Mr. Mchenry you have access of liquidity to get through any crisis you would foresee . Yes, absolutely. Mr. Mchenry in terms of safety and soundness, you are from the harm previous regime, thats positive. In terms of safety and soundness youre management, cleaning up the ship. So our expectations is we should have no problems from you in soundness, ety and is that fair . Mr. Scharf i think its fair work once we finish the we laid out, you should feel that. Mr. Mchenry ok. At employees do you have wells fargo . R. Schaefer i have mr. Scharf 260,000. Mr. Mchenry how many are customer facing . R. Scharf i dont know the answer. It has to be easily 100,000. Mr. Mchenry sure. Do you have plans in order to respond to the current threats covid19, especially in your footprint in california . Absolutely. We are, as i said mr. Mchenry as well as and other state primaries that are seeing an outbreak . Approach on ur covid 19 is we should do the ing we can to ensure safety of our employees as well as be helpful for our customers. We have an open line with them. We a wherever there is any concern, folks to work from home. I believe yesterday we had logged in working from home. And to the extent that there are issues within the institutions we are going to do everything we can to protect everyone else. Thank you. ms. Waters let the record show that during this investigation, information we shared with the republicans and they tried to rush a report out out. E we got ours this Ranking Member would like to have it both ways. Madam speaker, to point of personal privilege, madam chair. We both issued reports as outlined. Your report. Ugning i was impugning the conclusions of your report. S. Waters whatever you were doing, mr. Mchenry, you are trying to have it both ways. Mr. Mchenry we can have this debate in front of everyone or on with the hearing. Wae ms. Waters yes, we can. As chair of the committee, if ou want to have this debate, well have this debate. Mr. Mchenry you issued a report that waters mrs. Maloney is recognized for five minutes. Mr. Mchenry dont take shots letting me respond. Ms. Waters you have responded. The gentlewoman is recognized minutes. Mrs. Maloney mr. Scharf, you were brought in to clean things culture at ange the wells fargo and i certainly hope you do. To talk about one area where i believe you do need direction. Hen your predecessor, tim year stified last mr. Sloan said he didnt think wells fargo should, quote, go the law beyond what requires on guns even though the that it icitly states goes above and beyond the law in including human rights. To revise wells fargos policy on financing the gun industry. Your competitors, such as citibank and banc of america sensible policies to ensure responsible lending to heir businesses with the gun industry. Under the citi policy, all of banks Business Partners in the gun industry must require a background check before they firearm and they prohibit the selling of firearms to teenagers. Believe, are commonsense policies that will increase Public Safety and save lives. So i want to ask you, will you commit to changing wells fargos policy on financing the gun industry . Scharf congresswoman, first of all, i do want to say i share our concerns about the impact of guns. Sitting here today, i dont know ally believe that i enough to make that commitment but i know that its something far more be thoughtful about. I know that we have created some for some nonpartisan research. And as part of that, we need to back and to make sure were thinking about what the right hing to do is in a series of Sensitive Industries and i am not making judgment one way or the other. Ts just not something that ive spent enough time on yet, but i recognize your concerns. Thank you. Y well, after you reviewed this policy and made your decision, will you the committee in writing about your decision and he reasons for making that decision . Respectfully . Congresswoman. , mrs. Maloney in the Committee Staff report theres an email want to compliment the committee for this excellent report thats gotten really a lot of positive feedback. It, you theres this officer, your risk michael lawsuiton, where he lawton where he said of he proposed 200 million in remediation is left over we will only after harity the cfpb and the o. C. C. Let us the Consent Order. If not, no donation. Back on us ba onus them. The victims of the fake accounts candal and over a charitable donation. And mr. Chair, if this Committee Really expects you to do the your customers that your bank has defrauded and e expect you to work with your regulators to compensate them or the scandals and of the misuse of their funds and other rauds, so i want to ask you since you took over as c. E. O. In ctober of 2019, what specific actions have you taken to concerns e o. C. C. s about how the bank reimmediate remediates harmed consumers . Mr. Scharf thank you, congresswoman. First of all, the gentleman you longer the is no chief risk officer at the company, and certainly when i those comments, they are inexcusable. Nd not something that should ever be thought of by someone inside of our company. O your question about what ere doing, first of all, we put in someone new to run our process. On that person reports to our new chief operating officer who we from the outside who has experience in dealing with remediations. And the mandate that ive given rethink what it is and how we do it. Dont stop the work thats ongoing but going through piece and asking the question what can we do to nsure that were doing everything we can for all of our customers as quickly as we possibly can . Thank you. Y do you know how many earlier, you were asked how many people defrauded . Do you know now . Ms. Waters the gentlewomans time has expired. Mrs. Maloney if you can in writing. I thank you wagner thank you. Thank you for coming here as c. E. O. At wells fargo. Placing ones money in wells an the custody of organization like wells fargo is the biggest displays of trust years consumers were betrayed and taken dvantage of in order to meet Sales Performance goals and ultimately to improve earnings prices. E wrong. S categorically not only did wells fargo and its employees fail their customers, whom are my constituents in missouris second congressional district. As our regulators failed well. They neither identified nor malpractice from occurring in the first place. It was the obama o. C. C. And cfpb that first uncovered this not, i should was cfpb of o. C. C. And the the Previous Administration that uncovered it. It was the l. A. Times, the media, that first brought your practices to light. Mr. Scharf, your predecessor appeared before this committee ensured members that wells fargo was on track to complying regulators l Consent Orders. The evidence outlined in the by d report produced committees republicans regarding wells fargo says otherwise. Was overly ssor optimistic about the banks progress towards complying with cfpb and o. C. C. Consent orders. His public statements assuring hebacks progress to achieving the banks progress of achieving compliance was not atching up what was taking place behind the scenes. Mr. Scharf, i am cautiously optimistic that you are the man for the job to bring putbank into compliance and these scandals to rest. You different from your predecessors to adequately resolve these eepseeded issues within wells fargo . Mr. Scharf thank you, congresswoman. Been lucky , ive enough in my career to have a series of experiences at companies that have been both and troubled. And coming out of those i believe that there are a series of things ive learned that could be very here. Able the things ive done since ive come to wells fargo i think are how we contrast approached some of the issues in the past. If you are inside the company like were approaching these issues very, very differently. I have been very open and honest about our lack of progress, not pointing out the positives, but also eing realistic and focusing on the negatives because thats where we can have an impact. I believe the sense of urgency are working with inside the company is very different today than it was four ago. S i personally am spending the majority of my time on these 75 to 80 of my time not