank you i yield back. The gentleman mr. From missouri whos also the chair for the subcommittee on international security, Monetary Development and policies is recognized for five minutes. Thank you madam chair. Yesterday two of your Board Members resigned. The two predecessors testified before this committee and resigned. You are less than six months on the job and you are sitting in that chair. Why in the world would you take this job . I appreciate the question, third person to say that since we started so im glad to answered. I believe, i genuinely believe that wells fargo is an Important Institution for this country. I really do. Just because the company has not been well run does not mean it can be well run. When i talk to consumers of all sizes, Small Businesses and middle market companies. When i see things weve done in communities and talk to our own people. I was in a branch yesterday and asked someone why do you come to work every day . I swear to god she said because i love this company. I love the opportunity that they have given me. That clearly wasnt the entire culture of wells fargo, but it is an important part of what the culture is. In the context of whats doing doing whats right for our employees, communities and businesses. I believe we have the opportunity to benefit more can compared to if we did not do this well. Thank you. For you to walk in, you have to have something that most folks dont. Let me turn to an extremely difficult part of this hearing for me. I have the minority report from senator brown. March 2020. I entered it into the record madam chair. Without objection such as the order. Heres whats troublesome. Its about one of the bloc posts of one of the employees who is gone. Hate crimes im quoting, hate crimes, hoaxes are about is prevalent as actual hate crimes. I hate that i actually dignify their existence by quoting a statistic that recognizes them. Fine. Lets say they called him the nword, would that make them racist or just blank holes . Looking for the most convenient way to get under his skin. This is a guy that worked at this you have to be. An appointed position at this ef3 be. So someone like me with my skin color, that is insulting and also disheartening. Im using this because there is a report that suggests that there is a back channel of communication between wells fargo and cfpb. My final question is first of all. Is this bank channel still in existence . To your knowledge. Im not aware of a back channel communication. No. Thats the first time youve heard about this alleged back channel . Communication going between. Ive read the report congressman. All of the conversations that we have with the cfpb and my knowledge are open conversations with the regulator that everyone should be aware of. Thats the answer im looking for because the person who made these statements is no longer there. Im very concerned, very much concerned. I was here when we, i guess the chairwoman and i, were here when the cfpb was created. When the weather the people who are not here to accepted or not, there were great paints taken to make sure that this ef3 be was not politicized all the way down to keeping congress involved and the funding of the department. Youve already read the report but i would advise everyone to read this report. It is chilling when they start quoting some people who were actually at the cfpb making decisions. Chair i yield back the balance of my time. The gentleman from ohio mr. Davidson is recognized for five minutes. I think the chairwoman. 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 nations 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 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. In spite of all the regulation, in spite of all the reforms and state regulators and federal regulators and the oh sissi and the fdic and the Federal Reserve. All kinds of laws that make it illegal that wells fargos employees did. These bad things happened anyway. They are human beings and all sorts of all other companies but we do not believe theyve happened to the scale these bad things have happened there. So what makes wells fargo so special . Now that youve been there, why could all of this happen and wells fargo . Congressman i believe your point is very fair. We did not have the appropriate controls in place. We did not have the appropriate culture. We did not have. So the humans theyre just needed the other controls that other places had . What drove these people to do it . Was it passive . Or was it in affirmative bush to do bad things. I think the controls should certainly 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. So for that reason, theres been a lot of culpability at least financially for wells fargo. How many fines in total has will forgo paid as a consequence of these bad actions . I dont have the number here. Is it a couple of hundred bucks like a speeding ticket . Is it a couple of hundred Million Dollars or billions . Billions. I think its fair to say that these culpabilitys, if they result in billions of dollars a fines. Did people lose their jobs . Congressman, yes many people have lost their jobs. At the very top . Ceos, you are the third, Board Members, bank managers, managers of departments, people that were supposed to manage risk. Lots of people have been held accountable in the sense theyve lost jobs . Has anyone going to jail . Now that im aware of. Does any of this rise to the level of a crime . Congressman, when we settled with the department of justice, we stated a series of facts which included that individuals at the bank had committed crimes. So its up to the department of justice to follow through and actually hold someone accountable . Congressman i think its up to the department of justice to determine what is right and appropriate. All of america is looking at the department of justice to hold people accountable. Frankly its not just in banks. Were always wondering when someone is going to jail because theres been all sorts of abuse of trust in our country. And frankly the government has violated them a lot themselves. Wells fargo you have taken some actions that are encouraging in your short time is ceo. When you look around by reputation, you come to someone who they say, who has the potential to come in and change a large organization. You created sales practice oversight management function. Could you describe what you envisioned for this role and what policies you think need to be put in place and wells fargo to make sure that employees are actually held accountable for their actions . Yes congressman. Since our sales practice scandal, we have looked across the company at the different sales practices to ensure that we do not have the kind of behavior that existed in the company prior. One of the things that we wanted to ensure Going Forward was this that we continue to evolve as a company. To centralize the oversight of sales practices, where they set the standards, they monitor what is necessary on a consistent base across the company. Though even though something might not exist today, we dont wake up and find out something exists in the future. Thank you. I yield. The committee stands in recess for five minutes. No more testimony from wells fargo ceo charles scharf. He was asked about the banks preparedness for the coronavirus outbreak. This is just under two hours. Committee will come to order. The gentleman from illinois mr. Foster is recognized for five minutes. Thank you madam chairman. Mr. Sharp. I echo the concerns of my colleagues about the extensive shortcomings of wells fargo over the number of years past. I hope that you are as committed and successful in turning your ship around as youve stated in your testimony. I would like to bring up the issue of dreamers. This is an issue that hits close to home. Last year edoardo pena, a citizen from illinois, filed suit because he was unfairly denied an auto loan by wells fargo. I was glad to see some of the changes wells fargo is decided to implement recently including its plan to provide docked recipients with access to market products such as auto loans and loans. Because of a press release is one thing, but at the end of the day a new policy that is not achieve results to actual loans to actual Daca Recipients can mean its been a failure. Can we have your assurance that you will track progress on this issue and that you will report periodically back to us on progress on providing credit to dreamers . Absolutely. We will track the progress and we can certainly talk to you about how we should report back to you. Thank you, i appreciate that. It is an important issue to my constituents. As you are no doubt aware, Thanks Community reinvestment act are disclosed the public after i believe a delay of a couple of years. One measure 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 effective, and effective method to limit consumer abuses . Congressman. We certainly agree on accountability and ensuring that relate regulators understand and have access to all information they have to draw those conclusions. The public also has a need to understand which banks deal properly with their consumers and which have a different record. Congressman, respectfully i think that is a decision, a discussion between you and the regulators. Okay. So you do not have an opinion on whether or not it would be a good idea so you are opposed to it . Honestly given the condition and the work we have to do, its really not up to me, im not the best person to give advice. Im focused on doing the work. Youre also 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 what this sort of thing, a little bit of public visibility towards findings that have shown and abuse of the consumer might be an incentive that might improve behavior in the past and Going Forward. Congressman i believe like any other issue there are places and minuses to this. I think that its really appropriate for you in the regulators to talk about what those are. So will handle this without your input i guess. Incentives in my mind art to the heart of getting corporate behavior right. I was happy to hear you made some changes there. One of the pieces of legislation that is being considered in this hearing does a number of things. One is which to put the bonus executive pool in a loss position for any regulatory fines or penalties. While i have lots of questions about the details, mechanisms and formulas involved in this piece of legislation. I wonder if you have a reaction to how effective this might be in preventing future and getting attention by top management towards consumer abuses. Congressman what i think we have to do and will drive accountability within the organization is a sure make sure we judge people and accountability and what we pay people. That is what we are doing today. Thats what i guess is my next question. Im getting you to answer for the record because there will be some detailed numbers. Could you answer for the record, how the financial burden for regulatory fines go over the top 20 finds