Transcripts For CSPAN2 Senate Banking Hearing On Wells Fargo 20171004

Last year wells fargo ceo Timothy Sloan came under congressional scrutiny after revelations the bank created millions of accounts without authorization from customers. Tuesday he gave an update on how wells fargo is addressing past wrongdoing and changing business practices. The searing will come to order. Before we begin let us remember that were still mourning those lives who are lost in our thoughts go to the courageous First Responders who put their lives on the line to save others. Both centers of nevada arse absent today because theyre in nevada. I know that senator heller and cortez are doing all they can there we will be reunited in prayer and support with them during this difficult time. Today will hear testimony from wells fargo chief executive officer. Over a year ago john testified in front of this committee on the bank bank account scandal and his handling of the fallout. Of the many issues emphasized during the Committee Members one was the need to hold executives accountable and to ensure customers impacted will be made whole. He committed the bank would take necessary actions to make it right and restore the public and Investors Trust in the company. Incidents like these remind us how important it is to Institute Policies and procedures that foster customer protection, identify problems and treat customers fairly. Since that hearing they have made changes to the Corporate Structure in an effort to address these concerns. Developments and disclosures at the bank in the last year merit new scrutiny. In august 31 they announced the results of an expanded review of Retail Banking accounts which included those opening january 2009 and september 2016. The phone potentially unauthorized accounts was three and half million instead of 2. 1 million. They discovered problems with its Auto Insurance, or cpi program in selfreported these issues to regulators. In response to complaints received policies purchased on behalf of customers purchased in 2012 or eight and found they be 800,000 customers may have been harmed by the practices. Customers were charged for Car Insurance they did not need. Some had their vehicles wrongly repossessed. For families, having your car repossessed her credit compromised is devastating. These new developments raise questions that must be answered. Including what have they done to ensure customers affected by these issues are or will be made whole . More complex question cases, how is wells fargo working with the other parties to restore Credit Scores and return amounts were customers experience higher borrowing costs . What changes have they made in the last year to address post past issues and new revelations . I what new evidence is there . And as members as last year, what has been the involvement of regulators since the initial incident and in response to the new disclosures . We welcome comments on these matters. Before we get to the testimony, senator brown. I act your comments about the citizens of las vegas and those visitors that lost their lives and were injured in that shooting. Our hearts go out to them and their families, special concern to senators heller, i hope that after every charge at a we say hearts and minds go out to those victims. I hope the senate will actually do something about this for a change. A year ago john stumpf sat in the searing attempting to explain the inexplicable. The banks punitive sales goal have pressured its employees to open over 2 million fraudulent accounts. In written questions they asked mr. Stump if he was confident that this type of fraudulent activity existed and no other part of wells fargo. We asked about products including insurance. On november 15 they responded they believe the activity was issued to certain members within the Community Bank division. Weve learned that the problems are larger and most systemic than originally disclosed, before being forced to come clean wells fargo went to Great Lengths to bury the scandal. Subjected customers to forced arbitration preventing them from their day in court and further concealing the fraud. Employees who try to alert Senior Management there were silenced or fired. In 2013 a california customer sued claiming they had open several on authorized accounts in his name. Wells fargos forced the case out of the courts and into nonpublic arbitration claiming the terms of a real account should govern the fake ones. They forced that out of the claiming the terms that a real account should govern the fake ones. The bank again used its fine print legalese to fight to keep the case under seal, using forced arbitration. Has it changed . Just two months ago they used forced arbitration clause in august of this year they finally disclosed a number of fraudulent accounts 70 higher than originally reported. They revealed and stuck 800,000 customers without insurance policies without telling them or checking to see if they had insurance. The bank was aware of these yet well ceo told this committee that fraudulent sales practices were limited to the Community Bank. This was not a casual response, it caught somebody off guard at a hearing, it was a written response undoubtedly approved by lawyers and others at the bank, may be venue among others who saw the response you for it was sent to congress. A week after the board of directors initiated its independent review. The report to the board whose members are paid 370,000 for a parttime job to prepare for and attend several meetings. Found that the fault lay elsewhere. Thats cold comfort to the thousands of employees who make perhaps one tenth of what these Board Members make were fired for failing to generate enough new accounts. The Board Limited the scope which is troubling. Should it wanted to know that additional problems existed in the other divisions. The changes they have made are not sufficient. The pad numbers and an effort to increase executive compensation. In light of the millions of americans defrauded by wells fargo, the recent at the fax breach that compromise 145 million americans personal Financial Information in the breach that led to insider trading, its no wonder the public doesnt trust our financial system. We need strong rules to guard against abuses and payday lending and credit reporting accuracy. Rather than working to rollback Consumer Protections that this committee wants to do we should be supporting the bureau, supporting other watchdogs that stand up for hardworking americans when Big Companies take advantage of them. Thank you. Thank you senator. We will proceed from testimony from mr. Sloan, the chief executive officer and president wells fargo. Your written statement will be made part of the record in its entirety. You may proceed with your oral remarks. Chairman, ranking member, by name is tim sloan and im the ceo of wells fargo. I think you for the invitation for this here on wells fargo, one year later. This is a year disappointment in transition. But my predecessor testified here lester we havent grappled with the damage, the sales practice scandal had done to our customers, our team members, and their trust in our bank. We recognize too late the scope and seriousness of the problems in our Community Bank. We did not come to congress with a good plan and we deserved your criticism. But, i heard you. I heard our customers and team members. I heard them loud and clear. You expect us to do better, and so do we. Let me be clear. I am deeply sorry for letting down our customers and team members. I apologize for the damage done for all the people who work in bank at this important american institution. When the challenges demanded Decisive Action we acted too slowly and too incrementally, that was unacceptable. I want to be clear, wells fargo is a better bank today than it was a year ago. And next year wells fargo will be a better bank than it is today. Thats because we spent the last year determined turned back the publics trust. Since i became ceo my team and i have big home focused on three tasks, first in response to the sales practice problems announced in 2006 we are transforming our Community Bank. We have a strong leader, oversight compliance and Human Resources are more effective and have far greater visibility and accountability across the company. We have revamped the incentives for team members by eliminating Product Sales goals. Today we reword teamwork and customer service, not just selling products. Our bank is a fundamentally Different Organization from the one that existed in 2016. We are reviewing our accountability through the entire company. Now when a concern emerges we identify it quickly, we escalated promptly, would disclose it appropriately away address it fully. We will demand individual executive accountability. We have clawed back 180 million in executive compensation and have fired senior retail, mortgage and Auto Executives for not performing to the standards or customers deserve. Third, for compensating every customer who is suffered because wells fargo made recent the stakes. Last year we looked at accounts that were opened. This year we went back and took a closer look at 165 million accounts open be tween 2009 and 2016. Just as expected we found more accounts that should not have been open. It was not new potential misconduct since last year, it all happen before 2017. But its a serious issue. We are committed to fixing it. Of the 3. 