focused on growth, new like that. Anything mrs. Wagner i am not hearing specifics here. Changes are you going to implement . Wells fargos fragmented to be one of ed the root causes i think of the banks ongoing compliance challenges. See additional changes to address major outstanding issues . Please . Cifics, mr. Scharf we will have a much tronger centralized core in everything that relates to risk and control. We will run the company like a s one company with consistent set of standards, a consistent set of policies. Everyone understands that and we place that ople in believe thats the best way to run the company. Rs. Wagner the committees report found that wells fargo requested extensions for eadlines for setting remediation and reform plans. Regulators typically grant these banks plans the rema remain insufficient. Even with the extra time. R. Scharf, what steps are you taking to ensure wells fargo can submit these plans on time deadline extensions . Are you still using these contractors to draft plans to the cfpb and the o. C. C. Orders . E consent mr. Scharf in addition to the things i just mentioned, ongresswoman, were putting a substantially Different Group of people in charge of these ice. Issues. Se i personally and the operating committee are getting deeply involved in all of this. Its going to take time because you know there are series of orders that are outstanding. As were trying to be methodical as we can going through piece by piece and managing it in a very different very tight way, just like you would manage any significant project in an like wells fargo. Mrs. Wagner i yield back. Ms. Waters thank you. The gentlewoman from new york, ms. Velazquez, is recognized for five minutes. Thank you, madam chair. Dont like being misled and i dont really like to. G lied last year, i asked your predecessor about the status of fargo compliance with the consent eserves 2018 order. He responded to me by stating made the o had oversight improvements required the fed. Not true. W its as the new c. E. O. , i ask you, when do you expect wells fargo o be in compliance with the feds 2018 Consent Order . Mr. Scharf congresswoman, i you an answer to that sitting here today. When they believe were in compliance is whats mportant, not when we believe were in compliance. You we have spent an enormous amount of resources working on this. We are working on this, as am i. Cannot sit here today and give you a time frame. S. Velazquez mr. Scharf, according to correspondence between wells fargo officials will e fed, wells fargo resubmit plans to address governance and Risk Management 30, 2020. O you still expect to resubmit a plan by april, 2020 . Scharf congresswoman, i cant answer that question today. We are focused on doing the work thats necessary as we review it. If we feel its in the condition would expect ms. Velazquez so your answer is no. So wells fargo has already plans that have been rejected by the fed and has een granted numerous extensions. Why will wells fargo not make this deadline . Do you think we have a right to know . Congresswoman ms. Velazquez this is your deadline, by the way, sir. Fargos deadline. Mr. Scharf congresswoman, i feel tand exactly why you the way you do. What i can tell you is what i discovered since ive gotten to company and my obligation is to make sure were doing all the work thats necessary and about s honest as we can what we can get done and what period of time. Ms. Velazquez so, sir, as we discussing, and you are the third c. E. O. To come wells this committee, fargos failure to comply with Consent Order erives from a culture that focuses on profit instead of Risk Management as the new how will you emphasize verrational Risk Management of profits at wells fargo . Mr. Scharf congresswoman, i in both our words and our actions. I have said publicly, including First Investor call that this work will come ahead of Everything Else and our Financial Results might be because of that. Ms. Velazquez that is exactly what this committee expects from you. You said and set a deadline of april, 2020. Type of action that we need. Whoknow, a lot of consumers use a few consumers were excessive charged fees for accounts that they for. T sign up so, yes, i agree with the real state Ranking Member that we should be i agree with the Ranking Member that we should be coronavirus and for new workers for that matter, workers america, but you are responsible for the fact that many consumers were overcharged for products that sign up for. And you are the third c. E. O. If theres on is, anything else that might be oming to light in terms of wrongdoing mr. Scharf congresswoman, not that i am aware of. Better we have to do far than weve done. Ms. Velazquez chairwoman, i yield back, and thank you for meeting, hearing, fulfilling our responsibility of oversight. Back. D ms. Waters thank you. You to rf, i would like be as specific as you can what youre tout what was done to the consumers and how theyre going for it in the questions that will come back to you time and time again today. The gentleman from kentucky, mr. Barr, is recognized for five minutes. Scharf, mr. Scharf, over here. Elcome back to the committee, mr. Scharf. You are new to wells fargo, but ou are not new to the job of running a global systemically important bank. Position ly left the of chief executive officer of melon, another global systemically important bank. Nd given your past experience running a large and sophisticated global thattution, do you believe wells fargo is too big to manage s some of my colleagues are suggesting . Mr. Scharf excuse me. Congressman. Mr. Barr what do you believe ontributed more to wells fargos past failures . Do you believe it was more of management and the structure that was in place in it past, or do you believe was the size of the institution . Scharf congressman, theres no question in my mind that the culture and Management Structure the company. Mr. Barr because my friend from ew york brought it up, i have to ask. O you believe wells fargos policy on financing firearms had whatsoever on the practices and s the opening of unauthorized accounts . To my arf not at all, knowledge. Mr. Barr i will say as an if orial comment, i believe your bank allows politics to mpact lending decisions, it runs the risk of only distracting your bank from ctually doing the things that you need to do to if the gentleman will yield . Mr. Barr no, i wont. Take on the task at hand which culture at the bank and to reform the Management Structure that youve the problem. So please, i urge you to resist the temptation to politicize and focus on the actual issues at the institution. Me ask you, in the past, wells fargo maintained a in which Core Functions such as Risk Management was decentralized visibility from or accountability to Wells Fargo Company leadership. A Key Management breakdown identified in the published lastrt week. I understand that the company as moved to build out an enterprisewide Risk Management like your peers. A Flatter Organization . Mr. Scharf yes. Will it fix the things of the past . Mr. Scharf a combination of the things you referred to. No question we need an independent control infrastructure that does not any s not accountable to individual line of business, and in the case of risk and the other functions like this are directly to our board of directors. Independent, makes independent judgments, and in combination with the management table where we have more direct exposure into the issues because you have at the table talking to them allows us to be much, much ore engaged with the independent control infrastructure at the same table earing the same thing and having the ability to influence things before they become a problem. R. Barr under your predecessor, wells fargos esponse to regulators Consent Order left something to be desired. Were completely insufficient. You testified you agree to that. Managing the eams deliverables from shifted around and subordinated within teams, suggesting a low picking order in the order. You committed to a hand on versight and working with regulators to have compliance with directors. Was, you ur testimony are going to take this take his up as an on an urgent basis. Urgent was your word. Would you