And handle the coronavirus. noise the committee will come to order. Without objection, the chair is authorized to declare recess of the committee at any time. This hearing is entitled Holding Wells Fargo Accountable and ceo perspectives for the bank that broke americas trust. I now recognize myself for five minutes with an Opening Statement. Today, wells far go ceo, charles scharf, will testify before the committee about how he plans to end wells fargo egregious battle of abuse. Hes the third wells fargo ceo to testify before this committee and less than three and a half years. I will note that each time wells fargo ceo testified before this committee, he has resigned soon thereafter. Mr. Charles scharf, you have taken on a massive challenge and while i certainly wish you luck, it is clear to this committee that the bank you inherited is essentially a flawless organization that has caused widespread harm to millions of consumers around the nation. Wells fargo has opened 3. 5 million fraudulent accounts with their customers names which caused consumers over 6 million dollars. Charged to consumers for insurance policies that they did not need. Resulting in some consumers losing their automobiles. Engaged in a legal Student Loans servicing practices and charts consumers inappropriate Overdraft Fees and overcharge veterans for refinanced loans and fraudulently sold con plexus Financial Products to Retail Investors last week and a committee released majority staff report for wells fargo compliance with five considered by regulatory agencies and the response to the companies widespread consumer abuses and compliance breakdowns. Among the disturbing finds thats uncovered, the office of the controller of the currency is aware of dozens of cases that wells fargo with the number of consumers or customer accounts required through mediation or through the consumer abuse exceeds 50,000 or the amount of harm exceeds 10 million. Im very concerned the banks pattern of harming its consumers appears to possess the majority staff report and also uncovered notes from may 2019 Federal Reserve meeting with wells fargo reflecting that the wells fargo executive stated, quote, if he was ceo, he would not allow the addition of any new customers to the Company Since the firm is operating in this environment unquote. Based on the findings of the majority staff report, i agree with the sentiment that wells fargo isnt ready to be Americas Bank again. This is the challenge before you mister scharf. We must not only rebuild this institution you must rebuild americas trust. That begins with your testimony today. When your predecessor press sets predecessor testified in misleading testimony. I urge you not to follow this example. To be transparent and honest, this is first of several to commit its convenience to hold wells fargo accountable. Its part of this oversight will be looking at legislation to do just that. The Federal Reserves cap is a good start and doesnt seem to change the banks behavior. We will discuss a number of bills that will compel further action and rain in the piece of banks like wells fargo to hold them including their management accountable to their actions. Thank you in the show chair now recognizes the Ranking Member the gentleman from North Carolina mr. Mac henry. My colleagues on the other side of the aisle were talking about wells fargo long ago. In fact, before we received a single document of the then now chair of the committee in 2016 that she had quote come to the conclusion that wells fargo should be broken up, its too big to manage, and quote. Again, that was before the committee receive a single document or even a shred of evidence into the investigation of wells fargos sales practice. After reviewing half 1 million documents, but with both the democrats and republicans on this committee that has access to and hundreds of pages of witness testimony, we know breaking up the bank is not the answer. Wells fargo isnt too big to manage, the findings of these documents will show that it is mostly mismatched. The evidence shows that the core of the companys problems at its core braided structure. The Leadership Team that couldnt fix it. Those are the issues that are unique to wells fargo and wells fargo is uniquely mismanaged. However, the evidence does not tell us much about wells fargos large bank fears. We will spend all day in this hearing of the wells fargo new ceo that has been on the drop for six months and has no connection to whats in question. Well have to other Board Members of the sole purpose of embarrassing their documents that are deeply embarrassing to those Board Members of wells fargo and that is true. Chairwoman call on them to resign and they did and the markets were calling on them to resign and the system works. Im not sure what we hope to accomplish tomorrow with witnesses who are low longer in position to fix this moving forward. We dont have the luxury of three politically motivated, ideological ways on wells fargo right now. Serious things happening in the world where were having this hearing. Investors fear of the spread of coronavirus has had widespread consequences for Financial Services industry, the economy in the markets. Our constituents have real concerns and expect us to put aside politics, focus on the urgent matter at hand. We will spend the day asking mr. Scharf over and over again how he wants to fix the bank. Mr. Scharf and his plan launched a plan that looks good on paper. We hold him accountable for executing that plan. In fact, his stockholders will hold him accountable for that plan. The regulators, the justice will hold him accountable for executing that plan. In fact, the regulars of the Justice Department of an extremely aggressive on wells fargo. They continue to hear from them on whether or not mr. Scharf plans and we expect them to stay engaged. I look forward to this hearing today, scharf and hopefully our members will know what youre doing to prepare for your massive footprint to protect their safety. How you will protect the safety and status of your institution given whats happening in the marketplace and the fears we