5 million potentially on authorized accounts, about 190,000 incurred 6 million in fees and charges. Wells fargo is refunding every nickel. Were repaying 142 million to compensate customers including for increased borrowing cost credit score impacts. Apart from these reimbursement mechanisms want to be clear that we are committed to addressing any concern that any of our customers may have about an unwanted product or service, no matter where when it may have occurred. If theres a problem we want to hear about it. This past year has been humbling and challenging. My number one job is to make sure nothing like this happens again at wells fargo. Fortunately joining me are 270,000 Outstanding Team members. Im part of their work and want to thank them for their commitment to making things right. I see improvement every day and said or team members. Our customers have noticed the provement too. We will not stop until we restore trust and make wells fargo the finest and most Ethical Company can be. Thank you for the opportunity to address the committee. I look forward to your questions. And are hearing members ask questions about how customers and consumers whose Credit Scores were impacted would be made whole. Cases where the Credit Scores were negatively affected how is wells fargo working to reimburse those costs . For doing that in a few ways, we went to the Credit Bureaus and provided the names of our customers whose accounts could have been inappropriately open. Because of regulation the Credit Bureaus couldnt provide us with the detail of those back to us. But we saw was about 40 of the customers had no use of the trade lines within one year. Their credit was not impacted. Of the remaining 60 about 25 had no impact on their Credit Scores. The main impact was about four points. Numbers are just numbers. Certainly more customers were impacted and some couldve been impacted by more than four points. We reached out to 43 and half million Small Business and consumers and said, if you have an issue come in and see us and we will make it right. Approximately 41000 customers have come in. About half had credit related issues. We have made it right for those customers. In addition as part of the settlement that i mentioned, the lion share of those funds will go to customers whose credit score have been impacted. Will be working with the experts and attorneys for the class provided. Will provide them with whatever information they want. Were reaching out to 43 million customers again, as well as tens of millions of customers to make sure they know about the Class Action Settlement so they can be made whole for any credit impact. Some of those actions required include the establishment of a compliance committee, carrying out a risk review sales practice risk and maintaining enterprise ride Risk Management and oversight. What is the involvement of regulators since the initial incident including in response to unauthorized accounts and the cpi issues . We have an active dialogue with the regulators, the Federal Reserve, the occ were talking about bank related issues. For example, as it relates to collateral protection or cpi issue, when that escalated in the Third Quarter we reported it to her regulators on a realtime basis. We been working to keep them apprised of the issues and working with the occ to make sure the remediation plan for any customer impacted by cpi is acceptable. As it relates to the fundamental changes ive made since i became ceo, the compliance we have done the following. Weve centralize all of our enterprise risk and control, that was one of the failings that was found and we agree. Those have been centralized. Were hiring a new compliance officer. We devised a new compliance plan. Weve created a conduct office the centralize risk group that independently brings up complaints, epic line issues, and the team member turnover so we can connect the dots better than we did a year ago. I dont think we have a good answer yet as to how and why this activity went on for so long in your bank. The Company First blame to rogue employees, trying to meet unrealistic sales goal then blamed the executive who earned 9 million and finally john stumpf who earn 19 million that year. You been at wells fargo for a long time. Youve been head of the wholesale bank which includes overseeing insurance. Was there no point prior to 2015 with the lawsuits, termination and whistleblowers, was there no point that you saw problem that required action . Thats incorrect. Ive been public and made the statement on a number of occasions and in finding the board report that in 2013 when sales practice issues were elevated to the operating committee i set on that committee. It was elevated to that group, we took action, but in hindsight we took action that was insufficient as i said in my Opening Statement. Im angry about how we handle the problems historically. Im disappointed in how we handle those. But the fundamental change i made since ceo is addressing the failings without the board pointed out our regulators pointed out in the mistakes i saw my prior roles. Thats an answer, but as a cfo and having a strong close relationship it still perplexes me why you are a good now for speaking out about it for years ago could have more impact. You test about how it has changed, but i think actions speak louder than words. Use forced arbitration were Bank Accounts have been opened in their names. I mentioned a 2015 lawsuit that they were able to squelch because of this clause, not only did you use forced arbitration, but the bank took the position that the fine print on a real account should apply for one. So you settle with some customers on that issue. You are making that argument last month about customers in utah. Then you ask a court to toss out a class action on a different scandal. Again, based on forced arbitration clause you force your customers to sign. Many competitors are eliminating the practice of forced arbitration, with would you commit to the committee today that you will quit using forced arbitration . No, i wont. When i hear the word arbitration what i hear sword feeling. When we have to rezone and have to have a conversation with our customers about arbitration, it means we dont have the right product, havent provided it in the right way or responded to their complaint so let me describe what we have done to change. We are doing a thorough review of our services to make sure theyre right for customers. In some situations we stop providing certain products because we couldnt provide them in the appropriate way. Improving how to train our people and team members to seller products and provide the right advice and service. When a customer comes in were trying to resolve the complaint completely. One change weve made is making fundamental changes at the Community Bank. When you commit our branches one of our bankers are tellers doesnt say can handle your problem, we settle it there a trend that in there. As part of resolving the sales practice issues weve expanded to a nationwide mediation. We pay for a mediator to work on behalf of our customers is an independent mediator to resolve complaints. Im happy to say that of the 43 million and a half customers we reached out to. I need to cut