After listening to Wells Fargo CEO Tim Sloan try to convince lawmakers the bank has undergone a “transformation,” Rep. Maxine Waters (D-CA) says it’s clear the bank has “failed to clean up its act.”
Waters said she plans to reintroduce her legislation, the “Megabank Accountability and Consequences Act,” to break up big banks with a record of consumer abuse.
Waters also said regulators should consider removing executives, including Sloan, from Wells Fargo.
Sloan testified before the House Financial Services Committee for several hours on Wednesday.
Waters began the hearing by listing all the controversies surrounding Wells Fargo — including the creation of fake accounts, improperly repossessing service members’ cars and overcharging small businesses for credit card transactions.
“What this long, but impartial list makes clear is that Wells Fargo is a recidivist financial institution that creates widespread harm with a broad set of offenses,” said Waters.
Ranking member, Rep. Patrick McHenry (R-NC) said questions still need to be answered and he wants to know more about how Sloan is changing the bank’s culture.
“I’m concerned that we don’t know with certainty how many customers were affected, what business lines were implicated and the full extent of the damage,” said McHenry.
Sloan said since taking over as chief executive, he’s been working to “address the root causes” of the company’s recent controversies.
In connection to the sales practice controversy, Wells Fargo has looked back more than 15 years, reviewed 165 million accounts and contacted more than 40 million customers and paid millions of dollars in compensation to customers, according to Sloan’s testimony.
“To be sure, getting this right for each customer takes time – longer than I would like, frankly,” said Sloan in his opening remarks.
McHenry pressed Sloan about the possibility that additional scandals may emerge in the future.
“There’s nothing else that I’m aware of, that we haven’t disclosed,” said Sloan.
The ranking member also asked Sloan if this is the end of customer harm at Wells Fargo.
“I can’t promise you perfection, but what I can promise you is the changes that we’ve implemented, the substantive changes that we’ve implemented since I’ve become CEO are going to prevent them from occurring as best we can,” said Sloan.
In an interview with Yahoo Finance, McHenry said Sloan’s answer was “less than reassuring.” McHenry said at this point, he’s not confident the bank has done enough to fix all its problems.
Throughout the hearing, several Democratic lawmakers expressed concerns about the bank’s size.
“You basically qualify with all of the things that would lead the FDIC and the regulators to remove the CEO and take over that bank and I don’t know why they haven’t,” said Rep. Stephen Lynch (D-MA). “If I were you and you really wanted to do the right thing, put this bank on the right path — break it up. Decide how you would dismantle this so we don’t lose all the jobs. But you’re way too big, your conduct as been disgraceful.”
“It’s too big to manage,” said Waters.
McHenry told Yahoo Finance it’s a question of “mismanagement,” not the size of the bank.
“What is clear here is that the Wells Fargo situation is unique to their competence and management practices,” said McHenry. “We’ve had significantly larger companies in terms of head count that have not had these bad practices. You have larger financial firms that have not had these bad practices.”
Last year, the Fed placed an asset cap on Wells Fargo in response to its “widespread consumer abuses.”
In his opening statement, McHenry noted that the cap will likely be in place through the end of the year.
“Obviously the bank has a ways to go before the Federal Reserve is satisfied,” said McHenry.
“They [the Fed] wanted us to make more progress in terms of our improvement, required improvements under the order, and based upon that we believe it will take us a little bit longer. We have the same goals and objectives as the Federal Reserve does,” said Sloan, when asked about the asset cap.
Senator Elizabeth Warren recently wrote a letter to Fed Chairman Jerome Powell, saying the Fed should not lift the growth restriction on Wells Fargo until Sloan is ousted.
At least one regulator is not impressed with the bank’s efforts.
"We continue to be disappointed with Wells Fargo Bank N.A.’s performance under our consent orders and its inability to execute effective corporate governance and a successful risk management program. We expect National Banks to treat their customers fairly, operate in a safe and sound manner, and follow the rules of law,” said Bryan Hubbard, an Office of the Comptroller of the Currency spokesman.
Sloan is the first big bank CEO to go before the House Financial Services Committee since Waters took over as chair. Waters has vowed to step up oversight on the banking industry, and is expected to eventually ask chief executives of other big banks to testify.
"We are poised to have significant hearings" said Waters at a recent press conference, adding she would not hesitate to bring "bad actor" CEOs before her committee.
Jessica Smith is a reporter for Yahoo Finance based in Washington, D.C. Follow her on Twitter at @JessicaASmith8.
