Wells Fargo came under blistering congressional scrutiny Tuesday in the wake of a series of consumer-related scandals.
The bank engaged in an “egregious pattern of consumer abuses,” U.S. Rep. Maxine Waters said at the outset of a roughly four-hour hearing she chaired regarding the fourth-largest U.S. bank.
Tim Sloan’s appearance before the House Committee on Financial Services marked the second time he has testified on Capitol Hill over problems at the bank following revelations in 2016 that bankers opened as many as 3.5 million unauthorized accounts to meet high-pressure sales goals. Since then, Wells Fargo has struggled to fix its image as it’s disclosed harming customers in other areas of the company.
“The past few years have represented a difficult chapter in Wells Fargo’s storied history,” Sloan, 58, said in prepared remarks. He noted that the bank has worked to address “root causes” of its problems. “As a result, Wells Fargo is a better bank than it was three years ago.”
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But, he said repeatedly Tuesday, “we have more work to do.”
Committee members were skeptical.
Rep. Patrick McHenry, the ranking Republican on the committee, noted that after one scandal has erupted at Wells Fargo another followed. “Since 2016 the bank has entered into settlements with every single one of its federal regulators,” McHenry said.
“The bank’s behavior has real-world consequences,” he said. “Our constituents should be able to trust their own bank.”
At one point, McHenry, whose district includes the Charlotte metro area, asked Sloan, “Is this the end of scandal at Wells?”
Sloan did not rule out uncovering more problems.
But, Sloan said, the bank has made “substantive” changes that will prevent problems from occurring “as best we can.”
Underscoring the work Wells Fargo has to do to satisfy regulators, a spokesman for the Office of the Comptroller of the Currency said Tuesday the banking regulator continues to be disappointed with Wells Fargo’s performance under the OCC’s consent orders.
Wells has shown an “inability to execute effective corporate governance and a successful risk management program,” spokesman Bryan Hubbard said in an unusual reprimand from the regulator. “We expect national banks to treat their customers fairly, operate in a safe and sound manner, and follow the rules of law.”
Wells Fargo declined to comment on the OCC comments.
‘Too big to manage’
Waters told Sloan that the bank was “too big to manage” and noted revelations of customer harm that have been disclosed since he became CEO.
“You’ve not been able to keep Wells Fargo out of trouble,” she said. “Why should Wells Fargo continue to be the size that it is?”
Sloan said he believed the bank was serving its 70 million customers effectively, and reiterated changes the bank has made since he took over.
Those include getting rid of product sales goals for retail bankers in branches and call centers. He also said the bank has decentralized certain functions such as risk and human relations, to improve oversight of the company and prevent new problems from developing.
Sloan, in his remarks, pointed to other steps such as the addition of seven new members to the bank’s board over the past two and a half years.
There were plenty of tense moments Tuesday, as lawmakers blasted Sloan for a range of consumer abuses at the bank, including disclosures last year of a Wells Fargo error that caused about 545 customers to lose their homes to foreclosure.
But some lawmakers praised Sloan for steps he’s taken to fix the bank.
Those included Republican Ted Budd, who represents part of the Charlotte metro area. Budd said he commended Sloan for owning up to Wells Fargo’s mistakes.
The other North Carolina representative on the committee, Democrat Alma Adams, asked Sloan what Wells is doing to improve access to affordable housing, “an issue that we’re having in Charlotte.”
Sloan pointed to Wells Fargo’s Neighborhood Lift program through which it provides down payment-assistance grants to low- to moderate-income families.
‘You don’t get it’
In one pointed exchange, Rep. Gregory Meeks, D-N.Y., pointed out that Wells Fargo was given a rare double downgrade in 2017 by a regulator for its performance under the Community Reinvestment Act.
The act, created by Congress in 1977, requires banks to make loans in the communities where they do business, including low- and moderate-income neighborhoods.
The Office of the Comptroller of the Currency, in its latest findings on Wells’ compliance with the act, downgraded the bank to “needs to improve” because of previously issued regulatory consent orders. That’s the second-lowest of four ratings.
Meeks asked Sloan if he thought the downgrade was appropriate.
Sloan said no.
“Well, then you don’t get it,” Meeks said.
The hearing, Holding Megabanks Accountable: An Examination of Wells Fargo’s Pattern of Consumer Abuses, comes as Wells Fargo remains under intense scrutiny from federal authorities and lawmakers in the wake of the 2016 scandal and newer instances of customer harm.
The 2016 revelations led to the retirement of CEO John Stumpf, who was replaced by Sloan, a company insider.
Wells’ consumer abuses caused the Federal Reserve to impose an unprecedented cap on its growth last year, a restriction that remains in effect.
The scandals have also battered the bank’s stock and impacted its business. Last year, Wells, which has a large presence in Charlotte, reported only a 1 percent increase in annual profit after agreeing to billions of dollars in fines as it recovers from its problems.
Sending jobs overseas
Sloan also faced criticism during the hearing for Wells Fargo’s practice of laying off U.S. employees and sending those jobs overseas.
An Observer analysis in December found that the bank had laid off hundreds of employees during the previous year as it pushed many of those jobs outside the U.S.
At the time, the bank confirmed for the Observer that mortgage jobs eliminated in the Charlotte area last this year were also sent overseas.
On Tuesday, Rep. Cindy Axne, an Iowa Democrat, questioned Sloan about whether the bank sent any jobs overseas when it announced layoffs of about 400 people in Des Moines last year. Sloan said some of those workers lost their jobs, in part, because of a drop in demand for Wells Fargo’s mortgage servicing business.
“I have a signed affidavit here saying that an employee in Des Moines was told her job was being moved to India and that employees in that area have gone to India to train those replacements,” Axne said. “And then I’ve also heard from employees that are using your virtual classrooms for that same purpose, to train people in other countries.”
Sloan pointed out that the bank has 20,000 job openings and at least 90 percent of those are in the U.S.
“I fail to understand, though, how we’re laying people off in this country and building jobs overseas,” Axne said.
Workers: Sales pressure persists
The hearing also comes the day after the release of a report in which Wells Fargo workers claim they still face a high-pressure sales environment at the bank.
The findings were released by the Committee for Better Banks, a New York-based coalition of industry employees who push for better working conditions at banks.
“I still feel pressure to rush through transactions in order to keep up with productivity and pressure from sales and management,” said Meggan Halvorson, who works in Wells’ wealth division in Minnesota, said in a statement issued by the coalition.
The coalition’s report said Wells Fargo employees remain reluctant to report ethics violations to the bank’s ethics line for fear of retaliation.
“When I hear that people are afraid to use your ethics line because of fear of retaliation, I fail to see how you’ve changed your culture,” Axne told Sloan.
Sloan said retaliation has no place at Wells Fargo. He added that, after taking over the bank, he brought in an independent third party to examine the ethics line. “We have fundamentally reorganized our ethics line since I’ve become CEO,” he said.
Wells Fargo shares fell 0.22 percent on Tuesday, a day when major stock indexes rose.
Ken Thomas, a Miami-based banking consultant, said he doesn’t think the hearing will mean less pressure for Wells Fargo from lawmakers.
That’s because, since Sloan became CEO, there have been more revelations of consumer harm, Thomas said. The only way Wells might move past its problems is by naming a new CEO, he said.
“More bad things keep coming to the surface, and these are things that are serious,” Thomas said. “This is something that’s not going to go away.”