you off. I wanna follow up. I appreciate the answer, but i think forced arbitration clause always give the advantage to the bank as we know, youre still going to use those forced arbitration clauses to take advantage of your customers the way you did in suits 13 and 15 in the case against the customers in utah. Why should we believe youre committed to changing practices when you continue to use that behind closed doors arbitration system that clearly doesnt allow customers their day in court . Because we have made fundamental changes to the way that we do business. It will limit. Limit the number times is good, but give them their day in court. Those that you are not able to help. Or satisfy. I look at the study and is said that arbitration is fast and efficient for consumers. The study said that consumers have better returns, higher resolutions with institutions. That selective reading. Keep in mind where they only came out on that question. Senator kennedy. A morning. Like you, i believe in the Free Enterprise system. I think it has lifted more people out of poverty that all of the social programs put together. I am certainly not antibusiness, quite the contrary. We all on this panel talk about the importance of jobs, i dont see how you can before jobs if youre against business but what im curious about is what in gods name were you thinking . Im not against im happy when businesses are successful. Im not against big. With all big due respect, im against don. Im against a business practice which has wells fargo first and customer second. I think it out of the customers are first and wells fargo second. I think its better for the customer and better for wells fargo. When did this start . Senator, i completely agree, wells fargo cannot be a successful american constitution or employ 270,000 of the best team members must we put our customers first. Theres no question are Community Bank we had an Incentive Plan that puts selling products first as opposed to customers first. Theres nothing wrong with that if its good for the customer. But when did it start . We investigated back to 2009. The board of directors, an independent board of directors look back as first 2002. Thats where they found that they saw instances of inappropriate Sales Activity under that plan. We should a vendor that plan years ago. We made a mistake, we have ended that plan, rolled out a new Incentive Plan. That plan rewards good customer service. Every words providing products in the right risk. I appreciate that, and im really not trying to be rude, should we just have a five minute limit and our chairman enforces it strictly as he should, can you tell me, was the total number now of fake accounts you found . In our review going back to 2009 because we couldnt call in a 65 Million People weve used a conservative set of data. And what did you come up with . There were up to potentially 3. 5 million unauthorized account. An expected 2009. To go back further than that . The reason we did 2009 is thats when wells fargo and waconia came together. Pgh so, money did you make off of those 3. 5 million fake accounts . They were potentially unauthorized. Lets assume they were all unappropriate, we found 190,000 accounts that we charge fees. Those approximately 6 million in total we have refunded that. Was anybodys credit impacted . Not for those deposit accounts but potentially for the unauthorized credit card accounts. Their credit could have been impacted, we are in the process of working to correct that. You said you talk to the Credit Bureaus, are they being cooperative . Yes they are. Will we provide them information about customers they cannot provide us the detailed Credit History without the customers approval. They gave out first data without the customer name. I thought you could buy it from them . We cannot buy it from them. Thats why its important part of the 442 million settlement and naturally the linchpin of that settlement is to make it right for the Credit History. Thats how they get their Credit Histories fix. In addition, if they come in to see us will do that. Thank you. Thank you for being here today. Let me go through what we have learned over the last year. September 2016 with her and 2. 1 million accounts have been fraudulently set up, credit checking, debit, july 7 of 2017 we learned that wells fargo set up a thousand Auto Insurance policies who didnt want or need them. In august 2017 we learn to an additional 1. 8 million, over and above the twopoint 1. 4 million accounts were set up. If you have those up it brings the accounts to 4. 3 Million People either fraudulent accounts or insurance companies. 4. 3 Million People is over four times the state of montana. Its a goodsized chunk of folks. The chairman of this committee and the Opening Statement basically asked you what have you done that has changed this culture . Its not one person or tellers on the ground, it has been a culture, so what can you tell me concisely the you have done. And ive talked about transforming your Community Banks. But as ceo or the board what have you done to ensure that we will be back here next week, month or year from the talking about Something Else. I cannot promise you perfection but we are working as hard as we can to get to near perfection. Reviewing processes and procedures. What we had to do and what you criticize us for last year and youre right is we needed an executive team to take full responsibility. We needed to reinforce that from our team. We talked and asked them what theyre concerned about. They were concerned about things like pay an escalation of issues. And things like executive accountability. Things like revamping our equity. We listen to our team. As we listen to our team that changes the culture. Our turnover is now down to the lowest level in four and a half years. Down to the lowest level in the Community Banks we had the biggest issues. I hope this works, i think its essential that it works. For doing this again six months from now, its not going to be good. You talked about things you have done improving training, resolving problems. He talk about nationwide mediator, who pays for that . We do. Who chooses them . The customer does. There the one who makes the call . We provide them with names they can decide who they want to use and will pay for it. Let me talk about what forced arbitration. Is it true youre using force arbitration when it is about a real account on a fake account . Weve dealt with this on the hundred 42 million settlement. We agreed to that settlement. We said, coming to see us, we will make it right by them. If youre not happy. The question is, were you using force arbitration from a real account and applying it to fake accounts set up on arthritis . There were instances historically. Were not doing that today. Will you commit to not use force arbitration and accounts that were set up without the authorization of the customer . If theres a situation. Yes or no woodwork. If we have set up an account that was inappropriately set up without the customer we will make a right by them. We will not. Theres not good to be reason to have a conversation. But let me point out, that was being used six months ago my staff whispered in my air that they were using arbitration on fake accounts that were set up on real accounts. I appreciate your question. Were not doing that. If we set up an account. The only time i get in fights with folks is when they dont give me a yes or no answer. The question is this. And you can answer in another way, but will you commit to not use force arbitration on accounts that were not authorized by the customer . The easy answer is yes. We have not done that. And you will not to that moving forward. Thank you very much. Thank you for being here. The entire Banking Committee is at least irritated by what we have uncovered and part of it is if its from 2011 at 2015 your 2. 