have in the reaction and the impact that my consumers, my constituents will have with changes in credit card, mortgages and other things. With that, madam chair id like to introduce for documents into the record and these are to allow supervisory information and these are issued by the ccf pd and Federal Reserve and important notes about these waivers theyre not to discuss csis. They were asked not to discuss these ratings and risk assessments in are not to name Supervisory Staff to either answer our questions and with that mr. Scharf i appreciate you and your company requesting us to be more forthright and with that i will ask consent to have the march six letter from the cfc be in the aoc sea and to march six letter from the Federal Reserve detailing what im outlining. Thank you very much and id like without objection. The documents are accepted. Id like to know, you have permission to disclose the names. I understand the agency asked us not to do that. Well, i was not asked by the agency to not do that and therefore i just said it in public what they outlined. These are letters to you and mr. Green. I am see seat on these things to have that request and i would have liked to have heard it before you announcing it here today and on this committee. That is what i understand. Weve already heard five hours of testimony from the ceo when i held for wells far so id like to set that to the record and your information is put into the record. The chair now recognizes the chairman of the subcommittee on oversight and investigations mr. Green. Thank you madam chair. My constituents would like to know, how is it that wells fargo and their three billion dollar fine can commit fraud, open accounts without knowledge of customers and not one person goes to jail. Of all of the top banks and too big to fail banks it has never been a ceo, a top officer of any of these two big to fail banks to go to jail. It seems like theyre not only too big to fail, theyre also too big to jail. This issue has to be resolved and it cannot be resolved by simply paying off the government. Wells fargo has this to atone for its transgression. Its more than it has to do to involve how it treats its employees, what it will do to make sure that this never happens again. But more importantly than all of these wells fargo as got to understand that it cannot continue with what appears to be a criminal enterprise, i yield back the balance of my time. The chair now recognizes the subcommittee Ranking Member mr. Barr for one minute. Thank you chairwoman waters and mr. Scharf, welcome back to the committee for your appearance and your current role. Its plaguing wells far go and addressing the problems in the aftermath and a breach of public trust and Consumer Protection we are not here to relitigate which they come committed in previous reports. Were looking to understand what the new management as done and how theyre compliant with regulators and directives to plant to ensure this doesnt happen again. Wells fargo interval inventive individualized and this conduct has been applied to all banks and much of which you hear from my colleagues today. Lately, all banks as the villains of capitalism make it easier for some on the far left to justify their quest to impose socialism on our free market economy and politicized access to capital. Were here to focus on only one isolated bank in its path to rebuild trust and mr. Scharf, i look forward to the work that you have done at the bank and to work with you to ensure wells fargo upholds in its promises. I yield back. I want to welcome to the committee charles swath. The officer of the welsh pharco company, scharf he is held this position at wells fargo since october 2019 and previously, from scharf he served at the senior official with the number of Financial Institutions including the chief executive officer of the Visa Incorporated and as chief executive officer and chairman of the board of the bank of new york mellon and without objection your written statement will be made part of the record but before we begin id like to share the witness please stand and raise your right hand. Thank you. Do you solemnly swear or affirm that the testimony you will give before this committee in the matter is now under consideration will be the truth, the whole truth and nothing but the truth so help you god. I do. Thank you. Let the record show that the witness answered in the affirmative and take your seat mr. Scharf you will have five minutes to use your testimony and with an one minute though yellow light will appear and will ask you to wrap up your testimony. So we can be respectful of the Committee Members and mr. Scharf you are now recognized to represent your oral testimony. Chairman waters, Ranking Member mchenry, good morning. Thank you very much for the opportunity to be here today. Im joined wells fargo just over four months ago after serving a ceo of the and why mellon and visa. In its early days i welcome the opportunity to discuss the next steps for wells fargo the. Members of these committees are welcoming with wells fargos history. The settlement with the doj and sec is the administrative taken by the oh sea against former employees. These matters described deeply disturbing conduct as utterly unacceptable and has no place in our company. In addition, recently released reports from this committee reinforces what ive said since i arrived. We have not done whats necessary to address our shortcomings. Simply said, we had a flawed Business Model and now the company is matched. Our structure and culture are problematic and the companys leadership failed the stakeholders. Today, id like to talk to you about our plan to show up a better course. I took this jobs i believe our country and communities benefit from a strong wells fargo. Im confident we can do whats necessary to significantly improve in this direction. It will take time, the transformation has begun. I realized the path forward will be difficult. I realize the path forward will be difficult and optimistic about our future. Heres some important steps we have taken so far. First, i provide an honest assessment to