Today, Congresswoman Maxine Waters (D-CA), Chairwoman of the House Committee on Financial Services, and Congressman Al Green (D-TX), Chairman of the Subcommittee on Oversight and Investigations, released a Majority staff report entitled, “The Real Wells Fargo: Board & Management Failures, Consumer Abuses, and Ineffective Regulatory Oversight.”
This report is a result of a one-year Committee investigation into Wells Fargo’s compliance with five regulatory orders issued in response to the company’s widespread consumer abuses and compliance breakdowns.
“This Committee staff report shines a much-needed spotlight on ‘The Real Wells Fargo,’ a reckless megabank with an ineffective board and management that has exhibited an egregious pattern of consumer abuses,” said Chairwoman Waters. “Last year, I made it clear that under my leadership, the Committee is putting consumers first and holding financial institutions accountable. The findings of our investigation detailed in today’s Committee staff report have only deepened this commitment. That is why I am convening three hearings on Wells Fargo this month to scrutinize the megabank’s harmful practices. Wells Fargo has clearly demonstrated an unwillingness and inability to stop harming its customers, so this Committee is working overtime to make sure consumers are never subjected to the types of abuses and failures committed by this megabank again.”
“This report underscores federal regulators’ repeated failure to hold Wells Fargo accountable for admitted wrongdoing that has harmed millions of Wells Fargo customers,” said Chairman Green. “When wrongdoers agree to settlements to make their victims whole, we rely on federal regulators to enforce the terms of those agreements. This report demonstrates not only that Wells Fargo is failing to comply with the terms of multiple settlement agreements dating back to 2016 and 2018, but also that our federal regulators have simply failed to enforce those agreements, despite having ample tools and authorities under existing law to do so. Unfortunately, those who pay the price of these failures are those least able to pay and most in need of protection – customers initially victimized by the bank. The status quo is unacceptable and must not continue. Wells Fargo must be held to its obligations to restore those whom it has harmed, and it must end the abuses of consumers as well as the conditions of the bank that have allowed and promoted such abuses.”
In Their Own Words: Excerpts from Problematic Communications of Wells Fargo Executives:
- “The Committee staff’s investigation uncovered an April 1, 2017 email exchange between Chief Risk Officer Michael Loughlin and Chief Executive Officer Tim Sloan that reflects an unwillingness to take seriously the Bank’s obligations under the 2016 Sales Practices Consent Orders to fully compensate harmed consumers and fix its internal controls.” In the email, Loughlin wrote, “If any of the $200MM [in proposed customer remediation] is left over, we promise to give it to charity—only after the CFPB and the OCC let us out of the consent orders. If they do not, no donation. Put the onus back on them.”
- “Board members also appeared reluctant to engage in oversight of the Bank’s efforts to comply with the 2016 Sales Practices Consent Orders. Notes from a November 28, 2017 meeting between the CFPB and then-vice chair of Wells Fargo’s board, Betsy Duke, CEO Tim Sloan, and General Counsel C. Allen Parker reflect that Duke questioned the CFPB’s practice of including her on letters requesting the Bank take certain actions: ‘Why are you sending it to me, the board, rather than the department manager?’”(emphasis added).
- “James Quigley, chairman of Wells Fargo Bank’s board, exhibited a similar lack of urgency in his engagement with the Bank’s regulators and a reluctance to oversee the Bank’s efforts to meet its obligations under the 2016 Sales Practices Consent Orders. On February 22, 2019, the Company’s corporate secretary sent an e-mail to Quigley, Board Chair Betsy Duke, and CEO Tim Sloan indicating that the OCC wanted to meet with the Bank’s independent directors to discuss ‘progress and accountability.’ The OCC proposed to schedule the meeting on March 7 or 8, which was four to five days before CEO Tim Sloan was scheduled to testify before the Committee. Quigley, wanting to postpone the meeting, responded: ‘I am currently scheduled to be in the Galapagos Islands on these dates. I have made arrangements to have a satellite phone available during these days. I will do my best to participate, but I am not certain on the stability of communications in that part of the world. . . . The sense of urgency is surprising, are they politically trying to put an enforcement action in place in front of the hearing?’” (emphasis added).