1 million fraudulent accounts. Them from 2,922,015 its a 70 increase. Were those new accounts were did you miss some between 2011 at 15 . The majority of the increase was in 2009 intemperate extending that to september 2016. Because we use a conservative view for the original timeframe of 2011 through 2015, we picked up a few additional. It was not within that time. Crack, 2009 and ten, and through 2016. So half a million customers were enrolled in bill pay without consent. They were charged without Auto Insurance without their knowledge, how about homeowners, Flood Insurance and property insurance . Having spent years in the Insurance Business Auto Insurance is the lower tier what banks engage in. Homeowners is significantly higher and they find themselves being charged by the bank temporarily. Flood insurance you see that happen oftentimes. Are the numbers and the homeowners just insignificant . Do you have a number . We havent found issues there. If you have to come back in six months which might be good for you to come back to have another opportunity for us to know what happened. My question is, if you havent found any instances of inconsistencies in other Insurance Related Services that would be surprising having dealt with banks consistently for 20 years. How do we know, did you say you have 165 million customers . We looked at hundred 65 million accounts. We have over 70 million customers. We serve one out of three u. S. Households. So out of 70 million customers youre confident that 3. 5 million is the final number. Of potentially unauthorized accounts . Yes. Lets talk about the corrosive culture that doesnt start a local Retail Locations or tellers, a corrosive culture starts at the top. And it germinates. And folks feed off of that. Have you change the corporate leadership in the Corporate Culture that will find itself at Retail Locations . First we looked at what caused the problems in a retail bank. First and foremost the issue was that we had an Incentive Plan that drove an inappropriate sales culture. That ended and we have a new Incentive Plan. The feedback we have gotten, will get the results of the Third Quarter set theyre very pleased with the plan, as we survey them there telling us they like the new conditions at wells fargo. Weve actually hired back with hired 17000 new team members into a retail bank sets september. Of those, several were those who had worked in retail bank that left because of the old culture or dismissed because they didnt meet certain sales quotas. To me, those folks coming back reinforce the changes that were making is taking hold. My thought is that your sales culture isnt driven by the sales products. Ultimately its not the sales goals, not the product selection, as the people. Its the people in management positions who put more pressure for results than an average person can get. If you havent change the people is difficult to change the culture. I agree with you. Thats why named the new head of our Community Bank group who i mentioned, mary mack is doing an excellent job. She has gone through each of the levels of management and have everyone reapply for their jobs. We reduce managers to change the span of control. We eliminated layer. But the issue is not just the Incentive Plan, we created a culture managers settling how to manage because of that plan. Getting rid of the planet making sure we had the best managers. Now, where the process of retraining everyone, starting at the top before you get to the folks in our branches. Thank you. When you are named ceo after the of fake accounts scandal, you are asked why a career as a wells fargo insider like you, why that means you the right person to fix the problems at the bank and he said quote, because ive been making change for 29 plus years at wells fargo. I went to look at your time there. From 2011 2014, the height of when wells fargo was cheating customers by putting fake accounts, you served as the chief financial officer. As cfo you talk to potential investors a lot. On those calls you aggressively promoted wells fargos ability to open up new accounts, didnt you . No, i didnt. Know you didnt . Here are the transcripts from all the investor earning calls they participate in. From 2011 2014. Ive read through them. On these calls, no one, not even john stumpf who is the ceo at the time break more about wells fargos ability and commitment to open new accounts for existing customers. In april 2011 call, i think i mark that one, you said i cant wait to get a credit card and every one of our credit worthy customers wallet. Nothing about whether they wanted or needed a wells fargo credit card. All that matter was opening new accounts. Youre bringing to investors about opening new accounts, you also personally owned roughly 2 million shares of wells fargo stock. I dont require call how much stock i owned. Its public. It looks like you had a really good thing going, talk up wells fargos ability to open new accounts, get investors excited and if the stock goes up by dollar you make a cool 2 million bucks. Then in december 2013, was three years in tears time as ceo. An article is written about opening new accounts. Space on the review of internal wells fargos documents, and interviews with more than 30 current and former wells fargo employees. It specifically said that employees had open fake accounts in response to the pressure. You were interviewed for that piece and you said quote, i am not aware of any overbearing sales culture. That is interesting freezing. I am not aware of any problem. So when the l. A. Times came to you and showed you concrete evidence of a terrible problem with fake accounts at your bank, did you launch an investigation into the issue before brushing it off . As it relates to my comments in 2011, im proud of the credit card products. Im not asking that. Youre brushed it off and said im not aware problems. Did you open investigation when someone laid out evidence of fake accounts . In that interview, to the best my regulation they didnt provide me with information. It was soon after. I take that as a no. You did not open an inquiry into it. Again, the l. A. Times didnt provide me with documents. So you had no clue did you read the article . Yes. And then you opened an investigation. At the same time the articles come in a the Community Bank elevated this issue, thus the time we began to take action. Thats talk about that, you didnt look into the fake account but you went back to pumping up the stock price by breaking about their Record Number of new accounts on your very next investor call. Forward to 2016, two months before the fake accounts scandal became public. Your chea chief operating officn an interview asked if you that the bank pushed sales goal and crossselling too far on your answer was no. The fundamental strategy we have is not going to change. That is july 2016. In july 2016 he knew thousands of employees had been fired for putting fake accounts and other sales violations. You knew aggressive crossselling goals were to blame. Still, you publicly said the bank didnt have a problem. Thats incorrect. Could you read the entire quote and could we go through the presentation . When asked about pushing a place to fart your answer is no. The fundamental strategy we have is not going to change. I was referring to the vision of our company. Including the fake scandals are being asked about . Every time i give a speech i talk about her vision. Our job is to satisfy financial needs and help them succeed financially. Since i have become ceo ive made fundamental changes to address the issues that were talking about today. You are asked about pressure on employees that cause the fake accounts scandal. Problem would you are asked about it you live. About personal responsibility. Wells fargo she the millions of people, for years. The Federal Reserve should remove the current Board Members who served during that fake accounts scam. You think youve been making changes there for 30 years but you enabled the fake accounts scam and get rich off it and then he tried to cover it up. At best you are incompetent, at worst you are complicit and either way you should be fired. Wells fargo needs to start over and that wont happen until the bank rid itself of the people like you who let itself into that. Mr. Chairman, respond to that . I want an equal amount of time. Ill get your criticism of me in a moment. The lets talk about the bird. The board has taken very important steps in terms of a thorough, independent investigation that has been made public. Thats number one. Number two the board has taken strong action in terms of executive accountability that is unfortunately some of the highest incorporate american history. I dont believe your criticism of the border are accurate. As it relates to me, the