pleads describe the hanges you made to the teams managing wells fargos response to these various Consent Orders . Centralized o we the management of all of these Consent Orders under our new chief operating officer who came from the outside, who has extensive experience in his prior role at dealing with issues. Under him, we have an is that is at organized around the work thats ot to get done of the Consent Orders. Structure is different than what we had in the past. Almost my time has expired. I agree with you when you say i believe our country and ammunities would benefit from strong wells fargo. I wish you all the best as you make these very important hanges to correct these failures in the past. And i yield back. Ms. Waters the gentleman from sherman, was. Also the chair for the ubcommittee on Investor Protection and Capital Markets and is now recognized for five minutes. Memberrman the ranking attacks the work of this timettee while at the same saying, its great that these forced to rs were because there were highly embarrassing disclosures so the system worked. Highly embarrassing disclosures, did they arrive out air . In were they presented to us by a demigod . No. These disclosures arose because of the work of our chair, maxine waters, the chair of the subcommittee, al green, and the staff. Tic and had we continued the hear no evil, see no evil approach that this committee had the prior embarrassing e disclosures would never have come out and these embarrassing be on embers would still your board. But we regardless of the cant allow the outrages of the past to blind us to the present. The we got a coronavirus. People are afraid. He Economic System could get better. Could get worse. Not only do we have a sudden rus, we have a decline in oil prices that are shaking up the markets and the act we have two problems doesnt immunize us from a third or fourth thing happening. In fact, your bank has done tests to look at other things that could hit our economy. Plan put in place to months, seven months ago send 31. 4 billion out of your shareholders. R you dont know, i dont know what this coronavirus is going to do to the world economy. Be too big to manage. You may be, but you are certainly too big to fail. Commit to can you this committee you will suspend buybacks and stock until we know what this coronavirus is going to do to worlds economy and to the solvency of your bank . You havent done a double stress test. Youre too big to fail. You have injured our economy by the practices that we are here to discuss in this committee. You want to do something good for the country and commit to ending stock buybacks and dividends until we know what the coronavirus is going to do to your banks solvency. Mr. Scharf congressman mr. Sherman yes or no. I have limited time. Mr. Scharf we are going to run the bank we think is prudent with our regulators. Mr. Sherman in other words, you are having dealt harshly with consumers in the past. You are going to do nothing to insulate our economy from the and our society from the possible meltdown of the bank. You ripped off consumers. Carolyn maloney has her overdraft protection act, which would protect consumers. You have substantial lobbying power, brilliant lobbyists who have represented you. Will you commit that they will be lobbying, starting tomorrow, for carolyn maloneys overdraft protection act . Do you want do you want to be on the right side of history . This is not a trick question. I asked your predecessors, predecessor almost a year ago today and we told your people this was coming. Mr. Scharf congressman coming we announced two new accounts. One that has no overdraft protection mr. Sherman i didnt ask that. You are repeating what your resigned predecessor said. Will you commit the lobbying power of your bank to work for the overdraft protection act, yes or no . Mr. Scharf ill commit that we will support the types of accounts that we just announced. Mr. Sherman that does not mean that you will work for legislation pending design to protect consumers from unreasonable overdraft protection it or the phony ordering of the it checks that cleared a particular day to disadvantage the consumer. Le finally, will you enforce the arbitration provisions in your contracts even as to the phony accounts where the consumer never signed them for that account . Mr. Scharf congressman, we were able to settle ourself practice mr. Sherman what about the ones still pending . Mr. Scharf where there is arbitration well continue to pursue t there is something well mr. Sherman but youll bar people from court. Thank you. Ms. Waters the gentleman from missouri, mr. Luetkemeyer, is recognized for five minutes. Mr. Luke mitre thank you, madam chair. I think i want to spend time with regards to the entry report that the republicans have put together and try to go back and get some give and take and back and forth on this. This is the third report we have done. Our side has done since 2016. And in fact t. Half the documents in here were obtained by republicans now as a result of the fact that the Obama Administration wouldnt turn them over. Now that the Trump Administration is in charge, we can get documents into the cfpb and other regulators that can have a better picture whats going on here. One of the things that concerns me is that as a former regulator we have three this is the first of three more meetings which we already had several prior to this. We have not had a single report, excuse me, a single hearing on the regulators who were asleep at the switch on this whole episode. In fact, in our report it says on december, 2013, the Los Angeles Times reported that the employees failed to meet their quotas and were going through this stuff, and that the cfpb supervisor staff was embedded in early 2014, and yet wells fargo had to notify the cfpb that the Los Angeles CountyCity Attorney was going to file a civil suit on the companys sales practices. This was on may 4. Then finally on may 8, six months after the fact, the cfpb comes rolling in on their white horse and going to save the day. The director was asleep at the wheel again. Its very unfortunate because this is a situation when your predecessor was in front of us, i asked the question, as a former regulator i am aware the regulators live in your bang. I asked the question how many are in your bank today, he told me 75 at that time. Do you know how many are fulltime today, sir . Mr. Scharf i dont. But its significant. Mr. Luke mitre would you say more than that or less . Mr. Scharf i would guess more. We can get back to you. Mr. Luetkemeyer its very frustrating to see the cfpb has regulators sitting in your facilities, knowing this practice is going on, was told about it by the new york the Los Angeles Times, broke a story. Yet six months later they finally take action. I think because of that the situation continued to grow and went out of control. Now after the fact trying to find a way to stop the nonsense. One of the other questions i asked of your predecessor, mr. Stump, when he was here because at that time we had there was a situation where even according to our own report here verify that is there was 1,000 people a year roughly for five years that were being fired for the their actions and their involvement in this sales scheme situation. I asked him at the time as i recall theres a third year this happened. I asked him, i said, what is wrong with your culture in that here we have a situation where you fired people, 1,000 people the first year. I understand you recognize the problem. Second year, another 1,000. You are not fixing your culture. You are not fixing the culture. How are you going to fix it . Finally we have a new individual take over, now we have you. I guess my question is how are you going to change the culture that your predecessors never addressed, quite frankly . What are you doing different . How do you see yourself Going Forward with your teams of people . Scharf i think certainly we have to be clear on how a series of things come together to form a culture. Then we as a Senior Leadership team need to make sure we are behaving that way. That includes changing compensation. The way we evaluate people. The things that we look at to