that happened over the last decade. Describe how they economic pain for those pains was distributed among 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. Congressman i can tell you that the finds that weve incurred over the past year when i was at the company have been impacted peoples compensation directly. I want to see a number of table of numbers and percentages to see what share, falls upon shareholders. The gentleman from tennessee is recognized for five minutes. Thank you madam chair, thank you Mister Scharf preparing today. Ive heard a number of people ask you why you take the job that youve taken and i frankly appreciate you stepping into the role. With that said, today how would you characterize the reputation and the brand of wells fargo. . Today as we sit . I think as we sit here today, we have not yet returned the trust that we would like an wells fargo name to represent. Your opinion is the brand and reputation of wells fargo irreparably damaged . I do think the brand and reputation is extraordinarily important in this business and that we have to work to earn it and that we can do that. You can restore it . The welsh forego can restore its brand and reputation . I absolutely believe we can restore the brand and reputation of wells fargo to by taking the actions ive taken in my short time at the company. In my district, you have a number of retail institutions, you have a number of branches. If the customers, an hourly wage employee, a Small Business person, a professional, and they come in and want to do business with wells fargo. In laymans terms, how would you instruct your bank officer, Customer Service representative, whoever is greeting them to get that business or maintain that business . What would you tell your employee to relate to this hourly wage employee, to the Small Business owner, whos trying to take out a mortgage. Why should they want to do business with wells fargo . 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 it them. That is the way we want everyone who works for wells fargo to be thinking about when dealing with their customers who walk through the door. If we are not doing that, i genuinely believe we will not be successful. Weve clearly not done that historically at all times. And weve seen the results of that. And so that has something which needs 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. Let me ask it in a different way. What would that bank officer tell that customer whos trying to maintain or obtain . What would they tell them about wells fargo and why they should want to do business with them considering everything that that customer or potential customer has seen or read about in the media . Congressman i think that we want our customers to know that we are committed to doing the right thing for them. All the actions that were taken since ive been at the company, it is directed towards that. Ultimately that is whats going to turn back the trust of the people who stand in judgment of us. It is not just our customers, the communities we serve, regulators and shareholders and legislators. So if we are not doing the right things for our customers every single day, then we are going to fall short of who we should be. Im the Bank Customer i say, im thinking about cutting my relations with wells fargo because of everything that ive heard about, read about that has been going on for several years. Mr. Wells fargo, miss wells fargo, why do i stays are customer . In limits terms what would that person say to them . The number one reason they would say is they love the people they do business with who work at wells fargo. The personal relationships that they have developed our extraordinary. I was in a branch yesterday in washington and we asked that very question. Why do your customers come in . It is because of that personal connection. Then its 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 rapper of whats were going to do whats right by them. Thank you mr. Sharp, my time is expiring, i yield back. Mr. The gentleman from massachusetts mr. Pressley is recognized for five minutes. Thank you. I want to recognize the diligent and good work of this committee. In 2018, large banks posted record profits that were only topped by their profits in 2019. A decade ago, the same things banks were rescued by trillions in bailout loans. It does seem in the case of banking, your profits are private while your losses are socialized. Over the years, youve helped lead city group, jpmorgan chase, b and why mellon and now wells fargo. Four of the nine recipients of the original round of rescue funds. Mister sheriff this is your second time appearing in for the committee in less than a year. Given that this report shows the limits of traditional Confidential Bank supervision in effectively curbing wells fargos egregious behavior, do you agree that the public has a right to hear from you directly . Your annual testimony through annual testimony and reporting . Congresswoman, when i took this job i understood that this is part of what the job is. What the corporate frequencies. I will leave it to you to make that determination. It is a reasonable ask, its a yes or no just for the record. Congressman congresswoman, im not the person to as i question to im focused on wells fargo right now. And yes or no do you agree that its fair that you should come annually, and report. Congresswoman, i do believe that its appropriate for me to come, when asked to come by the committee. So congress establish your national charter, it created the deposit insurance your bank enjoys, congress stood up to their federal serve, to be a last resort, and congress developed a Legal Framework that governs your bank, so an annual check in, is not too much to ask. And that is exactly why, with the support of the aflcio, i introduced the greater supervision in banking act. Requiring annual public testimony, of ceos like yourself, and reporting about bank size, diversity any regulatory enforcement or fines and notably the workforces treatment that all levels. Your contract with wells, specifically states he will not require, to relocate allowing you to work remotely. However, while there, you pushed employees to tell commute. Just for a question time, would you institute these policies at wells. First of all congressman i do not tell us commute. Thats a very important decision distinction. Its a National Color country and National Company with places all over the nation. Have you instituted any restrictive policies at wells. Congressman, i have not planted any restrictive policies at wells. In the midst of this global pandemic, will you allow all employees who work remotely or can work remotely to do so. Yes or no. Yes. Do you commit to providing all workers down to custodial staff, call center employees, thirdparty contractors, with necessary sick days as well as paid leave . Yes or no . I need to think about that whole list of people, but for employees yes we will do that. All employees . Down to custodial staff. I did not say thirdparty workers. No i did. I said we certainly would be willing to look at the rest, it is not something i thought of sitting here. I hope you will get deep thought, because they do represent our most vulnerable workforce. Want to be clear being a chartered bank and one of the largest at that is a privilege, its not a right, its a privilege that comes with accountability to this congress, to the employees and american public, when all americans not just those that are wells customers serve, at least you can do is show up once a year to answer these questions thoughtfully thank you and i yield. The gentleman from ohio mr. Gonzales is recognized for five minutes. Thank you mr. Sharp for your testimony. When i look at the report i book at things in three places, one compliance, two reporting, and three board of director issues. I want to try to hit on all three of these. On the compliance side you have talked about how you flatten the organization no longer the federated structure part of the federated structure was Risk Management. It was embedded in the each of the business units. We have elevated the management sort of pulled it away to monitor it more broadly. We have to have independent Risk Management, we have pleaded that with the company we are continuing to build that, and all of the appropriate first line functions. As to make that second line function as effective as it can be. Another issue was mentioned, Risk Management, component i realize it looks different at each bank, but how are we progressing on that specifically . We are continuing to work to make sure that everyone in the company understands what responsibility is, the only way that we can have an effective Risk Management infrastructure across the company, is that there is consistency of application consistent level of understanding, and limitation. That takes sometimes and thats what were working through. On the reporting side again it was clear that the board felt or had all kinds of faults, but they felt at times they werent getting the right information or they were being misled. Obviously they do not prepare the reports, its the reports that management provides them. How confident are you that the reporting issues, the accuracy the frequency etc, has been taking care of Going Forward. I certainly think that congressman the quality of the reports we give them, has to continue to improve, i think that is an ongoing task that we have to make sure we do our very best at. Board members generally can be often as good as the quality of the materials we give them. And so that is an ongoing effort. That is underway and has to continue to improve on that. Thank. You in respect to the board, i want to ask a general question because will have two former members of the reward here tomorrow, and i think that sets an interesting precedent, i hope doesnt become routine that were hauling in Board Members of companies now, your situation is unique i hope in fact this is unique. High level, what is the role of abortive director in a public company. The boards responsibilities to oversee management, to prove strategy, and certainly in our case to have the confidence in the regulatory work that is ongoing. Not to run the bank . Actually no i believe the Management Team is running the bank and overseen by the board. Thank you. How important is it for you to have proprietary conversations with your board . Congressman i think its 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 early, and doing that, in a confidential way, i think is critical. And i think, im sort of caught in two minds here, if i were shareholder of wills, i would be happy with the outcome of your Board Members, as a member of congress, again i worry that we are going to set a precedent where we haul Board Members in with every company that is not doing things the way we want, i think that sets a dangerous precedent, i think we did it with and ron awhile back, i think its a unique situation and what it feels appropriate, i want to switch or