reason im the right person to run this company today, notwithstanding your criticism, is because ive been making change at the company for the for 30 years. I have made mistakes but having knowledge of the company and ability to make the change, the actions that ive taken since i became ceo have made fundamental change of this company. Im not afraid to make her decisions when needed. And i have the support of 270,000 people. I just want to make a short. I know were over. Are you kidding . Look, youve been there for 30 years. Every one of my colleagues on both republican and democratic side of spoken who talked about a broken culture at wells fargo. Talked about the fact that the problems are with leadership. The people who were there and leading wells fargo during the time of a years long scam, and multiple scams as our chairman pointed out. Those people should not be left in charge of this business. When you promote what is wrong with this bank, you went to the stock market bragged about it. You made money personally off of it. When asked you didnt tell the truth and try to cover it up. Wells fargo is not going to change with you in charge. Send it around his next. Please Pay Attention to the time limit. I know were not supposed to be in the middle of this. We normally get five minutes. Some ago back, i know you dont always get the opportunity to respond but i want to hear your full response. You said basically a senator warren has indicated that you wanted to see everyone with a credit card, would you please go and buy what you meant by that statement. Sure, when the banking business. One of the products we provide to our customers as a credit card. Any one of our customers that comes into serious thats interested in a credit card we like to provide it to them. Im proud of the hard work and effort of all of our team members. Weve seen growth because customers like using the product, im not embarrassed about that. What of the whatever adjectives are used to describe that is inconsistent with the fact that our job is to satisfy our customers financial need. If that means they want a credit card and if we have the right product i would love for them to have a, thats what we do. Would you agree that there was a broken culture at wells fargo during this time . In our Community Bank we have fundamental problems they created serious cultural issues. In terms of the rest of the company i wouldnt say its a broken culture. Sco and technology that it been there for 30 years, there some that dont think i should be in this role, weve heard that. We went out and asked third parties to help us do new culture surveys to make sure we werent missing anything. Even though ive been there for 30 years and done done thing sometimes good or sometimes made mistakes i dont want to be in a position of we need to listen to all of our stakeholders in our team members. For making fundamental changes in the company to address any culture weakness that we have. One area we are concerned with is that wells fargo i want to make sure members of the military, they do have special Legal Protections under the Service Members civil relief act. Such as protection to the soldiers creditor property when serving on active duty. Can you discuss the specific ways that wells fargo has tried to improve its compliance with civil members particularly in light of the sales practices issues. Can you give us some assurance that changes have been made with regard to how Service Members are treated with regard to their credit activities . We care about our customers, i dont think theres any Customer Group that we care more about that our servicemen and women. We created a center of excellence that looks across the company to manage matters. The center of excellence is staffed with experts that only look at the ways in which we can provide the appropriate benefits for servicemen and women. We work closely with the Defense Department to make sure we get updates for the Defense Department in terms of which customers are now on active duty. That puts them in a different category. Were proud of the fact that weve made improvements. Weve had historical and we had issues. But we needed change and to have a center of excellence. Looking across the company. In addition we have 8500 team members or veterans. Ive made a commitment sco that we want to hire another 20000 by 2020. We provide a Financial Education services to hundreds of thousands of servicemen and women so they can manage their finances appropriately. Weve donated more than 300 homes free of charge to wounded veterans so they can have a place to live. Youve used a thirdparty to come back in and do the analysis on the accounts and to identify problems. You continue to use a thirdparty to go in and double check in terms of whether or not the proposals you have laid up and being followed through on . As it relates to the accounts thats what we did, we went back and double checked the prior time that we had disclosed and expanded that. We put in additional policies and procedures in place to address those issues. Those are independent of the business line. Thats one of the issues we had before. My time has expired. Will you continue to use a thirdparty to use Due Diligence to make sure the changes are being made are being implemented . Were bringing in third parties to look at berries policies and procedures across the company. The answer is yes. Thank you mr. Chairman. Mr. Sloan, we have a Statutory Authority to revoke a National Charter the bank if its found to violate the National Bank act. Why shouldnt the occ consider revoking your charter . Because we provide products and services to one out of three american households. We talked about the mistakes, but today were often times not we do it appropriately. The company is growing, the Company Provides jobs to 270,000 people. So youre too big . No, were not too big, at all, but we have 270,000 team members. It sounds like what you said, the reason it shouldnt be considered for revocation is because the first thing out of my mouth was her size. The first thing out of my mouth was our customers, we serve one out of every three customers. When you look at the bank in totality today were doing many more things right than wrong. I appreciate that were talking about wells fargo one year later in the changes. That does sound to me like to be, i guess well let members of the panel on the audience to make a judgment about whether your answer suffice. Im not an expert in banking. Explain this to someone back home. You made 21 billion in profits last year. You made a nice salary, your board makes better than a nice amount of money. Your ceo when this went down. And now your ceo. Explain to the man on the street why this is fair. Im not hundred sure,. You get a promotion, all the people in charge get a lot of money. Lots of consumers get harmed. So explain to me in english why this is fair. I have taken responsibility for the mistakes that have been made at the company. Im taking action in my role as ceo to make wells fargo a better bank than it was year ago. It will be a better bank in the future. For taking action and providing, proud of the fact that our bank is the largest Small Business wonder, we make a difference to americans every day. I only have two minutes, cursed me that its only in this industry where people can make such massive errors and there doesnt appear to be accountability. Only because of your size doing not understand totally which statutory tools are predatory tools that we have at our disposal to find a remedy. At a briefing for staff representative said that they would make good will payments to customers who had their cars repossessed. As i understand that the bank will designated thirdparty claim administration and ask customers to send a form explaining how they are harmed and how much money they need to be made whole. The claims are basically going to be paid up to 2000 no question asked. My question is, why not just cut checks up to 2000 for all those impacted . The only thing i can think of to put this on consumers is that your hoping that many of them wont do it. So, can i have your commitment to go ahead and push out the money rather than force people to figure out they have this right and are likely to be approved up to 2000 but they have to go through the paperwork, connecture