go internally and externally of our significant shortcomings and our failure to effectively address them. Second, i made it clear, also internally and externally that we must prioritize technical problem part of our culture especially if we flatter organizational structure and direct representation are ability its a clear line of sight and direct involvement which will provide Greater Transparency to how our businesses are working and what kinds of risk theyre taking on, how theyre treating customers and whether theyre operating at the highest efforts. Fifth, were introducing a new set of prophesys to thoroughly review our process and our progress against our regulatory effort. Six, we offer all evaluation and compensation practices that significantly greater accountability and continue to make tough decisions around our leaders. Seventh, redefining our culture. Especially regarding how we were together. We will have a strong, centralized and controlled infrastructure. We will ensure we have the right people in the right rules. We will move it with a sense of urgency, we will hold each other accountable for our commitments. We will judge ourselves based on our outcomes and not our words. Most importantly, the guiding principle in these decisions is that everything starts and ends with our customers. We must put them first in our decisionmaking in all we do. As we move forward, i have no preconceived notions about our banks but i firmly believe that we must be able to manage all of it. I also know that progress will take time, and ultimately our regulators will decide when we have met our obligations and my commitment to a regulators is that we will approach this with the greatest sense of urgency. To my colleagues at wells fargo, we heard more from the banks leadership and the feelings that occurred that major jobs difficult. Im committed to doing better as we seek to ensure that such things never occur again at wells fargo. To the committee, ill give you my personal assurance that we will do the work necessary to put wells fargo on a sound footing and our customers, employees, regulators, shareholders and communities. Thank you and im happy to answer your questions. Thank you very much. I would now like to engage you with a few questions that i have about some of the findings. That were reported in the investigation that was done by the majority staff. According to the committees and the discovered report, there are dozens of consumer abuses that had affected 50,000 a customers or accounts into mediation. Mr. Scharf, this is one of the most troubling findings of the report because after more than three and a half years wells fargo may still be harming millions of consumers. Exactly how many consumers were harmed by the bank as a result of the dozens of abuses site in the report . Chairwoman, i do not know the answer that question. Will any consumer that its been harmed by the bank and identify and receive payment within the next 30 days . Chairwoman, taking care of our customers is the most important thing for us. During the process of doing all of the work thats required of us to mediate everything we can and we will take longer than that. But the process has to be complete, it has to be thorough and were committed to doing it. How long will it take to for these consumers to receive payment in the reported fix . I said about 30 days and you not asked her answer that directly. How long do you think it will take . Chairwoman, as of now, our plan is to take us into 2021 to ensure that all of the payments are made appropriately. A particularly, fresh look at how we do mediation to make sure or us thorough as we possibly can and meeting everyone we should and to ask the question, the changes we can make to get this done more quickly. My concern is only deepened as i think about the millions of customers who will be looking to wells fargo to support the economic pain. Inflicted by the coronavirus. Wells fargo and its foundation have offered about 11 million to support efforts to combat the virus. Banks like yours will be asked to have payments on mortgages, credit cards. How can your customers regulate this in the public of any confidence in your institutions ability to support your customers when you have dozens of ongoing instances of consumer abuse . Chairwoman, i appreciate understand the question. All i can tell you is that we are approaching the virus the way you would expect us to. We are thinking about it in terms of what it really means for every american out there. Its how i think about it. Its starting with those that are the most affected. As we think about what we could be doing relative to late fees, missed payments and things like that. We want our customers to believe that were a source of strength and we will approach it that way. I know that you understand theyll be looking for a lot more specificity than you have just described. Now, i know that you became ceo four months ago and there are lots of changes needed at wells fargo. I think absence, significant reductions and wells fargos footprint will never be able to rein in the culture of consumer abuse. What can you tell us about reducing the footprint . Chairwoman, what i can tell you is that we have sold off businesses over the last several years and we continue to look at what the makeup of the company is. My First Priority since i arrived at the company for months ago as you mentioned is to ask the questions around what we have to do to get the regulatory work in far better shape than it is. At the same time, we have launched a series of meetings where were looking across the company id what we do. To answer the question, does everything belong under the roof of wells fargo . Given the priorities that i have, my expectation is that will take through the end of the year to accomplish that work. As you know, the asset cap, there is a cap on the assets of the bank, have youve been trying to undo that since youve been done or review left alone and do you think thats fair . I dont have any knowledge of us try to do anything other than by it. Were trying to do the work necessary that will satisfy our