something and we get through it, do you have any immediate plans to run for congress . No i do not congressman. Good job. Do you seek to become a legislator at any point . No i dont congressman. Do you like running your bank . Do you like running banks . Congressman i am very proud proud and i do enjoy running the bank. So i would encourage you to run your bank. Running your Bank According to the laws of this country. We are the legislators. I dont want to run your bank, i dont think you want any of us running your bank. I dont think you want to us 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, its a beautiful system. If we start making it up by telling you who you can and cannot do business with, i think we set a terrible precedent. With that i yield back. The gentlewoman from iowa, we miss actually is recognized for five minutes. Thank you chairwoman and thank you Mister Scharf for being here today. Most of my colleagues have addressed these issues so i wont rehash them. What everything ive been hearing so far sounds like things are improving and i hope that continues because i think all of us here expect more from wells fargo. My interest and wells fargo in doing better is but you employ almost 1500 people in my district so thank you for that. We have a vested interest 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 are not creating the kinds of risks that were so poorly monitored before. Congresswoman, theres no question in my mind, in our boards mind. I dont think theres a question in the minds of wells fargo employees that our number one priority is to fix these issues. Ive said it internally, written it internally multiple times. Ive talked about it on our Quarterly Earnings call. They have called for specifics in terms of strategy and growth and ive said i am not in a position to give you information about that. Im focused on fixing these issues that we have which are the regulatory problems and the underlying infrastructure and that has to come before everything. I deeply believe that and i told everyone whos associated with the company that that is the case. Given the work we have done, its totally appropriate. Im sorry your second question . Thank you totally you answered the question exactly the way i would like you to answer. It making aware that we are on top of that, and i appreciate you bringing that up. As a leader of the company its important for you to make sure that message is being pushed down all the way through the ranks. Allowing folks on the frontline jobs to be able to push up to management as well to ensure that there is a good culture. Thank you so much because representing those employees and providing a voice for them truly is one of my biggest responsibilities out here. I was very 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 that ensure all of your employees are paid a living wage . Put more money in their pockets, what might be some of those things youre doing . Congresswoman we absolutely have to continue to look for ways to help our employees, especially the lower paid employees. When we got there and we look at this issue we did think it was appropriate to look at the cost of living in different parts of the country so we could represent to ourselves that we were thinking what that living wage looks like. Differentiating and playing 20 dollars an hour in the highest cost locations is we think very appropriate. Scaling it based upon the 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 we do once, its set in stone. We need to make sure we are 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 monies into people ages. The majority of the lower paid people, if not all of the lower paid people did not see any increase, and many saw a decrease. That is something else. It was done before i got there but that is something as we go through the processes, were going to take a look and say are we sharing Health Care Costs appropriately across the company . Certainly, giving people an opportunity within the company is extraordinarily important. Whether its within a location so people can continue to grow and take on more responsibility and earn more money as time goes on. Or do something at a different part of the bank. That is something that should be core to what our employees think of when they think of wells fargo. Last year i asked mr. Sloan about wells fargos 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, that certification did not come until two months ago. Way too late to be of any use for a lot of those people. Wells fargo has been a lot always been an american bank, gets a significant part of its revenue from the u. S. Will you commit to fully considering where wells has built its business and what it is going to do to make sure that we do not move jobs overseas . We would like to keep as many jobs in the u. S. As possible and we will commit to retraining, offering retraining to anyone who winds up in a situation where we have to make a change in their location. Thank you. The gentleman from tennessee is recognized for five minutes. Mr. Rose. Thank you chairman waters, thank you Mister Scharf for being here today. Contrary to some of my colleagues, i want to applaud you for taking on this role. I know that it is challenging, 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 morals far go, but fair or not, you are also here to answer for the mistakes of your predecessors. Mr. Scharf i understand you led an intense review of your bank since you became its ceo on october of last year. To some extent, i know youve already addressed this but can you discuss again what youve learned from this review in terms of the culture and wells fargo and Risk Management and other related issues . Congressman i have had the opportunity to talk to so many of the employees at wells fargo who i found to be extremely open and forthcoming. With their opinions of what we as a company and what the management has done right and done wrong. They recognize that the problems we have are extraordinarily significant and they look at management and say, you will need to do something very differently 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. Probably most importantly, because it sets the tone for so many things, it is about accountability. Both people staying in jobs but also whether we are appropriately impacting them for both the good and the bad theyve done inside the company. There were actions taken on every single one of those items to ensure that the company is run differently than it has been in the past. Thank you. One thing we learned since 2016 is that wells fargos leadership provide 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 has no was no closer to complying with the regulators Consent Orders when time sloan resigned in march of 2019, then 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. Whenever a major bank like wells fargo fails to uphold its duty, to their shareholders, their customers, the public and the regulators, it reflects poorly on the entire industry. 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 regulators that wells fargo is a changed institution. Mr. Scharf weve talked a lot today about the changes the bank is making under your leadership to strengthen the bank Going Forward. As ive listen to you talking, im reminded of an old quote that ive 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 earned back the trust of your customers, but also that of this congress. Congressman we need to run the company fundamentally differently that we run in the past. And my approach, to both hear congress, with our employees, everyone outside the company, is to be completely open forthright and honest, im not trying to paint a picture which is better or worse than anything i say, because you and others will find out. I live my life as simply as i can. If theres one story, thats what i believe and i find out that im wrong, i will deal with that and change the course. So what you are hearing from me, is exactly what i think. Im not trying to minimize the work thats necessary, it is there is a lot of work theres no question about that. But i do believe based upon what ive seen at other institutions, and the issues that we have, that we can run the bank. In a way that will earn back the trust and respect of all those outside of our company. There of course is tremendous work left to be done from a reputation standpoint, i hope you will commit to being transparent with congress, your regulators and the public, every step of the way. Thank you the gentlewoman from virginia representative wicks than is i recognized for five minutes. Mister scharf have you had the opportunity to review the House Majority staff report . Congresswoman yes i have. And it is entitled the real wells fargo, ineffective regulatory oversight. I believe so. 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 in a large number of plants had to be submitted multiple times. You do acknowledge that right. Yes congresswoman. And that the occ remains concerned about the overarching vision around mediation. Yes absolutely. And you also then, are aware that the report concluded that wells fargo board abdicated its responsibility tos oversee the board for the 2016. Yes i am aware that the report that said that. Do you agree that the board did not provide robust oversight. Congresswoman i can talk to what ive seen at the board since ive joined. I was not there. Well that fine will just focus on being forwardlooking. As a result of this report, i dont know if its a result of this report but right after this report was released to hear directors resigned yesterday is that correct . They did resign, sunday i believe. Okay sunday. Yesterday morning. And so you also said, in response to an earlier question, that 70 of your board was new is that correct . I believe thats approximately the number. Theres been a lot of turnover in the board since you took office. Yes there has been. Excuse me i have to correct myself, since i have joined the board we have had one new board member join. And a ceo you serve on the board of directors cracked . Yes i do. And you have a role in selecting new members in recruiting and recruiting new members for the board of directors . Our directors are selected, first by our governance and nominating committee, which i am not a member of. Then they are voted upon by the full board. So i would be aware if it, i would be part of conversation, but i do not have the responsibility to do that. Okay, but you believe that the boards role is to provide oversight of the directors of the company, of the executives in the company correct . Yes i do. 