commitment today . No. Were making the 500 goodwill payment to those customers whether impacted or not. And my commitment that will make sure will make it right for those customers to the extent they were impacted. If we need to do more than 2000 to make it right will do that. The she mentioned to her veteran husband i didnt know the va noticed they somehow got this categorized and thought it was a simple problem they said you have paperwork and phone calls you need to make to actually get reinstating at the veterans benefits. How are you maximizing, minimizing customers time and getting this right. Is it my problem to deal with those accounts through the accreditation agencies tell me about that process. In the Fourth Quarter we reached out to the customers in about 41,000 have come in to see us. To the extent that they are not weve offered free mediation services. One of the other fundamental changes weve made a rededicated to deal with it on the spot. Under the new leadership of the bank she delegated the authority down to the branches so that when a customer comes in we try to deal with as many of those as we can. I introduced the goals for the team in march and that the number one goal. Im going to make sure we have enough resources. The fraction of those that incur fees for any charges that correct quite as you dont like opening up accounts that have no activity because there is an inherent cost of operations that you are incurring so there is a natural im trying to figure out where the Circuit Breaker didnt click. Tell me and my remaining 25 seconds. It was not authorized on the board there is a new ceo weve taken the responsibility of the management didnt provide information to the board as well as we could have but its taking the risk control function and Human Resources, compliance, credit. They have issues in the company and i get the reports now. Who knows best what is in their interest . Is important from my perspective to get it right. Why do you deny them the ability to go to court to most of the studies including the one from two years ago is better for the customer we know what theyve recommended. There is an article here. The forced arbitration does apply. Are you aware of the case . Access layers for wells fargo have disputes and also cover other accounts of allegedly opened without their consent. That attributes the testimony. It contradicts the testimony to the committee. If that is true doesnt that contradict testimony lacks if it is true i dont know if they were sworn in today but it violates earlier testimony. Let me ask about the other overdraft fees. You still exercise their right to deny customers the right to go to court to. We dont normally charge customers fees when they overdraw but in the unauthorized accountaccounts that would potey authorized is that it could have been part of the 3. 5 million to the extent there were fees charged week reimbursed goes to the customers so theyve been made whole. Apparently you are in a case in the 11th Circuit Court of appeals we will follow up on y you. How about the practice where you were selling Auto Insurance for people that didnt want it. About 500 of them had their cars repossessed did you have a chance to hear that . I would encourage you to do that because one of my constituents came out to go to work one morning. He walked to the place that he parked his car and wasnt there a. The folks at the local branch said this is nuts. It took the employees of wells fargo for two and a half hours to connect to the folks in the other branch. The question is very simple. If it is the employees to spend a half hours to get in touch with others, dont you understand why it makes sense for people to be able to band together to file their claims if we make a mistake we need to make it right and improve the process. What id like is to the extent. They know the classaction settlements so they can be made whole. I find it amazing that you would say your customers come first and then you would deny them the choice of how to seek justice. How many states do they operate today and are you regulating every one of the states . How many federal regulators do you have today . Were you supervised by the Federal Reserve . In their oversight im sure they were quite involved did they reveal any issues in the period of tim . Were you supervised in this period of time and did that oversight reveal anything in this situation . Was there any material issue in this period of time and dealing with the regulators are there any issues today . Absolutely i have a long to do list. We are listening to the concerns and making fundamental changes because they make sense and the regulators believe theres other changes we need to make and we are being very responsive. Im sure if they were here they would say we are not moving as quickly as they would like the commitment to fixing anything broken and making wells fargo the best there is no way to sugarcoat this as a serious issue. You have an internal audit capability inside wells fargo and it is a sizable organization. How many people across the country are involved in the internal audit effort . The audit Group Reports separate from the Financial Organization because they have the audits to finance the organization. They have a direct reporting the line also to the auditing committee. There is an ex turtle auditor as well. To whom does the external auditor report. They also provide independent reports and other matters. In this period of time when the indiscretions were occurring did they disclose any of these . They made fundamental changes but when it was reported to the Senior Leadership team is there any other breach of operation that occurred that hasnt been made public . Minor breaches may be that thats one of the reasons we went above and beyond the normal standard of materiality in the Second Quarter to provide an update on things like gap insurance and a variety of different matters because as i encouraged the team, we need to make sure we are more transparent to the stakeholders than we have ever been. Has the scope than relative to this problem . It has expanded and expanded reorganized to reflect the reorganization and the company. I dont know the answer as to the number of folks that cover us today but it was more than the year before. Thank you mr. Chairman. Thank you. Mr. Chairman, one of the most important things we can accomplish is to figure out if there is a sense of cultural change. I think anyone with an open mind would question whether we are actually seeing a culture change. Let me run through this. Senator warren asked about the la times that the story that it broke and we can all acknowledge that they did a huge role in this. And you said you didnt have evidence about that so you didnt respond to it but then once it became a bigger scandal than we are going to fix it so then we find out we are going to fix it and we now realize this is a problem. Other management knew about this problem and thought that they managed it and fixed it. They didnt fix it. Its about how the they try to whistle blow in this and then again when we raised this issue we are fixing it. But now we hear we are going to fix it. So thats three times i hear more about basebal the baseballs you strike out after three times but what i want to say to you, because it goes back to door response to senator warren about the la times in the course of about 1 15 minutes they were tod about an overdraft problem in the circuit. You said you are not familiar. That sounds familiar. Then you were asked about illegal possession in arbitration about the media. You said i dont know about that. I would know about that if i were you. It is a news story that literally millions of people listen to and you are not familiar with it. This is problematic for us because we need to see that there is a coulter change. But there is a reaction to these kind of consumer failures and we dont hear it. What we hear a lot of is told no, look into it. We care about the customer. Where we are right now is a lot of soulsearching at the highest ranks. Correct me if im wrong what they heard you keep saying his mistakes were made at the Community Bank driven by wrongful incentives that were provided to the employees. I hadnt heard you say other than taking responsibility for the incentive i hadnt heard you say