include risk and Customer Experience as part of that evaluation. Any time that we see any harm, we have to be the ones to deal with it as quickly as we can. If there is wrongdoing inside the company, dont just look at an individual and say that they did something wrong, ask the question, do we have something in our structure thats wrong . And i think all those things come together with accountability probably being the most important thing. Mr. Luetkemeyer i want to follow up in my remaining seconds with something my colleague from kentucky talked about. Allowing the government to come in and change your Business Model. Im very concerned about the attempts, especially on the other side of the aisle, to intimidate you and your board in changing your Business Model by doing or not doing business with certain industries. To me this is something you as a board and leader of that company need to make and dont allow the socialization of your Business Model by the government to take control of it. With that i yield back the balance of my time. Chair waters thank you. Its not intimidation, its called standing up for the mr. Luetkemeyer if you want to discuss think be happy to discuss this. The operation choke point, you want to deny that, you can. But thats the truth. Chair waters the committee will be in order. The gentleman from new york, mr. Meeks, who is also the chair for the subcommittee on Consumer Protection and Financial Institutions, is recognized for five minutes. Mr. Meeks thank you, madam chair. First i want to thank the chairwoman and maxine waters, and the chair of the oversight teeth committee, mr. Green, for oversight committee, mr. Green, for doing the work antiresearch that refield and research that revealed the continuing pattern that has taken place at wells fargo over this period of time. Think that mr. Mr. Scharf, this should be something that should be an opportunity. If you look at the investigateor work that took place, admittedly all of it before your four months, it should give you further ideas of what needs to be done to fix wells fargo, to move forward. I think it would be an opportunity for you to look at it and to take it very seriously. For me, coming in, anybody that was on the board or had anything to do the way you first show that you want to clean things up is, you clean everybody out. Anybody thats there that was part of the decisionmaking process while these procedures have clean n do not hands. They are ditty hands dirt yea hands. That continues to be there. The only way you fix an organization in that regard as far as im concerned is you clean out. I will in full disclosure let you know i have had the ability and time to work with you in your previous capacity at bank of mellon. For bank of new york mellon. For the life of me i dont know why you took this job. Because anybody thats there has got to be held accountable and look to see what are you going to do to improve all of the horrendous, and i have taken mr. Sloan and others to task in a very, very strict way. I do intend on taking whether they resigned or not these board of directors that were there that were a part of the policies, im going to take them really to task tomorrow. I do think that you should take this report very seriously and to heart and to make the changes that are necessary. Now, i have been talking to you about some issues that have been very important to me and the subcommittee of which i sit on. Two of them. One is with m. D. I. s. And there have been a series of hearings because m. D. I. s in my estimation can come in to communities where maybe the big banks shouldnt be. Because they dont want to be there. But as far as giving out mortgages and making sure that they are able to provide services to communities, local communities, where banking deserts are now appearing, so we have been trying to make sure that these Community Banks and m. D. I. s where they are underbanked and underserved get capital from some of the big banks. We have had that discussion. You told me you are going to go and discuss it and come back. My first question to you is, have you had that discussion . And what, if anything, is wells fargo looking to do, because i want all the big banks, asking every one of them, to figure out how we can do to put capital into some of these big banks Smaller Community m. D. I. s. Mr. Scharf congressman we are going to do something about t completely agree about the importance of the minority depository institutions. They reach neighborhoods that we cant necessarily reach. We have been focused historically on connections, expertise, its more about capital as we have learned. We are going to commit to invest up to 50 million of capital directly into these institutions. As either tier one or total regulatory capital. Still keep them at a position where they are still minority owned but provide the opportunities. Mr. Meeks i want to cut you off because im down on time. I want to go through that with you on a continuous basis because as what we have been talking about we dont want the big banks to just give money to small we want big major investments. I want to have a further dialogue and conversation with you in regards to that. The other piece i got 20 seconds. Want to know about c. R. Rate modernization where the comptroller said hes discounting 75 discount for Mortgage Loans sold off. To me thats going to stop people from get giving out mortgages. Doesnt encourage t before i but i would like to get an answer from you in writing whether you think thats an appropriate thing in the way that the comptroller is looking to deal with c. R. A. Modernization, thank you. Chair waters the gentleman from michigan, mr. Huizenga, is recognized for five minutes. Mr. Huizenga thank you, madam chair. I guess let me start out with a tone of unity and ill agree with my colleague and friend from new york, mr. Meeks, when he said im not sure why you would take this job, i would agree. It is in all seriousness, this undertaking. Ant im glad you are doing it because we know the United States to remain competitive in the world stage needs to have Financial Institutions that can handle these Large International and National Accounts and those kinds of things. But there are problems in the past. Mr. Scharf, i am interested in what changes to the Consent Order plan writing process have you made since you have taken over as c. E. O. Its my understanding none of the Consent Orders have received a nonobjection. I think thats what the regulators specifically call it instead of aprolved. They have objected to each of the Consent Orders, is my understanding, even those issued in 2016. So im curious, walk me through that process how you are dealing with that now and maybe an update on that. Mr. Scharf . Congressman we have changed our entire management approach to the Consent Orders. I personally am deeply involved in all of our control related work, including all of the Consent Orders. Our new chief operating officer we brought in there the outside who has experience in dealing with issues like this at another bank that was going through a series of issues, is onboard now. And those responsibilities sit directly under him. He is probably spending 90 of his time on these issues. Under him there is a group of people dedicated to managing each of these individual Consent Orders alongside all of the people across the company to ensure that the work is getting done appropriately. Mr. Huizenga can you identify what the Biggest Barriers to achieving those acceptable commissions under the submissions under the Consent Orders are . Or what you believe the regulators may not have identified but maybe they have . Mr. Scharf the Biggest Issue is making sure everyone across the company, including those in the frontline, understand that Risk Management, especially operational Risk Management, is everyones job. We need to educate them on what that means and how that fits into a seamless structure inside the company with the independence of the second line. Mr. Huizenga has that been the barrier for you receive those nonobjections from the regulators . Or is there more to it . Mr. Scharf i cant speak to what happened before. Based upon the actions that i have