Patrick McHenryChairman

Washington, March 5, 2020 -

WASHINGTON – Today, Republican leader of the House Financial Services Committee, Patrick McHenry (NC-10), and Republican leader of the Subcommittee on Oversight and Investigations, Andy Barr (KY-6), issued the third Republican staff report on Wells Fargo’s sales practices scandal. The report found Wells Fargo’s uniquely flawed structure and gross mismanagement have stunted the company’s response to the scandal.

Uniquely Flawed: An Overview of Failures and Structural Deficiencies at Wells Fargo

Thanks to a more transparent posture by financial regulators under President Trump, Committee Republicans had access to evidence, included in this report, that was withheld by the previous Administration and sheds light on Wells Fargo’s failure to repair the damage from its sales practices scandal.

Democrats reached their conclusion before the investigation started. At a September 2016 hearing with then CEO John Stumpf, when the Republican led Committee’s investigation was just days old and before the Committee had obtained a single document, Maxine Waters stated: “I have come to the conclusion that Wells Fargo should be broken up; it’s too big to manage.” Waters urged Congress to require the company’s regulators to revoke the bank’s charter and “put them out of business.” Waters repeated that Wells Fargo is “too big to manage” when Tim Sloan appeared before the Committee in March 2019.

The evidence tells a different story. The documents and testimony obtained since 2016 show Wells Fargo’s inability to address the root causes of widespread sales practice abuses and scandals impacting consumers stem from deficiencies in the firm’s structure and leadership that made Wells Fargo an outlier among large banks. Simply put, the evidence shows Wells Fargo was not “too big to manage,” it was grossly mismanaged. 

Read the report’s Executive Summary.

Wells Fargo was no closer to complying with the regulators’ consent orders when Tim Sloan resigned in March 2019 than when his team took over in 2016. The management team of company insiders failed to understand the scope of the company’s problems when Sloan took charge in 2016. A deficit of in-house risk management expertise stalled the company’s efforts to remediate customers and develop a risk management plan. Between 2016 and 2019, the company routinely submitted incomplete plans to the regulators and missed deadlines.

The Board of Directors failed to hold management accountable. Consent orders require the Board of Directors to review the company’s plans before they are submitted to the regulators. According to regulators who provided information to the Committee, under Sloan, the bank’s submissions typically amounted to “a plan for a plan.” The bank’s prudential regulators expected the Board to “provide a credible challenge to management.” The documents show the Board continued to support management despite warnings that the consent order compliance program was inadequate.

Read the Key Findings of the report.

Obama-era regulators were slow to recognize risk at the bank. Wells Fargo’s pervasive problems were ignored by federal regulators for years and even pre-date Sloan. Federal regulators identified issues related to Wells Fargo’s sales practices as early as 2009, but the bank’s aggressive cross-selling strategy and customer abuse continued, unabated, until May 4, 2015. Now, the firm’s regulators—the CFPB, the Office of the Comptroller of the Currency (OCC), and the Federal Reserve—are making up for lost time under new leadership.

The evidence shows federal regulators have adopted a more aggressive posture with respect to Wells Fargo during the Trump administration. Federal regulators are engaged with Wells Fargo’s management and the Board of Directors regarding the consent orders, which remain in effect. To date, Wells Fargo has paid more than $4 billion in fines and settlements with federal regulators and the Department of Justice during the Trump administration.

Read the full report.