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 . Congresswoman again, i can only speak for myself, not the entire board but i think as a board we absolutely choose people who will challenge us, come from different different places different backgrounds, have different kinds of diversity. And that people with diversity your background should help us get to the best conclusion. The reason i ask is because warren buffett, just sent out his annual letter to shareholders, very recently, and in there he talked about the fact that corporate chiefs, really bring in outside advisers that provide dissenting opinions. And that as a result, when seeking directors, ceos dont look for pitfalls, its the caucus spaniel that gets taken home. So for you, in your decision, when you cast that vote for who is going to replace those the two members of the board of directors who resigned, will you commit to look for a pitbull and not a conquer spaniel . Congresswoman, i absolutely want someone whos going to speak up, can speak their mind that understands things that i dont understand, and adds to the conversation. Theres no question that i think boards are better off for having people like that. And pushes back on behalf of shareholders and other folks, and account holders . Congresswoman absolutely believe the boards have to independent and push back whenever appropriate. Thank you very much i yield back. The gentleman from North Carolina mr. Bug, is recognized for five minutes. Thank you madam chair, thank you mr. Sharp for being here today. Who knew 33 years ago as a teenager, in North Carolina, opening my very first checking account, with my dad, taking these air that it would be a First Union National bank, part of walkover, and later wells fargo. That will be next to the Congressional Office this bank is important to me not only for the sentimental reasons but its important to my constituents and thousands and thousands of family fare in the district its also important because its important to our economy. Again thank you for talking to be a few months ago with my staff about what you are bringing to wells fargo. I want to commend you from what i understand when your first commitment affixing 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 to for the job. In your first days later, the serious seriousness of what we do brings important priority, it is our idea to run it with highest standards of integrity. Risk control compliance are the price of admission, it will always be the highest priority. We cannot serve our customers in the manner they and olive stakeholders expect of us, if we do not operate the company, to the standards. My question, can you please elaborate on some of the new standards youre putting in place at wells, and how that will reshape the culture, the institution for the betterment of the consumers. 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 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 senior folks i think if you look back historically at how we paid 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 it a specific piece of the individual of their 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 control work. To the extent that people are not doing it, and that includes the remediation, and that will be a take away. Because as you talked about in my note, i think thats a price of admission. That sends a powerful signal through the organization in a way it didnt exist before. I dont want to take up all your time, by going on about that one question, but i think if i say one thing which i think is will set the tone inside the company, which is extremely different, i think that ranks towards the top. Very good thank you. So little more on incentives, so its not been several years since the scandal came to light, in that case it was clear the banks sales culture, was one of the root causes, and the bank has admitted as much. So 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 are saying earlier thank you how do you know that this is going to last to be meaningful. Congressman. I do agree that we do have to ensure that we dont just fix this problem once, but we fix it everywhere inside the institution and we have a systematic process to ensure it does not happen again. In addition to all the Risk Management controls that we have spoken about that are now being built out across the whole company. Weve just added a new rule called our sales practice oversight officer which looks independently and all of our sales practices across the entire company. It is responsible to 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 improving on the plans, but making sure that the right reporting exists and the right management processes exist to support the kind of behavior we know we need and wells fargo. Just as quickly as possible, its no secret that regulators were asleep at the switch when the bank was tied up in the scandal. What measures are you taking to ensure all future practices are above board with regulations . It seems that i am out of time if you would have a chance to answer that. The gentlewoman from pennsylvania miss dean is recognized for five minutes. Thank you madam chair thank you Mister Scharf for being here. Like many of my colleagues here, i really do wish you well. Wells fargo needs powerful leadership to write the ship and correct the wrongs of the past. Weve 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. But i would like to focus on the people left in its wake. The harms that have been done. As important as it is that you write the ship moving forward, i believe everyone who has been harmed by wells fargo is entitled to remedies. Full return of their damages. We know from oh sissi reports, i will read a part of it from the majority report page 63. When youre after sitting up a center of excellence, Customer Center of excellence, oh sissi found that the banks Remediation Program is critical to the organization as the current approach to remediation is inefficient, and consistent, often lacks appropriate accountability and often takes too long. I will use one example. Because i think personal stories often do it. In 2017, some severe handoff 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 with his credit score. He lost 100 points on his credit score as a result of the corrupt fraudulent practices at wells fargo. Thats one case. My question is, in your own analysis, has your company done a full look back on every Single Person who was harmed. Whether its the 3. 5 million fake accounts, fraudulent sale conference, wrongful disclosures with your predecessor said came about as a result of a computer glitch. A multipleyear long computer glitch. The taking of peoples homes improperly. The failure to modify mortgages improperly. Lost houses, lost cars, lost credit worthiness. How many people have been harmed . Are you looking individual by individual to know their damages and get them compensation . Congresswoman. I share your both the passion as well as the frustration. When we look at the things that we have done and the mistakes weve made, its one thing to say weve made mistakes we will make them better Going Forward. But we have to do the right remediation work. There is no question that in my mind, 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 myself coming into the company, a new chief operating officer coming into the company. We want to take a fresh look at what that actually means. That is what im asking you. What have you commanded your team to do in terms, were talking millions of customers. What have you commanded that they do in terms of looking at the harm. I hate the word remediation, it sounds like something that you do out of the yard when there is a spill. These are damages to human beings. Customers who have suffered harms. What are you doing to identify the harm and compensating them for that harm . What i have directed our people to do is to take a fresh look at every one of these instances where we farm consumers. 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 . Let me contrast what your predecessor said for example on mortgage foreclosures. He said they took a look and where they had made mistakes they sent 15,000 dollar checks to people, when they heard nothing back they thought it was probably satisfactory. Is that your approach . Our approach is to make sure that everyone who was harmed gets compensated properly. How do you calculate that . Thats what i want to know. Ill be glad to talk to some examples of what that is piece by piece. 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. Thank you. The gentleman from texas mr. Goodin is recognized for five minutes. Thank you madam chair. I will yield my time. Thank you. Thank you mister goodin. Thank you Mister Scharf for being here today. Wells fargo need strong Ethical Leadership to turn the tide. The board thinks you are the right person, time will tell. I appreciate you being here today to talk about what youre doing. Your day one letter to wells fargo employees at the you wrote, your front 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 today about the priorities and your execution and your leadership at wells fargo. Can you walk through what your priorities are that have been set in and the status of those priorities . What are the most important priorities . What needs to be achieved to fix wells fargo and restore public trust . More importantly, what has actually been achieved and what has not yet been achieved . For those that are unresolved, what is getting in the way of that successful execution . Congressman, i think the most important thing that i did when i arrived at the company, when i talked about setting 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 was not clear to me inside the company that everyone understood that. When we looked at the activities that people were spending their time on and where we were investing our money, it equally was not clear to me. Setting that as a priority and then as we go through our budgeting exercises and 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. The way we go about managing these activities i think today is very different. The amount of time that i am spending on these activities is 70 to 80 of my time. We brought in a new chief operating officer under which all the responsibility for driving the work across the company for remediation now sits. Hes probably send spending 90 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 individual Consent Order and thinking about how to do the work. It is a far more professionally managed set of circumstances than it was when i got there. These are just, this is just setting the framework for doing the work. I remind everyone internally all the time that what weve done is put in place our ability to get the work done, but we have to go do it piece by piece. Its a lot, its going to take a period of time, im not committed to the period of time because im not sure what it is yet. But we will stay as focused, as we have to turn sure that we get to the finish line on it. Thank you. Follow up a bit and a lot of my colleagues have discussed concerns about the culture at wells fargo when you arrived. Its well documented, 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 fargos efforts to change that Corporate Culture . Sure i think, i think one of the problems that we had, across the company is we didnt always put the right people in the right