taken i think that there, as i said, there is a different sense of urgency. There is a different focus. We have different people with different disciplines with different review processes in place. Fundamentally managing these differently. We have made clear these are the priorities of the company above all else. Mr. Huizenga you are updating those then . Mr. Scharf we regularly talk to our regulators about them, yes. Mr. Huizenga let me move on a little bit. You touched on sort of everybody on the frontlines needs to know what the new culture is. Could you describe how sales employees are incentivized, does the Company Still use sales goals . Mr. Scharf we have changed all of the practices that led to the bad sales behavior, including those sales goals that led to that behavior. Today our frontline bankers are paid based upon a series of criteria. None of which are sales goals. Its things such as Customer Experience. It is balances in the overall account. And things like that. We do not have goals like that. Mr. Huizenga how do you measure the Customer Satisfaction . Mr. Scharf historically we have used a third party to provide those. Where they come and do Mystery Shopping in the branches and provide feedback. Going forward we are going to move toward a net promoter score. Well do direct surveys of our own clients. Mr. Huizenga had a seconds 45 seconds. Talk about the board makeup. That was one of my questions from my colleague from new york was, cleaning house. What is cleaning house on your board look like so far . Mr. Scharf i dont have the numbers in front of me, but i believe Something Like 70 of the board is new to the board since 2017. I can get that for you. Mr. Huizenga was i heard 14 out of the 16. But if you could confirm that, that would be helpful. I see people behind you taking notes. Thats good. Then at the end of the day can you describe what cultural changes fundamentally need to happen there. Mr. Scharf absolutely. Sorry. Mr. Huizenga my time has expired. What fundamental cultural changes you felt are necessary and maybe we can follow up in writing. Unless the chair is willing to give you 30 seconds. Chair waters the gentlemans time has expired. The gentleman from missouri, mr. Clay, the subcommittee on housing, community development, is recognized for five minutes. Mr. Clay thank u. Madam chair. Thank you for your testimony today, mr. Scharf. Recently the student borrower protection center, an organization founded by former pb student loan ombudsman, seth, released a report called educational redlining. The report found that borrowers taking out private Student Loans to attend Community College may pay more than similarly situated borrowers, seeking loans to attend a fouryear institution. Sbpc applied for student loan products with wells fargo and found that wells will charge a student applying for a 10,000 loan to the attend a Community College, 1,134 more than a similarly situated borrower seeking the same loan to attend a fouryear college. Do you think thats fair . Mr. Scharf congressman, there is no room for discrimination in any of our lending businesses. Mr. Clay do you intend on changing the culture around mr. Scharf will i go back and look at the specifics around this. I am not aware of t if we have done something wrong well make it and make sure nothing like this happens Going Forward. Mr. Clay also you under your consent decrees you have policy that it steers people who would otherwise qualify for prime mortgages into subprime mortgages. Apparently thats part of one of the Consent Orders. Are you aware of that . Mr. Scharf no, i am not, congressman. Well look at it. Clay how would you make those people whole that applied through your bank and were then steered into higher cost loans . What do we do to correct that . Mr. Scharf congressman, if we have done something wrong, its our obligation to take the appropriate remediation and specifically thats something that i have to look at to understand what the right thing to do is. Mr. Clay would you assist elp those borrowers by reimbursing them or resetting the loans at a more reasonable Interest Rate . Mr. Scharf we would look at all of the circumstances around it and figure out what the right thing to do is for those customers. Mr. Clay i think your customers as well as most of us on this committee are looking for fairness. It people that come to your bank looking for help. Do you agree . Mr. Scharf i completely agree. If we have harmed people or if we have not treet people properly, we should take the appropriate remediation. Mr. Clay getting into another area. Do you know wells fargos lending volume in the state of missouri and southern illinois, a region that i represent, do you know the volume for minority and womenowned businesses . Mr. Scharf im sorry, i dont. Mr. Clay could you get me that information and share it with the committee . Mr. Scharf well certainly go back on that, yes. Mr. Clay what kind of incentive programs are in place in ells fargo employees your retail and Private Banking and are the programs linked to pay for bonuses . Im talking about an incident that i recently read about in your bank. Mr. Scharf i dont understand the question. Mr. Clay the typical Retail Branch employees at wells tends to be on the lower end of the pay scale. Compared with corporate and investment banking. But you do incentivize them for bringing in high dollar customers. Mr. Scharf we have changed the Compensation Plans of the people at our branches, bankers, so that they are no longer paid on sales goals or anything like that. They are paid on Customer Experience. And balance growth. As well as some other factors that i dont recall right now. Its nothing relative to sales goals. Mr. Clay how do we better address the culture of the bank that you treat all customers with some respect and dignity . Mr. Scharf we are moving the Customer Experience method of rewarding people to based upon what Customer Feedback directly is. Mr. Clay i yield back. Chair waters the gentleman from colorado, mr. Tipton, is recognized for five minutes. Mr. Tipton thank you, madam chair. Mr. Scharf, thank you for being here. This little followup in terms of some of the sales goals. A lot of the reason that mr. Sloan was here and now you was from sales goals and some of the initiatives that were put in place with false accounts that were opened. Can you maybe expand on that a little more so i can understand how Customer Experience he, expanding some of those balances how thats going to be rewarded . And how to offset any further abuse . Mr. Scharf yes, congressman. We have changed the entire Compensation Plan, but even beyond the Compensation Plan we have changed the Management Structure and the reporting. So that anything related to those sales goals that drove that behavior antimanagement process that is went along with t are no longer there. The people who work in our branches regardless of level have a series of things that they use to judge their performance. The most important which i think if you were to go around and ask folks in the branch they would say it is Customer Experience. Today it is mystery shops that take place inside the branch. We are going to be moving towards direct Customer Feedback which will be a part of that. Because we do believe that the customer is not happen inside our institution, then it thats obviously very bad for us. It mr. Tipton are you confident that you have a reporting structure through the chain of command to make sure that thats going to be implemented properly . Mr. Scharf yes, i am. Mr. Tipton great. In your first Earnings Call you mentioned you would introduce new disciplines how the Overall Company would be run. Could you outline what the new set of disciplines might look like and how they are different . Mr. Scharf yes, congressman. We now have an operating committee that meets regularly every single week for two hours. We meet once a month for a full month. Everyone is expected to talk about whats going on in their businesses. How they are doing with any of the control issues that we are aware of or if there is anything new. We hold the c. F. O. And i hold Monthly Business reviews not held in the past. Where we meet with every business