WASHINGTON -- More than two years after scandals engulfed Wells Fargo & Co., Chief Executive Officer Tim Sloan returned to Capitol Hill on Tuesday to lay out his efforts to clean up the mess.
Democrats and Republicans on the House Financial Services Committee took turns grilling Sloan for more than four hours Tuesday, with several expressing doubts that the three-decade insider should be running the firm. Committee Chairman Maxine Waters was joined by some colleagues in her call to go further, raising the specter of a breakup.
"Wells Fargo's ongoing lawlessness and failure to right the ship suggest the bank, with approximately $1.9 trillion in assets and serving one in three U.S. households, is simply too big to manage," said Waters.
"You have not been able to keep Wells Fargo out of trouble," said Waters, a Democrat from the company's home state of California. "Why should Wells Fargo continue to be the size that it is?"
Lawmakers unloaded on Sloan with bipartisan anger that showed the San Francisco-based financial institution has a long way to go to get past the controversies that harmed its reputation in 2016.
Several lawmakers noted that Wells Fargo had been fined by every agency it is regulated by. Sloan said that by his count, the bank is currently under 14 consent decrees with those agencies.
The contentious hearing increased pressure on regulators to continue their tough approach to Wells Fargo and provides fuel for Democratic efforts to seek the breakup of giant banks that have a history of consumer abuses.
Sloan was the first megabank chief executive whom Waters, an outspoken critic of Wells Fargo, summoned to appear before the House Financial Service Committee since she took over as its chairman in January after the midterm elections that gave Democrats control of the House.
Waters introduced legislation last year that would direct regulators to break up big banks that "repeatedly harm consumers." Republicans are unlikely to support the bill, but they joined Waters and her fellow Democrats on Tuesday in hammering away at Sloan for Wells Fargo's continued problems.
"Each time a new scandal breaks, Wells Fargo promises to get to the bottom of it. It promises to make sure it doesn't happen again, but then a few months later, we hear about another case of dishonest sales practices or gross mismanagement," said Rep. Patrick McHenry, R-N.C.
"Every single member of this committee has constituents in their state who were impacted by Wells Fargo," he told Sloan. "Our constituents should be able to trust their own bank."
Several times, Sloan said he didn't think the bank's size was its issue.
"I think in fact there's a place for every size bank in this country -- small, medium and large," Sloan said. He added that larger banks have the ability to invest in products and services, like real-time balance alerts, that smaller and mid-size banks probably can't.
Among a litany of scandals in recent years was Wells' acknowledging that its employees had opened up to 3.5 million accounts without customers' authorization or knowledge in order to meet sales quotas. The Federal Reserve took unprecedented action on Wells Fargo's business in February 2018, forcing the bank to replace four of its directors and capping its growth until the bank developed better risk-management practices.
Other scandals engulfing the biggest U.S. mortgage lender have included selling auto insurance and other financial products to customers who didn't need them, charging service members higher rates on loans than allowed by law, and improperly selling complex financial products to retail investors.
Sloan was also pointedly questioned by Rep. Brad Sherman of California about the bank's use of forced arbitration, even in cases in which customers had accounts opened in their name without their knowledge. Sloan would not commit to say whether Wells Fargo would consider backing a law that let customers who believed they had been defrauded or misled sue banks rather than be forced into arbitration.
Regulators hit Wells Fargo with a $1 billion fine last year for forcing auto-loan customers into unneeded insurance policies and charging improper fees to some mortgage borrowers. And in a securities filing this month, Wells Fargo said it could be required to pay as much as $2.7 billion more than it had set aside as of the end of December to resolve legal cases, including ongoing probes by the Justice Department and the Securities and Exchange Commission.
The Los Angeles Times first reported Wells Fargo's high-pressure sales practices in 2013.
Sloan's testimony came the day after a report released Monday by the Committee for Better Banks, an advocacy group that includes some current and former Wells Fargo employees, said the bank "has not fixed its culture of fear and intimidation."
Wells Fargo has paid about $4 billion in settlements with regulators and plaintiffs who have brought private lawsuits.
Sloan has said he expected the Fed-imposed cap to remain in place through this year.
Information for this article was contributed by Jim Puzzanghera of the Los Angeles Times, by Hannah Levitt, Elizabeth Dexheimer and Emma Kinery of Bloomberg News and by The Associated Press.
Business on 03/13/2019