jobs. I said that my opening remarks. The culture of the company, was more family like. And family can be good, but family can be bad. They making the tough decisions about who is capable, whos performing whos not performing its really important at all levels and the organization. I dont think we have done that as well as we could. So if people dont have the right skills, dont have the right experience for things that we need, we need to get people that do as long as we treat people with the utmost respect. When we look at the people that we brought in from the outside, or people that we promoted up from within, i think that people both inside and outside the company are saying that they fit the bill. They have the experience, the know how the Proven Ability to get work done. And so, we are set up with the right infrastructure now to get the work done the way that we werent four months ago. Thank you very much i appreciate you being here, and will continue to observe the progress that you will be making. Thank you very much i yield back. The gentleman from utah mr. Mcadams is recognized for five minutes. Thank you mister missed mr. Sharp for being here today, so not long ago another wells fargo person sat in that chair and promising to turn things around, but ill tell you i told him back then i want wells fargo to succeed, i want the bad practices to stop. I dont want people to taken advantage of. I want wells fargo to succeed, because it has 3000 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 hope and believe that you share the same sentiments. So mr. Scharf, you generally except that wells far go failed its customers, its employees, and must do substantially better correct. Congressman yes i do. Thank you im glad you answered that way because to answer otherwise, woods starts off on a very bad foot. To the extent of wills failures of the last decade they run far and wide. Lets talk about how we can do better. Before the hearing today, i read the note that you sent to all employees and your first day ceo. And i appreciated that note. One of the points you made, in that communication was that wells forego needed to move with a sense of urgency, you said it the state expects you to move forward faster than ever, but at the top of that list was to remediate past issues. One of the things the majority staff report said that wells Fargo Management prioritize 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. Congressman these are the most important issues we have, we will prioritize them at the top of everything. Im not only commit to you, here ive told employees that verbally, ive told him that in letters, and i told our shareholders that. It thank you and we expect to see that happen. Thank you for your commitment to. That also in your nose to employees, that you your people set your part, and that the best and brightest people work for wells. I press mr. Sloan an employee issues last year, and the ability for employees to raise concern, his answer displayed a lack of understanding. At the heart of the past welsh scandal, was a cultures in the issue, where profit was king and the employees didnt feel they can raise their voices on certain activities. Can you tell me how your soliciting Employee Feedback and how you want to do in the future. Congressman we do employee surveys, and i think even more importantly, during this rather than just doing the surveys, employees know that you read them and listen to it, and you will do something about it. So ive spoken about the results ive seen an employee survey, many of the actions that weve taken, our result of what we have seen. We have tell hall meetings, i hosted a town hall meeting every quarter, of every employee inside the company, i encourage people to give me feedback, and i get feedback, i get hundreds and hundreds of emails anytime i send something out, not just after those quarterly meetings, but even in between that time. Are you ensuring that employees can get that feedback anonymously, it it sounds that they cant give it outside the normal chain of command, but can they get it back anonymously so they dont get retaliation. I get signed and as well anonymous, and we also have a hotline so you can talk to us anonymously. Changing topics one thing that has been dominating like conversation with constituents is the coronavirus, and how to prepare for this on our economy and our government. 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 in their table, how are they going to pay their mortgage etc, 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 disruptions, if theres such a thing is loan forbearance, late schedules, waiver fee etc. This is something we want our customers to look at us as a source of strength for them, we do not know where this ends, and it is something we think about, and understand the impact that he will have an individuals lives. We asked the question both for employees as well as customers, what can we do to be there for them. As of today, but not sitting here today but not as of today were sitting here today we, have number set up that we are publicizing to our customers so they can call us talk about their hardships, we will talk to them about extension of fees, we will talk to them about other things that we can do for their loans. Thank you and i yield back. The gentleman from wisconsin mr. Style is recognized for five minutes. Thank you and i yield to my colleague mr. Goodman of texas. Thank you mister style, thank you for being here, i have just a few questions yes or no answers will suffice. But feel free to answer as long as you. Like is wells fargo large bank in the world . No it is not the language the large bank of the world. No are is a large bank in north america . No we are not. So not the United States im guessing . No congressman. Of the banks of a larger than wells fargo, are you aware of any that were involved in the scandal of such magnitude as wells fargo was and if so about how many . Im not aware of another bank the extent of the issues that weve had. I guess what im getting at is that its 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 problems are perhaps unique, and you all are trying to get to a point that like the other large banks in our nation, that are variable to operate fairly smoothly, and honestly despite being large. Congressman i do believe that we have not been running the way we should be run. Our culture was not what it should have been. And it is possible to change those things, and it is possible to run the company well. I appreciate that thank you for being here. You know i also wanted to make an observation, looking through some of the majorities reports, and its been very helpful, i appreciate the work that you have put into it, before i make the observation, i was just going to point out that we have had the head of the occ here, i guess last month it was, 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, in news release on february 3rd 2020, mankind of really blasted the fbis and occs plans to weaken the components of the role. In the press releases that ive read, it may clear that they held these accountability groups, the fbi see the occ, responsible for putting out, 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, page 23, Committee Staff findings, i dont dispute these findings im 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. The president was elected in 2016 so when i read all these deficiencies in regulatory efforts, on page 24, on april 19th 2017 a report issued by the occ and its supervision of the Bank Practices concluded that the occ did not take timely and adequate supervisory actions. The occ failed to conduct a comprehensive reviews of practices between 2011 and 2014. That is right in the middle of the obama administration. I cannot help but wonder how this report would read if the republicans were in the right house, during the years of mismanagement by the regulatory groups that just allow this to go on. My conclusion that i would like to make is that the Trump Administration has done a great job in the two first 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. Im disappointed that so much of this was apparently asleep at the switch actions during the obama administration. I wish you luck and thank you for coming for us here today and i yield back to the chairwoman. The gentleman from illinois mr. Garcia is recognized for five minutes. Thank you madam chair for holding this hearing along with Ranking Member and thank you Mister Scharf for being here. In 2018 the Federal Reserve imposed and asset cap on the wells fargo due to pending compliance issues at that time. Despite this, wells fargo remains one of the countrys biggest banks. That was not always the case. In 1998, wells fargo merged with northwest. In 2017 the independent directors of wells fargo released a report on the Company Sales practices and they found that the companies focus on cross selling and aggressive sales goals became came largely from northwest. Mr. Scharf is that correct to your knowledge . That is what i have been told but i do not have any evidence of that. In the decade after northwest wells fargo merger, they acquired the National Bank of alaska. Greater may bank or, United Bank Corporation of wyoming and on and on. You get the point, lots of mergers. Then in 2008, wells fargo acquired we cove you, doubling the size of the bank, is that correct approximately . I believe so. Some wells fargo and the sales oriented culture quickly spread through what kobe a branches. Is that correct . I do believe the welsh pharco management model was implemented wachovia branches. These mergers have not only made things more complex but brought illegal and practices to more customers thus the consent pieces that are out there. Mr. Scharf, if the Federal Reserve releases wells fargo to the asset cap, will you promised or not push for more acquisitions . Congressman im not thinking about anything like that today. What im thinking about is the work that we have to do. 