they were made at the highest level of wells fargo. We can say yes we lost a ceo and theres been more punishment. But i do not fear a level of culture change that satisfied me today. And i think that that is something that is very problematic. I am not familiar is not an answer that we should be getting. It should be yes we are aware of it and we are fixing it. So then we wonder what else we are not familiar with and i caution you if this is everything, thats what the last ceo told us and then the Insurance Scandal broke. So its up to your board to figure out what youre going to do. I appreciate your comments and in my Opening Statement i was very clear that we take responsibility for the mistakes we made and when i say we, i am the ceo of the company. The buck stops with me. I apologize that im not familiar with every matter but to the extent that im not, we will followup on all o follow e as it relates to senator orrin she talked specifically about information at the la times provided and if i take any action. I can take action if they didnt provide. Having said that, we took action when that information got to the Senior Leadership team. Ive taken responsibility for the fact that we didnt take aggressive action. Thats why we are making the fundamental changes that we are making to make things right for the customers and team members had all of the stakeholders. Having said that, i completely appreciate your frustration. I pled to you and not only are we fixing it, but we will fix it. To segregate the top from the bottom, it seems. Is this true, lets find out. And we did. We knew about this years before that. I didnt and the board conducted an independent investigation where they looked at documents to interview hundreds of people into the conclusion was consistent with what ive said publicly. We should have taken more aggressive action. I apologize for that. We have a document for the leftfield going back in 2008. Thank you mr. Chairman. Thank you for your appearance here today. I appreciate the visit in my office last week as well talking about the challenges. For the tens and thousands to include arkansas who are worried about the future of the company had what it means for the ability to put food on the kids table and a roof over their head. One of the quickest ways businesses can see an impact whenever they make a mistake like this customers can go elsewhere to another bank. Thats one thing that jamie diamond spoke about as its harder for smaller businesses to deal with the regulations the Washington Post upon them and gives big businesses theres less choice to consumers. Theres Certain Airlines that mistreated. They are losing customers and going elsewhere for pressure with big competitors. Media makes him a small banks provide customers lots of opportunities for good products and services. Theres no question that blend n since last september after the Retail Banking sales issues were announced, it was an impact on the business but since then, because the changes that weve made in the company, we are continuing to grow. We are not growing as fast prior to last september that we are on a good trajectory and i think that is because weve taken responsibility, weve taken executive accounts for responsibility, we made changes in the products and services and customers are seeing that and reacting positively to that. We are not where we need to be, but we are making progress. One of the things peculiar to me is how few of them produce any revenue. And its not just that they apparently were reporting employees for accounts that didnt produce revenue and the client didnt even know about. Seems like a u wind incentive. Not even effective at cheating the system. I think it was worse than a misalignment. It was stupid. What are the incentives. The Retail Banking business was focused on growing the number of accounts. As opposed to good products and services for the growing relationships in the right way in hindsight it was just stupid. So youve been on board now to try to clean up everything. What do you think is the risk of thought possible other misalignment incentives in spite of the organization of which are not yet aware . I think it is relatively low. I cant promise perfection, but we need to get near to it as we can. As part of the agreements with regulators, theyve appropriately set as a part of these orders, you need to look at the incentive compensation structures across a number of your products. I said no, we are going to go beyond that to look at the incentive compensation system through a company, we are not just going to do it ourselves we need to bring in third parties to do it independently and get reports of only two Senior Management but to the regulators so we are very transparent about it. And i am pleased that the we hae not found anything that is as serious, but we can never let Something Like this happen again. I would agree with that. Weve heard more about forced arbitration in the conversation. This is in reference to the Consumer Financial protection bureaus arbitration rule. I would say if we allow it to go into effect we may not have the forced arbitration but forced class action lawsuits because without arbitration as an option in the system, it will cease to exist and i dont think they we should be forcing consumers to the classaction lawsuit. Thank you mr. Chairman. You just mentioned that the buck stops with you. Are you going to make it right by american customers and employees . I am concerned about the outsourcing of the Call Center Jobs and that theyve eliminated several hundred jobs here in this country recently in recent years at the same time you were letting these people thoug peopu were adding on positions in the philippines. How is that making it right by your people here that work for wells fargo . We employ 270,000 team in first. More than 90 here in the u. S. , and the reason for that is its where most of the business is done, around 95 of the revenu revenues. We hire anywhere between 40 to 50,000 people here in the u. S. And currently 15,000 jobs are moving for the u. S. For example, in the retail being in business, september of last year since i became ceo more or less retired about 17,000 people that are here in the u. S. Let me ask you this, did you let people go were workin that g in the call center areas and people in the philippines for the same position . We want to make sure we are providing products and services to let people know here in the United States and the philippines. We did, and we hire somewhere between 70 to 80 of each of those folks into another job at wells fargo and they get a preferential treatment in review because we always have about 15,000 jobs. What happened to the other 20 . I dont know how to get them back on the team. We can make a commitmen could mo hide her as many qualified team members as we can. Would you commit to hiring them . If we have jobs open of course i will commit to that. Frequently it makes sense to have folks around the world. We could be working and not running a night shift somewhere. I dont think to be critical of anyone that works the night shift im saying in terms of how to effectively run. We have over 250,000 team members. I am guilty of both of those. In 2013, you said that you sat on the operating committee and solve problems and were concerned. I dont want t to get to an exat date. If you were concerned in 2013, why didnt you stop it . We took efforts to address the issues but in hindsight we should have and could have taken more aggressive action for example. I think in hindsight what we should have done is not in the plan and the retail bank. We should have ended it years earlier. We tried to deal with the issue that we dealt with incrementally. It incrementally. We didnt deal with that country and sadly and for that, we take responsibility. When you saw that in 2013, and you said weve got problems here this isnt working. Oif the things you see are not what they are. My recollection which is consistent with the report of the independent investigation the board did is those that is those that escalated to the board in 2014 and 2015 i think is another area where the management should have escalated. Did you escalate after the board saying this is way out of control click it was escalated by a number of leaders and they chose not to take action. We