regulators. And its appropriate and im focused on getting the work done. Thank you and i yield back the balance of my time and Ranking Member mr. Mchenry is recognized for five minutes. Thank you for your testimony. We understand your plan as you outlined and also to Committee Members use mentioned it briefly in your Opening Statement and youre intentions to write this ship. To remedy harm as quickly as possible. To comply with regulatory orders and the failure of wills far go is not a failure of some sort of innovation and lack of adapting to the marketplace. Lack of adhering to existing laws and regulatory orders. When regulators called institution on that for those breaking orders, they refused to comply before your last ceo and your predecessor was bounced as a result of that. Both democrats and colleagues is here is the report. In this report, they outlined the consumer harmony Risk Management failures of your institution. Have you reviewed both of these reports . Yes i have. I know you may disagree with some conclusions that we have in terms of policy with the democrats side but the findings of fact you have any disagreement with the democratic report or republican report . I do not. The only thing i would add, my reaction to those reports is very similar to yours. Which is what . Which is the serious behavior described should never have happened to the company. The failures described on or a direct result of not managing the Company Properly and i do believe that is possible to manage that differently to fulfill the responsibilities we have and its clear when you read the report and i said during my Opening Statement that its consistent with what i found since i arrived at the company and not being done whats necessary. In this structure that you outlined your plan you had a wide risk control similar to your peers and is that true . Yes it is Ranking Member. Why . Because there is no way that a company with multiple businesses would ensure that is doing the right thing across the entire enterprise unless youre taking a consistent view of that. Visibility into cross the enterprise . You need greater visibility and you need a group of folks that are independent of the businesses occurring are not and making judgments. So, along those lines your experience in previous roles as ceo, youre trying to bring that expertise from Risk Management to this enterprise . Absolutely. As well as the practices of the large institutions that ive done this at. In light of what has happened in the marketplace over the last month, are these institutions well capitalized . Ranking member i think were very well capitalized. The whole Banking System is far well more capitalized in the time of financial crisis in the capital that the banks have in three trillion or so in deposits. You have the access to the liquidity to make sure these prices are as you would see . In terms of safety, your mitigating customer harm from a previous regime thats positive and in terms of 50 50 in Risk Management your cleaning up the ship. Our expectations is that we should have no problems in terms of safety, is that fair . I think its fair to say once we finish the work that ive laid out, absolutely we should feel that way. How many employees do you have that wells fargo . 265,000. How many are your customers facing . I dont know the answer to that but it has to be easily 100,000. Do you have plans to respond to the current threats because of covid19 . And what is happening across the country in your footprint of california . Absolutely. As well as Washington State and other primaries that weve seen the outbreak . Our approach over covid19 is that we should do everything that we can to ensure the safety of our employees as well as be helpful for our customers. We have an open line with them wherever there is any concern the we encourage folks to work from home. Yesterday, with 62,000 people locked in working from home. To the extent that there are issues in the institution will do everything we can to protect everyone else. Thank you. Let the record show that during this investigation all the information was shared with the republicans, they tried to rush the report out before we got ours out. This Ranking Member would like to have it both ways. Madam chair one of personal privilege. The majority and minority outlined in the statement does not imputing the report is the conclusions of your report, i yield back. Youre trying to have it both ways. We can have this debate in front of everyone. Yes we can and as a chair of the committee if you want to have this debate we will have this debate. The gentlewoman from new york is now recognized for five minutes. Dont take shots at me without having me respond. You have responded the gentlemans time is now recognized. I think the chair lady for yielding. Mr. Scharf, you are brought in to clean things up into a change of the culture at wells fargo. I would certainly hope you do. I would like to talk about one area where i believe you do need to change direction. When your predecessor testified i asked about wells fargos policies the gun industry and theyre absolutely egregious and your bank has been financially in gun manufacturers that are making members that are killing our children and our neighbors. Mr. Sloan said that he thinks they should quote, go above and beyond what the law inquires on guns even though, the bank states that it goes above and beyond the law in areas including human rights. He refused to revise well far goes policy in the gun industry. Many of your competitors such as city bank and bank of america already have a sensible policies to ensure responsible lending to their businesses with the gun industry. Under the policy, all of the banks Business Partners in the gun industry must require background check before they sell a firearm and prohibit selling a firearm to teenagers. These are common sense policies that will increase public safety, and save lives. I want to ask you, do you commit to changing wells fargos policy on financing the gun industry . Congressman, i want to say i share your concerns about the impact of guns. Sitting here today, i