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 did not have the appropriate management in place. We do not have the appropriate controls in place, we do not have the appropriate risk infrastructure. As you pointed out. But it sounds like a no to me. Frankly, wells fargo unchanged by your response continues to illustrate how endless acquisitions and mergers are dangerous. That is why i introduce what 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 3000 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. They risk becoming too big to fail and put our entire economy at risk. This invaders all of us but especially working class families like the ones that i represent in chicago and part of the suburbs. After the 2008 crash. Dozens of my friends, neighbors and constituents, were foreclosed on. We sold, my parents too flat. The impact of the greed wiped out more than half of the wolf that black americans owned in our country. We cannot let that happen again. My bill requires Consumer Financial Protection Bureau approval of mergers. It requires regulators to evaluate Systemic Risk factors of a proposed merger. It 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, the Legal Practices on an enormous scale will not happen again. Thank you and i yield back madam chair. The gentleman from new york mr. Seldom is recognized for five minutes. Thank you chair women waters, thank you Mister Scharf for being here today for your testimony. We met recently. I found you to be highly motivated to do a good job, candid with all of your answers. As someone who represents the first 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 at the position you are now. I wanted to talk to you a little bit about the Veterans Issues ive discussed with your predecessor the last time he was here. You cannot 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 publicly highlighted initiatives that you are undertaking including a flatter line of organizational structure that we organizes the responsibility by creating five principal lines of business to ensure clear authority, accountability and responsibility. Its clear that you want to communicate progress but also be upfront about what went wrong. Under previous leadership, wells fargo ahead in fortunate history of wrongly trading act of service to the members of veterans. For example, it has been documented that the bank improperly repossessed cars from active military Service Members, overcharged veterans for refinancing their mortgages. Can you elaborate on some of the initiatives that youve been working on to help veterans in the wake of this scandal . Yes thank you congressman. First of all, i should start with just the statement that weve zero tolerance for a cra areas within the company. The things you described as well as some of the other things that some others as described in the harm that would cause its completely inexcusable. It flies in the face of who we should be as a company. Specifically for members of the current military and former military, we have the utmost respect for what they do. So we have to make sure that for that population as well as other populations that we have all the right controls in place. What i believe we have in place, and is effective is this point is a centralized group to review all those who are covered by scrh to ensure that those mistakes and harm that was caused does not happen again as we continue going through my process of reviewing the Company Piece by piece. We will continue to new and make sure it is as robust as it needs to be across all businesses inside the company. Im told people that is the case today but we will verify it. Id appreciate a continued open line of communication between you and not just myself and my team but everyone on this committee. On this issue which is close to my heart as i imagine it is for everyone on this committee. Transitioning a little, i want to talk about a topic that is of growing concern to me and my constituents. The d banking of legitimate lawful businesses due to pressure from social activists. Im the proud lead of the hr 55 95 the anti israel boycott act. Which would prohibit request for both shots against israel and 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. Its okay to have reasonable legitimate criticism of any government including our own or our allies like israel. But this hate field movement is not all about affirming the rights of palestinians. Likewise, the pressuring and coercion of those cloaked under the guise of social activism to deep 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 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, what can you assure me that wells fargos internal processes will not discriminate against credit where the individuals and businesses no matter how those in the public with loud extreme opinions may tray to cut off access for them. It we intend to treat all individuals fairly congressman. Thank you. Theres been an immense amount of public power in government granted advantages interested to banks to facilitate commerce. My time is up so i yield back. The gentlewoman from texas mrs. Garcia is recognized for five minutes. Thank you madam chairman, thank you for holding this very important hearing so we have an opportunity to visit with the ceo of wells fargo bank. Mr. Scharf i know that we were originally scheduled to have you come by the office to visit and it got canceled but 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 announced that it would the arbitration for. However wells fargo includes mandatory arbitration provisions for credit card agreements and account agreements. When can we see changes there . This body passed the bill in the house and the house passed a bill to end arbitration clauses in contractual agreements. I know ive personally been forced to sign some and did not want to. So when can we expect you to remove those closets from those type of agreements . Congresswoman as you pointed out we did make those changes to employees regarding sexual harassment. Weve also made been able to settle the sales practice exams without referring goes to arbitration as well. There are places where weve 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 just started to look through and there is nothing more to report on that today. But as we continue to think about it, certainly willing to continue to engage with you on the topic. Right. So was this a practice that you also maintained in your previous employment in the Banking Industry . I do not believe the b and why mellon had arbitration but i am not exactly sure. Can we check on that too . You said that you cannot commit to getting us on the right track on those particular agreements . 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 will look and determine what we think the best way to do that. This body has found that arbitration clauses is not fair to the consumer. As a consumer myself, i find them repugnant. As an attorney and former judge i find them repugnant. I know that you also deny consumers the right to participate in any, Class Action Lawsuit or arbitration against the bank. Is that true . And when can we see a change in that . I do not know the specifics congresswoman. You dont . I do not. When you go back to your office could you check into that or put it on your list so we can work on that also . Thats talk to you about. That great. Thank you. 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. You said that you are no longer use any reviews based on sales, that you would be focused on consumer Customer Service. That you would look at balanced growth. What does that mean . Congresswoman i was referring to the incentive plants that have been changed. Specifically in the consumer bank. Where the majority the meaningful part of the compensation was based on sales goals which 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. Correct. The second has to do with balances that exist inside the customer accounts. You mean the dollar balances . Yes the dollar balance. So they will score more points on their reviews if they handle their bank account . What we do, 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 rain shes. We have different bankers who cover different different customers and different wealth levels. So we are not judging those the deal. Youre not suggesting that bigger the bank account number, the better treatment that person is going to get. Absolutely not. The average joe who walks in with a 200 dollar bank account is going to get treated differently because the person is going to get more points for the higher value. He should not be treated differently. Thank you. And im sure i yield back. The gentlewoman from california is recognized for five minutes. Mr. Scharf have you seen the movie herald and kumar go to white castle . There is a famous scene in that movie where kneel Patrick Harris borrows the car and completely trashes it. Wells fargo lets monies to customers get a car and they want them to protect that car. The collateral, the value. Theres always the kneel Patrick Harris risk. Crashes the car, default on the loan and the value is not enough so there is the risk of a loss. To guard against that loss, wells fargo as consumers pay free gap waivers. Gap stands for guaranteed auto protection. The gap waiver cancels the remaining downs on the loan if the regular auto liability payout after the car is damaged is insufficient. But when someone pays off alone, there is no need for thaty waiver because the debt is paid off. But wells fargo keep charging for that gap waiver. You did not tell consumers after they paid off the loan early that you owed them money back, about 350 dollars 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 as consumers in gap overcharges has been returned . Congresswoman i do not know the exact number of what we have returned. The chart on the side, this is how much you oh 600 million. This is how much youve 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 whats right and paying consumers. 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 wells fargo his 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 giving them their money back . Congresswoman, there is no question if we have harmed customers than we should in fact do that. We will go back and take a look at the specific examples. I dont understand why it has not been done and how we can move quickly to rectify. This is the pleading in that case that is currently pending in which wells fargo is arguing even though they charged for many gap and spare insists, they have not in fact refunded that insurance. That 350 dollars means a lot, its 18 bags of groceries for families. I would love it for you to commit to doing that. I also wanted to ask you have you heard of the song mamas dont let your babies grow up to be cowboys . I dont believe you have. It was written by an american hero, willing nelson. I have three kids mr. Scharf. Im thinking of writing a new song, mamas dont let your babies grow up to be bank tellers. How many of your tellers are currently receiving public assistance in this country . Im not aware congresswoman. Right now, one third of bank tellers in the United States receive public assistance. Madam chair 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 also almost 900 Million Dollars per year. Without objection such as the order. We subsidize to the tune of 900 Million Dollars per year. I dont want my kids to grow up and the wells fargo tellers because statistically telling, one of the three would end up needing public assistance. Is wells fargo profitable . I believe it is, yes congresswoman. You believe . Its 19. 