along with their senior folks. And we review their Financial Results. Their risk controls. Progress they are making on people. Including the diversity component of that. Added to that is a fulsome budget process which is far moreau bust than something we have had in the past which becomes a mechanism for to us proactively discuss things and make decisions that prior to that were made in the individual businesses. Mr. Tipton thanks for that. I come from a rural area. We have a lot of conversation in this committee in regards to urban impacts that are going on. Could you maybe highlight for us the importance of wells fargo i think has a number of branches in my district, rural communities. Does that play a pretty Important Role in regards to c. R. A. In terms of Credit Access for Small Businesses . Mr. Scharf i think its extremely important. I think its not just important for numbers, but it does go when we think about some of the things that wells has done well and not done well, helping in underserved communities is something which has been a core of the company. So the branches that we have in the communities where we have been for a long time are very important to us. The investments that we do in affordable housing, the lending we do in our neighborhoods is something which is core to who the company is. And certainly will be Going Forward. Mr. Tipton we would like to give you an opportunity. Had you a question earlier on some of the stress tests, whether or not regards to the coronavirus and other challenges that may come up, known or unknown, to our Financial Institutions. In terms to be ablele to expand a little bit on whether or not you feel you are well capitalized and able to take that into consideration. Mr. Scharf right. The point i was going to make is that when you look at the stress test we went through i believe it takes unemployment going to Something Like 10 . G. D. P. Going down 8 . Real estate values dropping by a quarter. Commercial real estate dropping by a third. Very, very significant. So as part of the process, we have to be able to continue to maintain the ratios that were required in that event with the suggested capital actions. Then as an institution, we do our own stress scenarios. Which lead us to make decisions in terms of how we want to run and hit company. We have always done that prudently. Again with all the issues that wells has done, we had been very well capitalized and will continue to be. Mr. Tipton i yield back. Chair waters the gentleman from georgia, mr. Scott, is recognized for five minutes. Mr. Scott thank you, chair lady. Mr. Scharf, how are you . Mr. Scharf fine, thank you. Mr. Scott now, you know, our Banking System is the heart and the soul of our financial system. And this hearing this morning at its core is about trust. Its about consumer trust. Its about wells fargo customers trust. Is what i want to ask you this. Can the consumers, can the people in this country, trust wells fargo now . Mr. Scharf people can trust wells fargo to do the right thing, yes. Mr. Scott well, then, why is it that you have had Consent Orders. You have had Consent Orders from the office of the comptroller of the turncy curncy. You have had Consent Orders from the currency. You have had Consent Orders from the Consumer Financial protection bureau. You have even had Consent Orders from the Federal Reserve. And to my information you have not adequately answered those. Am i correct . Mr. Scharf you are correct. Mr. Scott may i ask you to explain why you have not responded . Mr. Scharf congressman, i have joined the company four months ago. Im not in a position to explain what was done right and what was done wrong because i wasnt there. What i can tell you the changes we are making which i think are different than existed prior to my aprifle. Mr. Scott my arrival. Mr. Scott well, i will tell you that this is important. For you to really understand. You have a myriad of customers out there. One of which is me. I am a customer of your bank and have had great experience with it. You have been a leader in my ommunity with helping to get some of the hardest hit funding to help folks out there who are suffering from their mortgages. This committee worked hard to get that done. We all didnt agree and didnt vote for the first bailout. Obama got a little peeved with many of us. But we said, mr. President , we love you. We want to do good. But you cant just throw all this money up to the banks and not do something about the struggling homeowners who were the victims. He said go back and do something about it. We did and we come out with. Out 2. 8 billion so there are some good things that youall have done, but my issue with you is that you are on this in a new position. But it is important. Once you get in a bad situation , in order to get out of that bad situation into a new situation, you have to know how you got into the bad situation in the first place. Or you not to respond to these Consent Orders is unacceptable. And i just want to urge you to do so. Now, i think that will be a good idea because to have your new chief accountability officer. I think you have appointed one recently, didnt you . Wells fargo, according to media reports, created a new role of chief accountability officer for the Branch Banking business. Are you aware of that . I mean i would think you are being the chief executive officer. Mr. Scharf i am, congressman. Mr. Scott why is it that you cant assign him to respond to this. If you dont respond to these Consent Orders that are being asked of you, by the regulators, the banging regulators banking regulators, then that trust factor that i mentioned at the ery beginning gets weakened. Will you move to respond to those Consent Orders after this hearing . Mr. Scharf congressman, all of my energy and management teams energy is responding to them in a way thats acceptable to them, yes. Mr. Scott thank you. Chair waters the gentleman from texas, mr. Williams, is recognized for five minutes. Mr. Williams when john came here before this committee in 2016, not long after the first wells fargo scandal broke, seemed like the only answer he had was simply i dont know. I called on him to resign immediately for such lack of knowledge into his own companys practice. This is a slap in the face to all members of this committee. More importantly to the consumers that were taken advantage of because of his gross miss management. His answers were unacceptable. Fast forward to 2019 when the next c. E. O. , tim sloan, came before us to testify, i was somewhat optimistic that he would be able to fix the root cause of the issues that allowed so many scandals to occur. He made it seem like there was great progress in institutional changes being made to ensure these actions would never be able to go unnoticed again. This might be an even more offensive than his predecessor was. I dont know. Answers since he was not taking the companys transgression seriously when such damage was done to customers. Now, all that being said on a more positive note im glad to see that wells fargo bring you in as an outsider of the company to try to fix the mess that has been surrounding the bank over the past few years. It will not be an easy process. You talked about that. Remaining regaining the committees or customers trust, i hope you will be able to get the bank moving back again in the right direction. Mr. Scharf, i know that you have Prior Experience at mellon, jpmorgan, and other Financial Institutions. My first question would be i want to know how Management Structures differ between wells fargo and other firms where you have worked and go into detail changes you will institute at wells fargo moving forward. Mr. Scharf i think what we have today is more similar to what some of the other large well managed institutions have. Versus what we had in the past. A t we had in the past was federated model, but there was not enough representation at the Senior Management table of all the different businesses. So the discussions that were able to occur in terms of how the company was run, decisioning getting made, the structure didnt encourage that to happen. Things today are very, very different than that. There is a clear understanding