dont personally believe i know enough to make that commitment. I know its something that we need to be far more thoughtful about. I know that we have created some financing for some non partisan research. As part of that, we need to go back and make sure that were thinking about what the right thing to do is. In the series of said to the industries cannot baking this one way or the other its something i spent enough time on but i recognize your concern. Thank you and after you review this policy and major decision, you get back to the committee in writing about your decision and the reasons for making that decision respectfully. Thank you. In the Committee Staff report there was an email and i want to compliment the committee on this excellent report that has gotten a lot of positive feedback. But in it, theres this email from your officer michael lawton, where he said and i quote, the committee of the 200 million proposed customer mediation was left over. We promised to give it to charity. Only after the cfo pd and the oh sissi lets us out of the consistent order that they do not make a donation but put the onus back on them. Your chief risk officer was gone trying to play hardball of the regulators that were compensating the victims of the fake accounts, scandal and charitable donation. Mr. Scharf, they expect you to do the right thing by your customers and that your bank has defrauded and we expect you to work with your regulators to come and save them from the scandals and the misuse of their funds and other frauds. I want to ask you, since you took over as ceo in october of 2019, what specific actions have you taken to address the occ concerns about how the bank mediates harm and consumers. First of all the, gentlemen you refer to is no longer the chief officer of the company and certainly when i heard those comments theyre inexcusable and not something that should ever be thought of by someone inside of the company and to your question about what were doing, first of all we put in someone of our a mediation process and that person reports to our new chief operating officer we brought in from the outside and has experience in dealing with customer mediations and the mandate that i recommend is to rethink what it is and how we do. Dont stop the work thats ongoing, but going through piece by piece and asking the question of what can we do to ensure that we are doing everything we can for all of our customers as quickly as we possibly can. Thank you. Earlier you were asking how many people you defrauded do you know at that time. The gentleladys time has expired. Miss wagner is now recognized for five minutes. I thank you madam chairwoman and thank you for joining us today and updating this committee on your progress as the ceo of wells fargo and being with someones money and wealth in organization like wells fargo is one of the biggest displays of trust and for many years consumers were betrayed and taken advantage of in order to meet Sales Performance goals and to improve earnings and share prices. That was categorically wrong. Not only did wells fargo fail these customers, some of whom are my constituents in the second congressional district. Our regulators failed as well and they can either identify or prevent this malpractice from happening in the first place. It was the obama administrations oh sissi and see f pd that covered this problem and it was not the oh sissi and the cfo ppb of the Previous Administration it was in fact the l. A. Times and the media that had this Companies Practice a light. Your predecessors were appear through the committee in the members that wells fargo it was on track to comply with regulators consent and the evidence outlined in the third report regarding wells fargo says otherwise and your predecessor was overly optimistic about the banks progress towards the oh sissi and the Federal Reserve cap and the public statements ushering the banks progress that they did not matchup with what was taking place behind the scenes and i will am consciously optimistic that you are the right man for the job to bring the bank into compliance and put these scandals to rest. What makes you different from your predecessors to address and resolve these deep seated issues within wells fargo . Thank you congresswoman ive been lucky enough to have a series of experiences that have been both well run and troubled coming out of those experiences i believe that there are things that ive learned that could be taken here. Things that ive done that ive done coming into wells fargo its a stark contrast to how weve heard these issues in the past. If youre inside the company, you feel like youre approaching these issues differently and ive been very open and honest about our lack of progress, not pointing out the promises but also focusing in on having an impact. The sense of urgency and its very different today than it was and im spending the majority of my time on these issues and 75 to 80 of the time not focus on growth, new businesses or anything like that. Mr. Im scharf not hearing any specifics. Wells fargo fragmented structure and are part of the compliance challenges and we expect to see changes to affect major outstanding issues . We will have a much stronger centralized court in everything that relates to control. We will run the company as if its one company, with consistent set of standards and consistent set of policies. Everyone understands that and we believe its the best way to run the company. The report found that wells fargo request extensions for mediation and they typically granted those requests by the banks plans to remain insufficient even with the extra time. What steps are you taking to ensure they can submit these plans on time without deadline extension are you still using these contractors to draft plans for cfpb and occ under these orders . In the things i just mentioned, were putting a Different Group of people in charge of these issues. I am the operating committee and are getting deeply involved in all of this. It will take time because as you know there are series of orders that are outstanding and be as methodical as they can