5 billion last year. We can rounded up, that is profit. They can afford to pay its tellers significantly more. Do you think the hard working taxpayers of this country should be showing up wells far goes salaries when the bank has profits of 20 billion dollars a year . And they pay back 30 billion in buybacks and diffidence last year . I believe we should pay People Fairly and i believe the actions weve taken recently especially raising the minimum wage does in fact do that. You raised the wage only in high cost areas, not across the board. Eight we raised our wages in four different tears. With that i yield back. The gentleman from illinois mr. Casten is recognized for five minutes. Thank you madam chair, thank you Mister Scharf for a long day here. I want to shift to some of the recent market activity, specifically in the oil sector. Im an energy guy. By history i dont want to make too much of one day volatility, but certainly the fact that after yesterdays news that russian interests and saudi interests are not aligned with our own and we need to brace ourselves for a potential downturn. As im sure you know in the 2016 period, wells fargo, your energy fund was exposed to significant losses because of the cubic energy law bankruptcy. What i would like to understand is how much capital exposure does wells fargo have exposed to the oil and gas sector . Congressman i do not 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 a percentage of our equity. It looks similar to what other larger banks have. You tell me if it is right. If there is exposure, would it all be in the Wells Fargo Energy group . Is that where all the energy landing will take place . Im not sure congressman. Im looking, this is off your website, an october 2018 report, it says you had 42 billion committed to public and private companies and if im looking at this, its just 41 in exploration and production, 15 in midstream. If i think exploration and production pipelines, thats perhaps 23 billion of exposure, does that feel about right to you . Im trying to do the math in my head im not trying to put you on the spot. Ill take your word for it if you have the document congressman. You have any sense of how much of that is an equity versus debt . No i dont. Im just trying to do the math. In your most recent ten k its your total Loan Portfolio for oil gas and pipeline was 13. 6 five billion. Im assuming thats just the debt side. Is it a reasonable guess that theres maybe ten billion inequity . Ballpark . I dont know the specifics sitting here today congressman. Okay. Can you estimate on the debt side how much would be secondly versus senior debt . No i cant sitting here today congressman. Okay. I suspect we will have a lot of i dont know. But if you could get back to us on all of these. Do you know how far the oil price would have to fall for your senior loans to be in technical default . On an asset value test. We have a risk function and business function than im sure has run models like that. That specific question i do not have the answer to. Do you have any general sense given the Oil Market Volatility right now how concerned your risk function is about that Oil Market Volatility . Congressman theres certainly a heightened degree of activity around the oil and gas exposures that we have. When we took those exposures we took them in the context of what we thought the risk we could tolerate. So beyond that, i cannot answer additional questions on it. Do you think your exposure risk sort of representative of the industry, the broader Banking Industry . I cant speak for the rest of the industry and i do not know the specifics of their exposures. Do you have any idea you have and reserved for potential losses in the sector . I dont sitting here today, im not sure its something i would want to share probably anyway. Okay. Well i will follow up if you could get answers back in writing. What i am trying to understand is what is the Systemic Risk created to the entire Banking Sector of what you are a participant if there is a sustained reduction in the value on the books of the Oil Companies in this country. And i will leave you when cubic energy went bankrupt, john ross, where you took a complete wipe out on the equity, john ross the Vice President of operations said what is really worth anything at 40 dollar oil into dollar gas . Its hard for me to say right now. The answer for the equity holders including wells fargo was zero. As of today, west texas crude is at 43 dollars and natural gas about a buck 90. It is a concern for me that you do not know. I understand this is 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 can assure you it is a topic of conversation inside the company. Thank you i yield back. The gentleman from colorado mr. Perlmutter is recognized for five minutes. Good to see you Mister Scharf. A couple questions. A wise man once told me problems do not age very well. This gap insurance, the guaranteed Asset Protection where wells fargo has received a premium to cover the loss of the car, and then the car is either sold and wells fargo is paid off, where they refinance it and it is paid off. Wells fargo continues to hold that full premium. There are cases out there brought against the company to recover that. Small dollar amounts and as somebody who has been outside counsel to Financial Institutions, you are outside lawyers are going to say we can fight this, we can require arbitration, we can make everybody come in to get their 322 dollars. And you know what . Will be better off as an institution. But i would remind you of this why saying problems dont age very well. Its chief executive officer, i would ask that you consider miss porters discussion and also that pleating and take a look at just getting it settled because these things need to get behind the bank. This brings me to my second question or point. I think the thing that really has been difficult for both democrats and republicans is the series of Consent Orders, the delay from the first point to today. And the question i think both reports to different magnitudes, there was an issue with management, issue with boris, issue with the regulators. I think for us the question is where 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 . Id like to get your response that. Thank you congressman. I think its absolutely possible to run a company like wells fargo well. There is a serious things that we have not done the categorize itself as running well and that is evident in our lack of ability to make progress in some of these activities that we spoken about today. Our culture did work against us. It is not what he needs to be. We havent had the right Management Structure of the company in place. We havent had the right people in place. We certainly did not have the right priorities set across the company. Then ive also spoken today about the fact that we do not have the right accountability for people then to be able to map what those priorities were to what it meant for them. I think when you put those things together you get the right people in the right seats to run the company very differently, it is possible to have a very different outcome than weve seen. Last one. Its, the proof will be in the pudding. Further delays are only going to be problems that continue to age and not good for the company. As a customer, ive been a customer of the bank for 40 years. Ive had some of those issues in my own accounts. So i want to see the company right its ship and just do good. Last thing is a softball i want to give you and that is if you are sitting up here, and youve got coronavirus, and you see Small Business potential victims as a recession. Tourism industry, hospitality, and 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 potential, what should we be looking for in the Financial Sector generally to help stem off something that will get worse . Congressman i would certainly look and ask the question what are the banks doing in order to do what they can to support all the individuals that are affected by this . We do not know how far it will go but we know it is significant. 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. Sort of a last point those that could be really affected. Some things were done by your bank during our shutdown. I would ask you consider to do similar things to help those affected individuals. Thank you. Thank you the gentlewoman from michigan miss tlaib is recognized for five minutes. Thank you madam chair. First of all i do think it is important that many folks understand i think what our chairwoman is trying to do its not called intimidation, its called doing her job. This report alone is doing her job as chairwoman of Financial Services, as someone who oversees, especially overseas actions by banks like yours. Many people are calling it a cultural issue right . Gets called cheating. The definition of cheating is to act dishonestly or unfairly to take to gain an advantage. I dont understand were calling it culture when its a criminal scheme. Page 13 of the report, along with you did to Service Members in our country, they were facing evictions. That alone is to me a criminal scheme that you all got away with. Understandably, my colleagues will try to be a little more forgiving but when someone in my community, a resident that difference the government, they go to jail, they get prosecuted. So im really taken aback by folks that dont understand the consumer abuse by the company and dismissing it and belittling it as a cultural issue. It is a criminal scheme. You all got caught doing something that was extremely disgusting and disadvantaged so many of our folks especially frontline communities like mine. Your predecessor at wells fargo made 18. 4 Million Dollars in 2018 did you know that . Ive read that yes. You know thats 283 times more than the medium Median Income for your employees . Yes. My question to you. Do you think it is appropriate for a bank cut cheating to not address the excessive executive pay at wells fargo . The bank you now oversee. Congresswoman, i am focused on making sure that we treat everyone fairly Going Forward. Let us talk about that. Do you know when you all do not pay a living wage to our residents, many of them employees, they live in our communities, that because you dont pay a living wage they end up going on assistance . So we have to cover Health Coverage maybe that you dont provide adequate Health Coverage. Where they have to get second job. Thats something you should absolutely right down mr. Scharf and find out what is happening in the lives of the people that serve in your company. One of the things that ive been trying to figure out is, is there in amount of ceo pay that you would consider inappropriate . Yes or no would you recommend that you or any other Bank Executive should have to forfeit some of your own compensation to pay any penalties wells fargo paces under your leadership . Congresswoman i think all of the activities that occur should be factored into the ceos compensation. How many ceos do we have since all of this . Im looking at the dates. This has been ten years and people have been trying to say this is an issue with chairwoman. This is ten years of doing this to real people. Theyve lost their homes, their lives, this stuff is on their credit reports still while you all settle out of court and get away with it. I have a ceo tax goal, its important, i encourage my colleagues