that we are going to run the company as one. We have Business Leaders in charge of the significant business that report directly to me where we have the opportunity to question everything that goes on. There is an independent infrastructure around all of the risk and control work that needs to happen. People understand that that is independent and the level of responsibility and accountability that they have. Having said that, its still early on. So i do not think that we are as well run as other firms yet. We just implemented this. But everyone understands why its better for the company. And is supportive of it. Mr. Williams the other side of the aisle has reiterated they believe wells fargos too big to manage and should be broken up. Im completely disagree considering the other banks of similar sizes have been able to successfully cooperate when they have appropriate Risk Management structures in place. I ask this same question to mr. Sloan and im curious to get your perspective on the issue. When former president obama was questioned about breaking up big banks in a New York Times interview he said, one of the things that i consistently tried to remind myself during the course of my presidency is that the economy is not an abstraction. It is not something that you can just redesign and break up and put back together again without consequences. Thats what president obama said. Do you agree with the sentiment from the former president that breaking up the biggest banks is unrealistic . Mr. Scharf i believe the country benefits from the large banks. And they can be run properly and should be. Mr. Williams all right. Im a main street guy, car dealer in texas. 50 years. I have owned this business for 50 years as i said. I know how important access to capital is for the Company Looking to grow and expand operations and how important risk and reward is. And how important it is. One of my questions would be to you, are you a capitalist or socialist . Mr. Scharf im a capitalist. Mr. Williams thank you. Since wells fargo is one of the largest small Business Leaders in the country, id like to know quickly what controls are in place to ensure your Small Business clients like me are being treated fairly and not subjected to abusive sales goals or incentive programs. Mr. Scharf our Small Business franchise has the same controls over today that the consumer franchises and corporate franchises have. We have first line Risk Management which is far moreau bust than first line meaning part of the business. Its far more robust than at the time of the sales practice problems, and we have an independent risk function which is separate in fl them which has an independent reporting line up to the chair of the Risk Committee of our board. Mr. Williams thank you. I yield back. Chair waters the gentleman from texas, mr. Green, also the chair for the subcommittee on oversight and investigations, is recognized for five minutes. Mr. Green thank you, madam chair. Please allow me to thank the persons who have worked so hard to pull this report together, the staff. Madam chair, they literally had to fight to get many thousands of records that they have received. It was not easy. The republicans played no role in securing those records. They are simply playing catchup and they are not doing a very good job. , we cannot rf allow the punishment for this level of fraud to simply become a cost of doing business. No one has gone to jail. It is true that the c. E. O. s of the too big to fail banks have thus far been too big to jail. We must do more than simply pay the government a fine. Most of the frontline workers in these banks live paycheck to paycheck. While the bangs have made process in excess of 150 billion a year. 150 billion a year since the recession. 776 8 a bank c. E. O. Made times the salary of a minimum wage worker. At c. E. O. Made approximately 24. 2 million. I shall not mention his name but am prepared to if i have to. I have visited with you. Thus far you have been straight with me. And i do believe that out adversity there is opportunity. The greater the adversity, the greater the opportunity. You now have an opportunity to help us change not only the culture at your bank but to change the culture across banking. Workers need a living wage. All workers and banks should have a living wage. Workers need stronger whistleblower protection. This is part solution. Not nondisclosure agreements. That silence workers. If we had had stronger whistleblower protections, i do believe someone would have reported this circumstance and we wouldnt be sitting here today. We need to improve your mentor protege standing. Black banks are going out of business. We have approximately 18 or 19 now, depending on who is counting and how you count. We need help. 7 you are in a position to change this you are in a position to change this. You can change the course of destiny for minority nstitutions, m. D. I. s. The lowest paid workers in banks are women and people of color. Highest paid disproportionately in both cases are white men. White men are doing well. People of color and women are not doing as well. We can change this. These are the kinds of issues that we refuse to confront because there is a danger associated with it. There is a culture that has developed that will punish you if you try to develop equity and equality. It will silence you. You can speak with a very loud voice. You are not a part of the transgression that is took place, but you can be a part, and i believe you really want to be part of a solution that can change not only the culture at wells, but the culture across banking. For d a bill of rights the workers within the banks. We ought to have something that is posted, that is clear, concise, and conspicuous, unambiguous, that says to workers you mean something not only to this institution but to this country. Here are your rights. You have the right to report ithout fear of being somehow punished for your doing the right thing. So im going to ask that we meet again. Will you assure me youll meet with me again, sir . Mr. Scharf absolutely congressman. Mr. Green will you assure me youll work with me to develop this bill of rights for workers, will you assure me, sir . Mr. Scharf i will absolutely work on a bill of rights that makes sense in wells fargo. Mr. Green i yield back the balance of my time. Chair waters the gentleman from georgia, mr. Loudermilk, is recognized for five minutes. Mr. Loudermilk thank you, madam chair. Mr. Scharf, thank you for being here. Thank you for the time discussing your short time at wells fargo and your vision how to correct these problems and move forward to make Wells Fargo Organization in compliance and focused upon its customers. Before i get in my questions, id like to remind my colleagues, i heard something earlier that the republicans took a hear no evil, see no evil stands stance on this. It was the republicans, 2016, first year i was on this committee, that began the investigation into wells fargo. And we obtained several hundreds of thousands of pages of documents. And this report that was submitted today is not the first. Taste not the second. But third report its not the second. But the third report that was issued that was based on those documents and the thousands more that the Trump Administration has released voluntarily in the last year or so. This isnt something new. This isnt just something thats popped out of the woodwork. This is something thats been going on that has we have geffen given our utmost attention to. I have been frustrated and concerned over the specifically the lack of progress we saw over that time. Especially when it came to zphrigecomplige with the Consent Orders by the regulators. From our meeting and other information that i received, im encouraged that the o. C. C. Has indicated under your short tenure that the bank has made progress toward complying with these Consent Orders. With this large of a committee, your short tenure, everyone knows the past, you are going to get the same questions repeated over and over again so everybody can get their sound bite. Some of mine may be questions have been asked before but i want to hone in on. So details. Could you briefly describe specific