What to Watch When Wells Fargo’s CEO Returns to Congress
(Bloomberg) -- How much progress has Tim Sloan made cleaning up Wells Fargo & Co.?
That’s the key question that Sloan, 58, will face when he testifies to the House Financial Services Committee Tuesday in a hearing titled “Holding Megabanks Accountable: An Examination of Wells Fargo’s Pattern of Consumer Abuses.”
Sloan, who rose to chief executive officer of the fourth-largest U.S. bank in October 2016, appeared before the Senate Banking Committee just months later, telling lawmakers he had “a long to-do list.” Tuesday’s questioning poses both a chance for Sloan to tout what he’s checked off that list, and a risk that he’ll stumble in front of some of his harshest critics.
Scandals at Wells Fargo erupted in 2016 on the revelation that bank employees opened millions of potentially fake accounts to meet sales goals. Problems have since emerged in all business lines, prompting the Federal Reserve to ban Wells Fargo from growing assets beyond their end-of-2017 level until the bank cleans up to the regulator’s satisfaction.
Wells Fargo has dispatched its army of lobbyists and executives, including Sloan, to meet with lawmakers ahead of the hearing. The efforts cap a months-long charm offensive ahead of Sloan’s appearance and a planned combined hearing with the heads of the biggest U.S. banks.
Here’s what to watch for during Tuesday’s hearing:
Committee members want to know what Wells Fargo is doing to make things right for customers, and what safeguards were put in place to ensure nothing similar happens again. The bank revealed last year that it improperly foreclosed on more than 500 homes after wrongly denying mortgage modifications. Lawmakers may trot out constituents affected by this and other bank missteps, such as improperly repossessing vehicles.
“I know I’m going to ask him some questions about what they have done to repair the damage they have done,” Gregory Meeks, a New York Democrat, said in an interview.
Sloan will provide updates on “important changes that have taken place at Wells Fargo over the past two years as we continue to rebuild trust, innovate for consumers and make things right with our customers,” bank spokeswoman Jennifer Dunn said in an email.
Is Sloan -- a three-decade company veteran -- capable of turning the bank around? Wells Fargo’s list of woes has grown since he became CEO, in part because extensive internal reviews exposed more issues.
Senator Elizabeth Warren, a prominent critic of Sloan and a presidential candidate, has said he shouldn’t be CEO because “his hands are too dirty from overseeing years of scams and scandals.” Representatives may weigh in on the issue.
The session, among this committee’s first under a Democratic majority, is an opportunity for some of the new voices in Congress to make a splash. Wells Fargo’s stance on guns is unique among its peers and may draw lawmakers’ ire. While Bank of America Corp., Citigroup Inc. and JPMorgan said last year that they would reduce ties to gunmakers, Wells Fargo has protected its long relationship with the National Rifle Association and the industry.
Freshman New York Democrat Alexandria Ocasio-Cortez has already criticized Wells Fargo over a Consumer Financial Protection Bureau report saying it charged students the highest fees of 573 firms examined. Other key freshman Democrats to watch include Katie Porter of California, a former consumer-protection lawyer; Rashida Tlaib of Michigan; and presidential candidate Tulsi Gabbard of Hawaii.
Lawmakers are also poised to use Sloan’s testimony to score political points on Trump-appointed financial regulators, especially at the CFPB. While Democrats praised the CFPB for its role in fining the bank over the sales scandals, Republicans say the agency didn’t do enough to catch the problem earlier.
Who Gets Paid
Wells Fargo’s 258,700-person workforce as of Dec. 31 makes it one of the biggest employers in the country. Last year, Sloan announced plans to trim staff by up to 10 percent within three years as the bank also pledged to buy back as much as $24.5 billion in shares and boost the dividend.
Choosing repurchases as the best way to deploy capital while cutting jobs is likely to be a focus of questioning. Sloan’s compensation, $17.4 million for 2017, has been a point of contention.
Too Big to Manage?
Committee Chairwoman Maxine Waters, a California Democrat, has said that San Francisco-based Wells Fargo is too big to manage and has proposed legislation that banks with repeated consumer-protection failures should be broken up. Can Sloan prove her wrong by demonstrating that it’s possible to make sweeping overhauls at an organization that spans the U.S.?
“I am interested in understanding on the ground, at the level of employees, at the level of investment and technology, at the level of hiring and training,” Porter said in an interview. “So I hope that the CEO comes prepared.”
©2019 Bloomberg L.P.