to look at it. The tax excessive ceo pay act i cool lead with senator sanders and lee. This would put a penalty on all banks and corporations with big gaps. Im tired of us subsidizing for you all not even paying a living wage for the residents that work at the company. On top of that, youre also around the corner scamming them. Im not convinced. Its not fault of your own or maybe it is because you chose this role. You come in here and continue to say that is before my time. If i went to my community in 13 district strong and said i just got here, i dont know, they would literally push and hold me accountable and say you need to know. Were telling you before 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 do not even acknowledge its exactly what you inherited is a criminal scheme by your company. It is literally leaving people on the streets. This is not personal mr. Sheriff. This is literally life and death for our residents at home. When you come here and you do not have answers, then its a disgrace and honestly its disrespectful to this chamber. You cannot come here and continue to say im new, that is not the right answer. I think ive provided many answers. Thank you madam chair. The gentlewoman from ohio mrs. Baby who is also the chairman of subcommittee for diversion and Diversity Inclusion is recognized for five minutes. Thank you to the chair and the witness. Im interested in how you plan to run the bank. Let me start with do you know what you inherited when you took this job . Yes or no to move us along, its been a long day. Do you think you are adequately prepared to know what you were inheriting . I was as prepared as i could be. I was can you tell me if you think you are adequately prepared for this hearing today, yes or no . Its for the sake of time. Ive done the best as i can. Were you adequately prepared by your team for this hearing . That is four others to determine. Im asking you, youre sitting in the chair, you are our witness, do you think you are adequately prepared . Its not a got you question, i was hoping as a ceo that you would say yes. I believe i was. But its important for others to determine. What do you believe, do you believe you are adequately prepared . Yes i do. Thank you. Are you familiar with the interests of the subcommittee chair people on this committee . You know what i chair on the subcommittee . You chair the diversity subcommittee. See it seems that you are adequately prepared to know what i chair. Did you read the wells fargo report that was submitted to my subcommittee . No i did not congresswoman. Thats disappointing. And im 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 were doing in moving this needle and then you want to wonder why people ask you questions . Because when we talk about moving the needle for inclusion. Were talking about closing the wealth gap, pay equity, it is far beyond race, ethnicity and gender. It is about veterans, is about regular people, it is about how we move the needle to make sure that people have equality and not in justices. Im very sad because you cannot answer half the rest of my questions since you did not even take the time to look at the report. Ive been very consistent. I ask the same questions for the last six years. To every ceo that has been in this 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 and in the world that you run. From the transcript, when they talked about hiring you. I dont know if you will remember this. But let me quote. Its said that you were passionate about diversity and inclusion and that you were committed to work with a talented Management Pool of people. Then you answered and said you were excited to come on board and do those things. See how connecting the dots . If they thought you were passionate and committed to diversity and inclusion and yet you dont read or look at the dni report . You knew you were coming before this committee. Ive asked every Single Person the same question. 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 Inclusion executive on your team . Yes or no . Yes we do. Does that person report to you . No she does not. Wrong answer. If you really believe in diversity and inclusion, that person, especially with all the inequities and the lack of addressing the questions that my colleagues have asked, you should look at that personal person reporting to you. You have a seat on the board. I get the point that you dont serve on the nominating committee. The question to you is, will you push for Something Like the rouhani rule . Sitting there as a board member, or do you even know what the roomy rule is . Have you heard of it . I do. So you know the rouhani rule, i have a piece of legislation thanks to the chairwoman called the baby rule that was passed. Will you participate in doing that . I can certainly have the conversation and be in support of but it is the boards decision. How many people of color and are diverse on the board . 30 are women and 20 are diverse. Sorry my time is up and i yield back. Thank you very much, before we adjourn the hearing. I yield four minutes to the gentleman from North Carolina. Thank you for your testimony today. First i think we have to say that youve outlined an aggressive plan for the institutions. You will be held accountable by year regulators, by your board. You will be held accountable by your shareholders. You will certainly be held accountable by those who make the law here on capitol hill and have oversight over those regulators. Whats clear, in the history of your institution, wrong was committed. This hearing today was about the forwardlooking nature of this. 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, to 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. But we can chairman opened an investigation. He called this ceo to testify and requested documents and information from your company and the companies regulators. All told, he obtained about 170,000 pages of documents from your institution and from regulators. He had issued subpoenas to get some of those documents, he had issued subpoenas to get documents from our regulators which we have oversight over. That was during the obama administration. Democrats had those jobs but it was a republican subpoena to get that information. Both majority and 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 this last congress. That last congress. Then you fast forward to 2019. Democrats are now in charge of the house of representatives. Change over at the regulators as well. So we had a request for Additional Information from wells and the regulators. Another 370,000 pages are turned over. Without a single subpoena from your institution or regulators. The key difference is that every single one of those pages without a subpoena from the regulators. That was different under the Trump Administration there was under the cfpb. Now this cfpb and this director freely handed those documents over. Necessary documents for us to have oversight on your institution and ensuring that our laws are appropriate. The enforcement is appropriate. So between us, weve obtained about half 1 million pages of documents that both democrats and republicans on this committee have. We have key findings of fact that a real indictment for your institution. An absolute indictment of 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 do different conclusions on how to deal with your institution and institutions of your size. That becomes the decision for policymakers to make on what to do about those key findings of facts. We have a disagreement and that is an honest disagreement between republicans and democrats. The key findings of facts were bipartisan in nature. So we know that now is a question of what to do with it . I think we need strong oversight of you. You need better management practices. 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. Thank you very much. Before we conclude todays hearing, i yield mys up for minutes to describe the process the majority undertook to conduct our wells fargo investigation and create the report with these findings. Over a year ago, at my direction, the majority staff initiated an investigation into wills far goes compliance with five Consent Orders Committee Majority staff requested and we reviewed 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, sec and wells fargo. We conducted interviews with Key Executives at wells fargo and the former chair of the board risk committee. In addition, they interviewed officials at the Federal Reserve, the occ and cfpb. The documents would serve for the basis of the majority staff report in which the minority also used for their report which were obtained because the majority staff spent months working to obtain them from regulators and the bank. 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 but productive negotiation. The majority staff determined that the focus of this investigation drafted the document request to the occ, the cfpb and the Federal Reserve. Wells fargo bank and wells fargos board of directors determined the scope of those inquiries. A majority staff selected the witnesses, the committee interviewed and negotiated their appearances for interviews. At the same time, republican staff had access to all documents that 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 yearlong effort this report would not have been possible. Bruce johnston. Deputy chief oversight counsel. Caroline khan, senior counsel. And i will also like to acknowledge kevin boris, chief oversight counsel. Christine baths, our paralegal. Glenn sears, director of Consumer Protection policy. Senior counsel, yanna miles, senior counsel, pierre wobbly, professional staff. Y eric low, Deputy Communications director. Even harris, press assistant. The majority of the investigation revealed deeply troubling failures on the part of the banks board, and regulators. It is broken and consent continues to haunt consumers. Congress must act accountability to the public or responsibility to harm to consumers. At this hearing, weve made it clear to mr. Sharp that this committee is keeping a close eye on wells fargo and we will be holding them accountable to ending the banks agree just pattern of consumer abuse. It is an immense task asked of him and the committee will not repeal it scrutiny on the bank, until other banks understand they are not above the law. No matter what is being said, about who did what and win, im 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 and correct 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 witnesses for the testimony today. Without objection, all members will have five legislative days within which to submit additional written questions for the witnesses to the chair which will be forwarded to the witnesses for this purpose. I wish, i ask, our witnesses to please respond as promptly as you are able without objection, all members will have five legislative days within which to submit extraneous materials to the chair for inclusion in the record. The hearing is now adjourned. Thank you