thought they would address the issues and again in hindsight, we were wrong. And it lessens the issue so that the number of accounts, the number of team members impacted was declining. But that isnt how we should have dealt with the issue. The way we should have dealt with it is to end it permanent permanently. Thank you mr. Chairman. Two senators have asked for a second round of. The activity is limited they lied to the committee and applied it to the public. It was disclosed into in july 201 2016 they had Auto Insurance policies added without their consent about 800,000 customers. Every day sinceveryday since yoe head of wells fargo youve made the decision not to disclose this information to the public. The former ceo testifies when did you first become aware of the Auto Insurance policy and why did you think it was okay to continue covering it up to back the i dont think it was okay to cover it up, senator brown. When it was escalated to me in 2016, in august and early september, i talked to my team about it and we decided at that point in time to end and tell the vendor to quit providing in chickens to the customers and that was effective at the end of september. We then created that internal groups made up of business line experts, legal experts, auditing function to look at the matter. We brought in an independent law firm and consulting firm. We got the results in the First Quarter of last year and began to put together the remediation plan and the disclosed the remediation plan in august and disclosed the issue in august and described where the remediation plan is to and we reported that in the Second Quarter. But it took you 13 months to disclose such a violation if this move to Something Else arbitration is better for consumers. How have consumers fared in arbitration on the average . I dont have the answer to that. They paid 7700 arbitration overall in arbitration cases under the data at 811,000 on the average, so they brought the arbitration or you brought them to arbitration on the average they dont do very well in the arbitration suggesting that theres something wrong and also suggesting arbitration seems to work out well for wells fargo bandbox so well for your customers, so it is troubling that you continue to dig in a way are not waiting for our customers to want to arbitrate. What we are doing. If you have a complaint about the rate lock extension you would remediate it. On the fundamental issues he said optional and we are saying its forced arbitration for so many customers. The last point before this bro broke. Increasing demand on pay for 12, the 1350 an hour depending upon where they are located to visit with increase and above the federal minimum wage. It was overseeing the compensation increase from 19 to 21 million a year. Theaffairs of subsidizing emplos in medicaid and food stamps. You fight class action that didnt pay overtime. Thats one of the reasons they are defending the wage theft in court in these overtime claims by employees. Im proud of the fact we raised the base pay for the team members. I think that is one of the reasons why its gone down because what they are saying is we are paying them terribly. In addition to the base pay, we provided benefits package to those team members to average between six to 8,000. We provide other benefits to them. What we are seeing is a team member base at the lower levels thats very happy to work at wells fargo and you have my commitment to continue to make sure that they are paid in an appropriate way. Thank you mr. Chairman. Since becoming ceo, you said your priority is rebuilding trust with your employees. This past march you told your employees and i want to quote you, the mission has never been just about improving our bottom line. Then you went on to assure them that the employees were the most important and valuable resource. Is that right . I see that often. So after making those comments, you held an investor day where you made the pitch to the wall Street Investors and rolled out a new Financial Plan and i would like to submit a copy if i may. Without objection. Im sure you are familiar with the presentation and ive given you a copy. On the pages 26 and 27 of the presentation, you say that wells fargo will cut 4 billion in expenses by the end of 28 teen and 2019. This is a huge cut over just a twoyear period. Heres some of the ways you describe how youre going to achieve those cuts. Thats number one. Number two, what he said is the first we are going to reinvest. You said you were going to consolidate similar operation activities to provide a better economies of scale. In probing processes including Digital Technology to automate the manual process and outsourcing of certain non differentiated capabilities. Now, that is a lot of corporate buzzwords but it sounds an awful lot like firing people, so get giving the statement about how much you value your employees, can you tell us today you will not be firing any employees as a part of the 4 billiondollar cut . It looks like youre going to end up firing tens of thousands of employees to make these numbers are. Its about 60 and we are proud of that if theres an 8 cut in those expenses it means he would fire more than 20,000 employees in the next few years. It never would have been about improving the bottom line. I want to read what you told wall Street Investors to. We expect an additional 2 billion in annual expense reductions by the end of 2019. These are projected to go to the bottom line. The. Can you say youre not going to make these cuts and i you were very direct. I have a responsibility by the team members to make sure that the company is in existence and successful and year after year after year. I have one more thing i would like to read. At the same time you are planning to fire employees coming you are promising to spend in the next year buying back stock. You made this public announcement and have that much extra money just like in the scandal before it was executives that demanded new accounts to be a pest at all cost is 5300 employees who paid for that with their jobs and now that the fake account scandal despite the reputation it is going up the bottom line keeping wall Street Investors happy to costs by firing lowlevel employees. What happens in the use cases is almost always the front line workers who paid the price and the only way we will ever stop the scandals is by Holding Executives Personally accountable. Im going to take my last word im interested in what your answer would be to the statements and assertions. I couldnt disagree more with everything said. I think its inappropriate to take statements out of context and multiply numbers and apply them to people my commitment is to serve the customers they are paid fairly and what those team members were saying to us even in the midst of the fact that he said we need to become a more Efficient Organization as they like working at the company because our attrition is down to the lowest levels in years because they appreciate the fundamental changes so they are talking to them and understanding how they are feeling and we are making changes based upon what they tell us every other month 12, 3,000 team members unscripted to give suggestions but i have an obligation to make sure that we keep other stakeholders happy and that includes our shareholders who are not just wall Street Investors that supports many retirees across the company. Weve got an obligation to them so my job as the ceo is to balance appropriately and im working as hard as i can to accomplish that. We would ask the witnesses respond to the questions as quickly as they can not knowing how extensive they will be and we cant give a specific timeline. If you want to set a deadli deadline. We ask that the question speed responded to without anything further, the hearing is adjourned. [inaudible conversations] i am an entertainer. I was called by the uso, but im just an entertainer. They were great guys and the men that took me around in the services were fabulous, mike and sean and they had unbelievable courage and skill set for the most part they were glad they did it and they felt that it was their duty to. Former senator Pete Domenici died last month at the age of 85 retired from the senate in 2008 citing declining health. Yesterday the current senators from new mexico spoke about the life a