Wells Fargo CEO Tells Lawmakers Bank Has ‘Sense of Urgency’
Wells Fargo CEO Tells Lawmakers Bank Has ‘New Sense of Urgency’
(Bloomberg) -- Wells Fargo & Co.’s new chief executive officer told lawmakers that the bank hasn’t done enough to turn itself around following a series of scandals and is now more focused than ever on fixing its problems.
“The sense of urgency within the company is very different today than it was four months ago,” Charlie Scharf, who took over as CEO in October, told a U.S. House committee Tuesday. Scharf said he’s spending about 75% of his time on regulatory issues. “We’re going to have a much stronger centralized core when it comes to risk and control.”
Not yet five months into his tenure atop Wells Fargo, Scharf is in Washington for what’s become a rite of passage for the bank’s leaders: a congressional hearing. He appeared Tuesday before the House Financial Services Committee to offer his thoughts on what the panel called “next steps for the bank that broke America’s trust.”
It’s the first of a trio of hearings this month examining scandals at Wells Fargo in recent years, beginning with the 2016 revelation that employees opened millions of potentially fake accounts to meet sales goals. Former Chair Betsy Duke and former board member James Quigley are set to appear Wednesday for a hearing of their own.
Duke and Quigley resigned from the board Sunday. The pair faced a growing chorus of calls for their exits after the Democrats atop the committee issued a scathing report last week on the bank’s response to its scandals.
Departed CEOs
Wells Fargo’s leaders have been in Washington’s crosshairs for years in the wake of a series of consumer scandals. The company has faced unprecedented political and regulatory fallout, including repeated hearings, record fines for former executives and a growth cap put in place by the Federal Reserve.
The bank has been working to make affected customers whole after problems including the opening of bogus accounts, the charging of improper mortgage rate-lock extension fees and the forcing of insurance policies on auto-lending customers. Remediation is part of Wells Fargo’s consent orders, and Scharf has identified it as a top priority for the bank.
The company’s remediation plans currently stretch into 2021, but executives are taking a “fresh look at how we do remediation,” Scharf told lawmakers Tuesday. Wells Fargo also has changed its management approach to the consent orders, which are a key focus for the bank, he said.
Two former Wells Fargo CEOs, Tim Sloan and John Stumpf, stepped down after tough hearings of their own in Washington that included calls for their ousters -- resignations noted by Congresswoman Maxine Waters, the committee’s chairwoman, during Tuesday’s hearing. Waters said Tuesday that she’s asking the Justice Department to look into whether Sloan “knowingly and willfully” made false statements at a hearing last year.
Over the course of four hours, Scharf answered questions ranging from the impacts of oil-market volatility to whether he’s seen the movie “Harold & Kumar Go to White Castle.” Multiple lawmakers wondered why he took the job.
‘Similar to Yours’
The hearing was largely free of blockbuster moments. Scharf offered a blunt evaluation of what he views as Wells Fargo’s past failings, saying at one point that his “reaction to what’s in those reports is probably very similar to yours.” He was at times criticized for being too light on detail.
He outlined steps he’s taken since joining, beginning with “an honest assessment -- both internally and externally -- of our significant shortcomings and our failure to effectively address them.” He touted the prioritizing of regulatory work, leadership changes, a simplified structure and new processes around evaluation and compensation.
“We have not yet done what is necessary to address our shortcomings,” Scharf said Tuesday in his prepared remarks for the committee, adding that Wells Fargo had a “flawed business model” and that the “culture was broken.”
Scharf has been conducting a wide-ranging review of the bank’s operations. He has struck a cautious tone so far, emphasizing that the work of reinvigorating the firm after years of problems is hardly over. He has said he’s been spending the majority of his time on regulatory issues, and that it will take much of this year to complete his reviews.
Scharf said he has “no preconceived notions” about how big Wells Fargo should be, but that leadership should be able manage all of it. In conducting his review, Scharf is taking “a fresh look at how we operate and what additional changes we need to make,” he said.
He also offered details on what San Francisco-based Wells Fargo is doing in response to the spread of the coronavirus. He said there are things the bank can do, ranging from working with customers on their loan payments to arranging for remote work for employees. Scharf said that 62,000 Wells Fargo employees worked from home on Monday, while dismissing a lawmaker’s suggestion -- based on his New York residency -- that he’s working from outside the office himself. “I do not telecommute,” he said.
Scharf, along with other banking-industry leaders, is set to attend a meeting at the White House on Wednesday to discuss the coronavirus.
To contact the reporters on this story: Hannah Levitt in New York at hlevitt@bloomberg.net;Elizabeth Dexheimer in Washington at edexheimer@bloomberg.net
To contact the editors responsible for this story: Michael J. Moore at mmoore55@bloomberg.net, Daniel Taub, Steve Dickson
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