- “WFC board member Ted Craver wrote to Duke to express concern about Sloan’s performance and how the public would react if it knew of the Federal Reserve’s feedback: 'Speaking frankly, this was a big miss that doesn’t reflect well on Tim. It would seem that there is little under the very important category of ‘clean up the mess’ that is bigger than this recent submission to the Fed. We shouldn’t have to take a Mulligan. I imagine that investors and customers would view this feedback from the Fed as completely unacceptable. I would expect to hear from them something along the lines of, ‘is there anything you can get right?’” (emphasis added).
- “Wells Fargo’s own executives questioned the Company’s ability to manage risks and protect consumers. For example, in May 2019, Federal Reserve staff met with a senior compliance executive at Wells Fargo, and discussed, among other things, the Company’s challenges with putting its compliance plans into action. According to meeting notes produced by the Federal Reserve, the Wells Fargo executive expressed to Federal Reserve staff that, ‘if he were CEO, he would not allow the addition of any new customers to the company since the firm is operating in this environment.’” (emphasis added).
Committee Staff Findings:
The Committee staff report found that:
- Financial regulators knew about serious, enterprise-wide deficiencies at Wells Fargo for years without taking public enforcement action;
- Wells Fargo’s board of directors failed to ensure management could competently address the company’s risk management deficiencies;
- Wells Fargo and the Consumer Financial Protection Bureau’s political appointees had backchannel communications regarding the CFPB’s Compliance Risk Management Consent Order;
- Wells Fargo’s board of directors allowed management to repeatedly submit materially deficient plans to regulators in response to the consent orders;
- Both Wells Fargo’s board and management prioritized financial and other considerations above fixing the issues identified by regulators;
- Wells Fargo’s board failed to hold senior management accountable for failing to meet regulators’ expectations;
- Former Wells Fargo CEO Timothy J. Sloan gave inaccurate and misleading testimony to Congress during a March 2019 Committee hearing; and,
- The potential for widespread consumer harm still remains at Wells Fargo.
Committee Staff Policy Recommendations:
The Committee staff report recommends that Congress:
- Compel regulators to act against recidivist megabanks, like Wells Fargo, that engage in widespread consumer abuses;
- Strengthen the regulators’ authorities and enhance bank management and board accountability;
- Require greater transparency regarding bank supervision and how banks treat consumers;
- Enhance bank compensation practices; and,
- Pass a bank workers’ bill of rights.
To view the full report, click here.
In February 2020, Chairwoman Waters blasted the disappointing settlement between Wells Fargo, the U.S. Department of Justice and the U.S. Securities and Exchange Commission, and announced her plans to continue efforts to hold the megabank accountable by convening three hearings on Wells Fargo the following month.
In March 2019, Chairwoman Waters convened a hearing entitled, “Holding Megabanks Accountable: An Examination of Wells Fargo's Pattern of Consumer Abuses” with Timothy Sloan, then-President and Chief Executive Officer of Wells Fargo.
Shortly after Chairwoman Waters and Committee Democrats pressed Sloan about ongoing management failures and repeated consumer abuses, it came to light that he had received a $2 million bonus the previous year. Chairwoman Waters and Committee Democrats pushed for Sloan’s removal, and days later, he resigned.
In February 2018, then-Ranking Member Waters applauded the Federal Reserve Board’s announcement that it will restrict the growth of Wells Fargo until it sufficiently improves its governance and control, and replace its board members.
In September 2017, then-Ranking Member Waters released a Democratic staff report detailing a pattern of abusive business practices by Wells Fargo and finding that prudential regulators have not utilized the full extent of their authorities to end unlawful practices at megabanks like Wells Fargo.
In August 2017, then- Ranking Member Waters and other Committee Ranking Members wrote to former Committee Chairman Jeb Hensarling requesting a public hearing to review the ongoing violations of consumer rights by Wells Fargo.