actions you and your staff are taking from a Risk Management perspective to come into compliance with the 14 outstanding Consent Orders that the regulators have imposed . Mr. Scharf specifically Management Issues in compliance, we have increased staffing, but more importantly than just the people is putting the right framework in place. Understand how we are going to and understands what their role is ensuring that Risk Management is done properly in the organization. It makes it clear what everyone in the business has to do with their level of responsibility. How we are going to do that review work in the second line f defense independent of the business itself, thats the independent Risk Management function, and thirdline xtremely important mr. Scharf that has to be the top priority. I take it a step further inside the company which is what i explained to meme is we are not doing this just because the regulators want t we are doing it because its the right way to run a company. So we need to do this because we believe its right. When we run the company that way, then the regulators will be fine with it. Business leaders staff functions that control their own risk functions, and Everything Else that went along with it. So there wasnt a consistent set of policies. The independent fudgeses to come and look and say we like an agree with what we are doing or we dont and therefore you need to change it. Thats what we have to today and that overrules what individual businesses want. Chair waters the jofment missouri, mr. Cleave, also the chair of the subcommittee on national security, international development, and monetary policies is recognized for five minutes. Mr. Cleaver thank you, madam chair. Yesterday two of your board embers resigned. Two predecessors testified before this committee and shortly after resigned. Here you are less than six months on the job and you are sitting in that chair. Why in the world would you take this job . Mr. Scharf i appreciate the question, congressman. You are the third person who said that since we started. Im glad to be able to answer it. I believe i genuinely believe that wells fargo is an Important Institution for this country. I really do. Just because the company has not been well run doesnt mean it cant be well run. When i talk to customers of all sizes from conconsumers to Small Businesses to middle market companies, when i look at some of the things we have done in communities, when i talk o our own people. I was in branch yesterday and asked someone why do you come to work every day . I swear to god she said, because i love this company. I love the opportunity that they have given me. That is that clearly wasnt the entire culture of wells fargo. But it is an important part of what the culture is. So in the context of doing whats right for our employees, doing whats right for alt people we do business in their communities, i believe if we run the company properly, we got the opportunity to benefit more than if we didnt do this well. Mr. Cleaver thank you. For you to walk in there you got to have something that most folk dont. Let me turn to an extremely difficult part of this hearing or me. I have minority report from senator sherrod brown, march, 2020, which id like to enter into the record, madam chair. Chair waters without objection. Mr. Cleaver heres whats troublesome. s with one of the log posts of one of the employees, hate crimes, i am queeting, hate crimes are about three times as prevalent as actual hate crimes. I hate that i actually dig phi their existance by quoting a statistic that recognizes them, unquote. Then quote, fine, lets say that they called him the n word. Would that make them racist or just blank holes . Looking for the most convenient way to get under his skin. This is a guy who worked at the cfpb. Appointed position at the cfpb. Which for somebody like me with my skin color thats insulting. Lso disheartening. Im using this because there is a report that suggests that there is a back Channel Communication between wells argo and cfpb. Inal question is, what first of all, this bad channel, is it still in existence . To your knowledge. Mr. Scharf i am not aware of a back Channel Communication, no. Mr. Cleaver this is the first time you heard about this alleged back channel . Communication going between mr. Scharf i read the report. All the conversations i think that we have with cfpb to my knowledge are open, on the record conversations directly with the regulator that everyone is supposed to be aware of who should be aware of it. Mr. Cleaver thats the answer im looking for because the person who made these statements is no longer there. I am very concerned very much concerned. I was here when i guess the chairwoman and i may be the only two members here who were ere when the cfpb was created. Whether people who were not here choose to accept it, that was great, great pains taken to make sure the cfpb was not politicized. All the way down to keeping congress from getting involved in the funding of the of that department. If you take a look you have already read the report. I would advise everybody to read this report. It is chilling when they start quoting some of the people who were actually at the cfpb making decisions. Madam chair, i yield back the balance of my time. Chair waters thank you. The gentleman from ohio, mr. Davidson, is recognized for five minutes. Mr. Davidson i thank the chairwoman. Mr. Scharf, thanks for being here. Its been a long tradition. Unfortunate tradition for the c. E. O. Of wells fargo to spend disproportionate amount of time here in the nations capital. Frankly the federal government spends a lot of Energy Running all sorts of businesses that they probably have no business running, but wells fargo kind of proves that even with all sorts of regulations, all sorts of oversight, layer upon layer of redundancy it feeds this narrative that we just need more regulation. In spite of all the regulation, spite of all the doddfrank reforms and state regulators and federal regulators and o. C. C. And fdic and Federal Reserve and all kinds of laws that make it illegal to do things that wells fargo employees did, these bad things happened anyway. There are human beings in other companies, but we dont believe it happened to the scale, these bad things have happened there. What makes wells fargo so special . Now that you have been there, why could all this happen at wells fargo . Mr. Scharf i think your point is very fair. We did not have the appropriate controls in place. We didnt have the appropriate culture. We didnt have the right mr. Davidson the humans there need the the other controls that other places had . What drove these people to do it . Was it just passive, you didnt have the controls . Was it an affirmative push to do bad things . Mr. Scharf i think certainly the controls should have caught it after the fact. But the initial problem was that the structure of the company was decentralized. The culture promoted these types of activities. And the culture was not one of accountability. Mr. Davidson for that reason theres been culpability, financially for wells fargo. How many fines in total have wells fargo paid as a consequence of these bad actors . Mr. Scharf i dont have that number. Mr. Davidson is it couple hundred bucks like a speeding particular snet couple hundred million bucks or few billion . Mr. Scharf billions. Mr. Davidson billions of dollars. I think its fair to say that if these culpabilities result in billions of dollars of fines, did people lose their jobs . Mr. Scharf congressman, yes. Many people have lost their jobs. Mr. Davidson at the very top. C. E. O. s. You are now the third. Board members. Bank managers. Managers of departments. People that were supposed to manage risk. Lots of people have been held accountable in the sense they lost jobs. Anyone gone to jail . We are going leave the wells fargo hearing to take you live to the u. S. Capitol. As part of cspans 40year commitment to bring you gavel to gavel coverage of the house. Can you continue watching the hearing online at cspan. Org. In the house today work on two veterans bills and recommendations for modernizing congress. You are watching live coverage on cspan